Someone I know shared a situation his tax person is investigating. He sold property overseas and is figuring the capital gains for US personal income tax. There is considerable capital gains of figured in local currency but it's closer to a wash if acquisition cost/value is converted to US$ using the currency rate at the time of inheritance in the '80s. Is the second scenario a valid tax basis?

Sixto
83 300SD
98 E320 wagon

Logically on average the inheritance value will be higher at the time of them inheriting it. Over the value years ago usually. Reducing the amount of taxable gains to be paid. The paperwork required that is acceptable to verify the value at the time may be an issue or not.


I have a need to have one place valued at a specific year done. A real estate company has told me they have enough records of sales of simular properties in the area at the time to produce what I want.


Sometimes it may be even easier as the property assessment for that year may still be a public record. Once found this can favor a situation sometimes.

Did he pay originally in dollars or the other currency? I suspect he'd need to use the same currency when he sells and calculate it there, then convert to usd when taking the gain or loss on his us taxes. OTOH if he earned the money there and invested it there and sold it there he might not owe any taxes at all on his us return.

I don't know anything but am just saying what makes sense to me. His tax preparer should know the rules. If there is no rule to cover the situation then I would write down on a piece of paper how I figured it in case of an audit. In that case it would seem the worst that could happen is they disagree and you have to pay some additional tax.

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[SIGPIC] Diesel loving autocrossing grandpa Architect. 08 Dodge 3/4 ton with Cummins & six speed; I have had about 35 benzes. I have a 39 Studebaker Coupe Express pickup in which I have had installed a 617 turbo and a five speed manual.[SIGPIC]

..I also have a 427 Cobra replica with an aluminum chassis.

The property was inherited in '87. He's a US citizen now but here on an investor visa then. I don't know if the property was disclosed during naturalization or was required to be disclosed at the time.

Sixto
83 300SD
98 E320 wagon

The basis in the property is the value at the time of inheritance. If the inheritance was valued in dollars AT THAT TIME, what would it have been worth? I think it would be defensible to use the old exchange rate.

Let's say the property was in France. In 1987 it would have been priced in francs. Today it would be priced in euros. So what would you use for an exchange rate? There isn't even a current franc/euro exchange rate. Only the old rate would make sense.

The country the property is in may need oralready have gotten a piece of the pie as well. . Reducing the inheritance value and punative to the end reciepient.


The tax law in Canada depends on if the inherited property was the deceased persons primary residence. If it was there are no capital gains applicable here to add to the equation. Although in this case the tax law states that his tax liabilities if any had to be settled within a specified period of time in most countries. So that part is no longer an issue.


We as Canadians for example can get past the capital gains aspect if we make each property in turn our sole legal residence for a one year period before disposal. You have to absolutely occupy it.


It may be a real pain in the posterior to do this on one of ours. So I am mentally trying to figure another way but think it is hopeless. There is an inverse situation presently existing in Canada in comparison to America.


In Canada you service morgages or pay the purchase cost with fully pre taxed money.. In America the mortgage payments are not taxed I thought. Maybe the lump sum purchase price if used gets some type of similar treatment.


When you sell primary residences here there are no capital gains to consider but in America I think there may be. Our system seems a little more punative.


Say you buy a property one way or the other in America. The government has not seen the tax on the money spent in acquisition. In America if there is no real general appreciation of the property during the period of ownership the government loses. Commercial property is another kettle of fish in most countries.


America is also no exception in having tax laws that are more usable by extremely rich people than those that are not that well heeled. There is a very large majority of the really wealthy that will never pay much tax.

In the us we are allowed to deduct the interest cost and closing costs only...on a residence that we live in.

On a commercial property you get to deduct actual expenses plus depreciation which is fictional usually....but perfectly legal to the extent if you own much commercial property you won't pay any federal income tax. (Like me and Trump).

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[SIGPIC] Diesel loving autocrossing grandpa Architect. 08 Dodge 3/4 ton with Cummins & six speed; I have had about 35 benzes. I have a 39 Studebaker Coupe Express pickup in which I have had installed a 617 turbo and a five speed manual.[SIGPIC]

..I also have a 427 Cobra replica with an aluminum chassis.

Does the US government know anything about the inheritance?

You can remit $$ amount into US or bring cash as long as it is under $10K. Any cash over $10K need to be declared, that's all. If he/she declared the asset in form 1040 then Uncle Sam would like a cut of the capital gain. Basically any depreciation taken in filing taxes? Otherwise I would just remit the money into US.

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Not MBZ nor A/C trained professional but a die-hard DIY and green engineer. Use the info at your own peril. Picked up 2 Infractions because of disagreements. NOW reversed.

W124 Keyless remote, PM for details. http://www.peachparts.com/shopforum/mercedes-used-parts-sale-wanted/334620-fs-w124-chasis-keyless-remote-%2450-shipped.html

1 X 2006 CDI
1 x 87 300SDL
1 x 87 300D
1 x 87 300TDT wagon
1 x 83 300D
1 x 84 190D ( 5 sp ) - All R134 converted + keyless entry.

I agree with this. Convert it to USD at date of death of former owner. Convert it to USD at date of sale. The difference, less selling expenses, ( ignoring depreciation) is US taxable gain. This will adjust for changes in exchange rates and inflation in each country.
Seller is entitled to claim a deduction or credit for any taxes imposed by the foreign government on the sale. Flow of money is irrelevant to gain & tax calculation.

Been a long time since I reported a client sale of a foreign real estate - his casa in Italy. Pretty sure that's the way we did it.

That sounds very logical.

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[SIGPIC] Diesel loving autocrossing grandpa Architect. 08 Dodge 3/4 ton with Cummins & six speed; I have had about 35 benzes. I have a 39 Studebaker Coupe Express pickup in which I have had installed a 617 turbo and a five speed manual.[SIGPIC]

..I also have a 427 Cobra replica with an aluminum chassis.

Sounds fair as well in general.

There are a lot of expenses if you think about it in an old car, especially if you keep it for decades. A guy like you Barry and I have plenty of expenses related to our real estate and other business expenses to offset capital gains on a car....even a really nice one like your Buick.

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[SIGPIC] Diesel loving autocrossing grandpa Architect. 08 Dodge 3/4 ton with Cummins & six speed; I have had about 35 benzes. I have a 39 Studebaker Coupe Express pickup in which I have had installed a 617 turbo and a five speed manual.[SIGPIC]

..I also have a 427 Cobra replica with an aluminum chassis.

I agree with this. The IRS is concerned with the amount of income the taxpayer has received measured in U.S. dollars, not some foreign currency.


I will use the Philippines as an example as I am more familiar with it than with other countries. The exchange rate in 1990 was about 1 dollar for 25 pesos; it is now 1 dollar for 50 pesos. If a person acquired a piece of land for 25,000 pesos in 1990 in the Philippines, it would have been worth 1,000 U.S. dollars; if he sold it today for 50,000 pesos, he would be receiving 1,000 dollars. A 50,000 sale today would be a 25,000 peso gain but a 0 dollar gain.


The IRS should be concerned only with the U.S. dollar gain from the transaction. There was a 0 dollar gain, and no tax should be due.

I changed my last post because I thought it somewhat irrelevant as presented. Plus with an American not familiar with many things in Canada. You cannot easily compare things. The same applies with my knowledge of all the American system. .

In Canada as a couple we have less issue with paying taxation as we see the benefits to the overall society for the dollars. As a couple we seem to have no issues with what the money is being used for.

If taxes have to be increased to sustain what is. That is both fine and probably expected anyways. We do not want them to be reduced if it put any existing program at serious risk. Even if we do not directly benefit from many of them as a couple. Others do. Even allowing for that we still gain in general.

I feel like you do.

Unfortunately our programs get cut too often by one party, the other if in too long builds them up perhaps too much so its a Rolla coaster ride here.

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[SIGPIC] Diesel loving autocrossing grandpa Architect. 08 Dodge 3/4 ton with Cummins & six speed; I have had about 35 benzes. I have a 39 Studebaker Coupe Express pickup in which I have had installed a 617 turbo and a five speed manual.[SIGPIC]

..I also have a 427 Cobra replica with an aluminum chassis.