Further Light and Knowledge

Man, I love the free tax advice thread, though I always feel guilty, like I'm making you work during your time off.

I have a weird tax situation this year, to wit: several years ago, my wife's father died, leaving some nebulous overseas properties to her and her siblings and mom. They all got percentages like 40% of this house, and 33% of that commercial property, all in a foreign country. Now, they never declared any of this on their taxes at the time, as they had no idea what the property was worth, if anything at all, and even if they would get the property as there was legal action pending in this foreign land.

Fast forward to 2009: somehow, miraculously, someone actually wanted to purchase one of these parcels in a far away land, and did, to the tune of a fair bit of cash. Now, my wife got 40%, her sibling another 40%, and her mom 20%, all in a foreign currency. How the hell do we declare this on our taxes this year? Is it a capital gain, even though the property technically became hers six years ago? (Complicating things, the money came in checks drawn on a foreign bank, but not in the exact percentage from the inheritance. They sent over all the money and let the family split it up in the appropriate percentages. I don't know that the IRS is going to take that on faith.)

Should I hire someone from the website you linked to, to have a professional opinion (and some cover if the IRS disagrees with our assessment of the situation)?

I miss having the computer do my taxes for me.

_________________
My blog (warning: TMI!)

You have to pay Federal Income Tax on your foreign earnings? They don't give you a credit for taxes paid to the foreign country either? That's an awful expensive passport.

_________________
My blog (warning: TMI!)

LOL...no I DO get foreign earned-income credit, and that often balances things out. However, I do have to file every year, account for my every penny, including all accounts, pay difference between tax credit and US tax liability (ie, I FREAKING *HAVE* A US TAX LIABILITY GRRR), and pay for a US tax accountant to do the return, and spend all the time on it (in addition to the Kantonal and Federal tax I have to deal with here). It's just ridiculous.

So yeah, the passport is a bit expensive. LOL. Also, I'm completely venting and ranting -- I am mostly blase about this by now, but every now and then, a soapbox appears as if from nowhere...

And we are all better because of it.

_________________
"I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them."-Thomas Jefferson

Jamie, thanks so much for the information. I will pass the information along to my father. The data about a portion of assisted living payments possibly functioning as deductible medical expenses is especially exciting. That is a TON of money.

_________________
Ma'am, we don't care what you do with your tractor after you purchase it.

I Imagine a soapbox creeping in on tiny feet, Wry. You have the coolest accessories, woman. First your huff, and now an ambulatory soapbox.

Verily, you rock.

(Sorry about the thrice damned tax situation. You could borrow my dad's trick - he always made the check out to the "Infernal Revenue". They always cashed it.)

WoB

_________________
History is a lie agreed upon.

This is what I do man! I'm the reference librarian reading the newspaper until someone asks a question.



First inheritances are not part of gross income and are not even reportable. What would be reportable would be any capital gain. This generally would be any increase in the selling price over the Fair Market Value of the property on the date of death (or alternate valuation date if used). Given the state of the real estate markets, I don't think it is obvious there would be a gain. Start by seeing if anyone can give you a letter on the FMV at date of dseath (the attorneys who lhandled the sale?).

Second, you are functioning as a "nominee" when you accept payment on behalf of everyone and then split it up. Be proactive and file a Form 1099-S for each of the other heirs, and append a note explaining what you have found out about the basis and amount of gain.

Good luck and let me know when the next batch of questions on this come up.

Jamie

_________________
"Now I troll back to my little cave where we no talk about things we no understand..." Malfalda

"Ummmm. Roadkill."