How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Paul Taliefero Your Own Question
Paul Taliefero
Paul Taliefero, Enrolled Agent
Category: Tax
Satisfied Customers: 239
Experience:  19 years of experience in income taxes
6159
Type Your Tax Question Here...
Paul Taliefero is online now
A new question is answered every 9 seconds

Is this income deferrable Do I owe capital gains

Customer Question

In the last year, I have sold some of stocks I owned in India. These stocks were acquired by me through my earnings as a resident of India and Indian stock purchase plans of my former employer.

These stocks have appreciated significantly and I decided to sell good amount of these stocks in the calendar year 2004. Company also declared special dividend last year (2004) and paid all shareholders a large sum of money.

Capital gains made by sale of these shares are not readily convertible to U.S currency as INR is still not convertible to any international currency. Most of people I know are of the opinion that these gains are not reportable for U.S. tax purposes.

Last year Indian government eliminated long term capital gains. This has complicated the situation further. So far, declaration of these stocks may have not mattered much as both countries had similar tax structures and if taxes were paid in India already, it would result in no/minimal net tax obligation in U.S. With elimination of long term capital gains this difference has become significant.

Publication 54 tallks about filing "Deferrable Foreign Income, pursuant to Rev. Rul.74-351". Is that how this income should be filed?

How should the cost basis of these gains be calculated? Should I take the cost basis as the fair market price of the stock when I became a resident of USA? Should the cost basis be used as the actual price I acquired these shares for? There are several hundred employees who share the same question. Between my colleagues, we have consulted several tax consultants with no consistent answer.

Even though knowing it a little complex question, I am hoping I can get some clear response.

Regards
Submitted: 11 years ago.
Category: Tax
Expert:  Paul Taliefero replied 11 years ago.

 This income is deferrable until the INR is convertible to US dollars.


This income is reported on a separate Form 1040. At the top you write "Report of Deferrable Foreign Income, pursuant to Rev. Rul. 74-351". This is treated as an informational return.


As soon as the INR becomes convertible to the US dollar, you will report it as income for that year.


 

Customer: replied 11 years ago.
Reply to Paul Taliefero's Post: Do appreciate the confirmation but I had figured out your reply as you will notice that I have posted the same thing in my own message too (from publication 54). My question which remains unaswered is really that am I supposed to pay any capital gain and if yes, what is my cost basis. Day I became resident? Purchase price? Most people just don't pay the capital gains.
Expert:  Paul Taliefero replied 11 years ago.

 You pay capital gains tax when the currency becomes convertible.


The cost basis is still your purchase price.


The holding period begins on the day of purchase.


If your currency never becomes convertible to US dollars, then you won't pay the tax. However, it will still be owed to the US government.

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Previous | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    577
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    577
    10 years experience
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    1245
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3882
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg Robin D.'s Avatar

    Robin D.

    Senior Tax Advisor 4

    Satisfied Customers:

    11072
    15years with H & R Block. Divisional leader, Instructor
  • http://ww2.justanswer.com/uploads/YI/yirtual/2015-3-12_43754_egan.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    8621
    Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2884
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/FA/fastfile/2011-12-15_23139_Klein2011small.64x64.jpg R. Klein, EA's Avatar

    R. Klein, EA

    Enrolled Agent

    Satisfied Customers:

    1837
    Over 20 Years experience