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.
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
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.