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Lev
Lev, Tax Advisor
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I do not need to report my properties (a condo as a rental

Customer Question

I do not need to report my properties (a condo as a rental property ; an apartment as a vcation home) in China, do I? Below is what I found in www.irs.gov:

"3. Does foreign real estate need to be reported on Form 8938?
Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938. For example, a personal residence or a rental property does not have to be reported."
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.

LEV :

Hi and welcome to Just Answer!
You do not need to report the fact of having a rental property on form 8938.

LEV :

See instructions - http://www.irs.gov/pub/irs-pdf/i8938.pdf

Specified foreign financial assets include the following assets.
1.Financial accounts maintained by a foreign financial institution.
2.The following foreign financial assets if they are held for investment and not held in an account maintained by a financial institution:
3.Stock or securities issued by someone that is not a U.S. person,
4.Any interest in a foreign entity, and
5.Any financial instrument or contract that has an issuer or counterparty that is not a U.S. person.
In most cases, a foreign financial institution is any financial institution that is not a U.S. entity

Thus assets held with the US financial institution are not considered from 8938 reporting requirements.


However - as an US person - you are required to report all your worldwide income on your tax return - that include income received from rental property.
Regardless if that a property in the US or abroad - rental income and rental expenses are reported on schedule E - www.irs.gov/pub/irs-pdf/f1040se.pdf

However - if the same income is taxable abroad and in the US - you may claim a credit for taxes paid abroad - so the same income would not be taxed twice. Use the form 1116 - http://www.irs.gov/pub/irs-pdf/f1116.pdf please find instructions here - http://www.irs.gov/pub/irs-pdf/f1116.pdf
The credit is limited by the US tax liability on the same income - the form 1116 is used to calculate the amount of credit. Means - if tax liability abroad is higher - there will not be US taxes on that income, but if tax liability abroad is lower - in the US you will pay the difference after the credit will be applied.


Let me know if you need any help
Be sure to ask for clarification if needed.

Customer :

Thanks! How about selling the property? If I need to report the capital gain, loss, and tax paid in the foreign country, which IRS forms handle them?

Customer :

Thanks! How about selling? If I need to report the capital gain, loss, or tax paid to the foreign country, which IRS forms handle them?

LEV :

The sale of the rental property - regardless if the property is located in the US or abroad - is reported on the tax returns. Form 4797 is used to report the sale of business or rental property.
The disposition of the property is reported on Form 4797 - http://www.irs.gov/pub/irs-pdf/f4797.pdf - is to report the disposition of business property - rental property in your situation. To calculate your gain or loss - you will use an adjusted basis. In additional - you will recapture the depreciation for the time the property was rented.

LEV :

Let me know if you need help with reporting.

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