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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
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Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Here are my question: 1. An individual sold inherited property

Resolved Question:

Here are my question:

1. An individual sold inherited property from her father a citizen of Russia( had received the property from the State in communist era) and repatriated the proceeds to his/her US account from the purchaser. It should be treated as a gift from her father. Correct? Please expand by citing IRC§ and regulations governing such transactions.

2. An individual became a U.S. resident ( Green Card Holder) but has been receiving Pensions from his employment from his/her old job in the former country (India) is subject to U.S. Income tax or exempt under a treaty.Please expand by providing treaty details, citing IRC§ and regulations governing such transactions.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

Lets take them one at a time:

1. An individual sold inherited property from her father a citizen of Russia( had received the property from the State in communist era) and repatriated the proceeds to his/her US account from the purchaser. It should be treated as a gift from her father. Correct? Please expand by citing IRC§ and regulations governing such transactions.

That's essentially correct; Because this is not earned income the individual is just transferring the assets. THe US taxes INCOME, and on transfers, gifts, estates (does not tax the receiver, but rather the giver.

(a) General rule.--Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.

26 U.S.C.A. § 102 (West)


2. An individual became a U.S. resident ( Green Card Holder) but has been receiving Pensions from his employment from his/her old job in the former country (India) is subject to U.S. Income tax or exempt under a treaty.Please expand by providing treaty details, citing IRC§ and regulations governing such transactions.

 

Under the tax treaty, the individual will only pay tax once (the purpose of the treaty is to prevent double taxation), and will pay tax in the country of domicile. See this:

From http://www.irs.gov/Individuals/International-Taxpayers/Taxation-of-Resident-Aliens

A resident alien's income is generally subject to tax in the same manner as a U.S. citizen. If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U.S. tax return. You must report these amounts whether from sources within or outside the United States.

Resident aliens are generally taxed in the same way as U.S. citizens. This means that their worldwide income is subject to U.S. tax and must be reported on their U.S. tax return. Income of resident aliens is subject to the graduated tax rates that apply to U.S. citizens. Resident aliens use the Tax Table and Tax Rate Schedules which apply to U.S. citizens found in the instructions forForms 1040 (PDF), 1040A (PDF), or 1040EZ (PDF).




Hope this helps

Lane

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Customer: replied 1 year ago.

Your answer to second question is not complete. I understand and know that any US person, resident or citizen is subject to reporting worldwide income and paying taxes and use of foreign tax credit as applicable.


 


My question still stands unanswered because I have asked specifically:


 


1. The U.S. resident was working in a former employment out of the country prior to becoming a resident and is receiving pension on account of his past services. What is the U.S. taxation law on taxing pensions received from foreign employers in foreign country to a U.S. resident. I will need the IRC§ and regulation on it.


 


Thanks.

Expert:  Lane replied 1 year ago.

Coincidentally, a colleague has just provided more information:

I said "Under the tax treaty, the individual will only pay tax once (the purpose of the treaty is to prevent double taxation), and will pay tax in the country of domicile. See this:"

 

See http://articles.economictimes.indiatimes.com/2012-07-24/news/32828211_1_pension-income-india-tax-returns-india-pension

 

"Vaibhav Sankla, Director H&R Block India explains, "If a US resident earns Government pension from India, his pension is taxable ONLY in US if he is a resident of and national (citizen) of US. So if a US resident is not a citizen of the US, then irrespective of whether he is a green card holder or not, his pension income from the Indian governmentwill be taxable ONLY in India."

Since Patel is not a US citizen but just a green card holder, he will have to pay tax on that pension ONLY in India.

Article 20 states:

Any pension, other than a pension referred to in Article 19 (Remuneration and Pensions in Respect of Government Service), or any annuity derived by a resident of a Contracting State (in Patel's case, US) from sources within the other Contracting State (India) may be taxed only in the first-mentioned Contracting State (US).
According to the above, if a resident, green card holder or citizen of US received private pension or annuity from India, then that is taxable only in US"

 

Apparently the tax treaty makes a noncitizen of US taxable only by India on nongovernmental pension from India sources.

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4009
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 6 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.


Thank you Sushil.

and thank you J.

Lane

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