Have a Tax Question? Ask a Tax Expert
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You are not subject to tax on the inheritance, but you are subject to tax on the gain from the sale of the property. As a US citizen or resident, you are subject to tax on your worldwide income. Your basis in the inherited property is the Fair Market Value (FMV) on the date that your wife's aunt passed away. If that was fairly recently, then the sales price is probably the same as the FMV. So you would more than likely incur a small loss due to the closing costs. IF there were any gain, it would be small.
Depending on the country, you may have to pay local income or gains tax on the sale. If you did have to pay any tax, it would be available to offset any US tax on the transaction.
You could bring the cash through customs, but travelling with a large amount of cash, especially in South America, can be very dangerous. I have travelled through several countries in SA, and sometimes I don't even bring my watch or wedding ring! While you could bring the cash, declaring it would be the start of a paperwork nightmare. While it was legally obtained, you would still have to document it and have it verified when you passed through customs. Then when you deposited the cash in your own CA bank, if it is over $10,000 the bank would report it to the IRS, and you would have to explain it again!
A much simpler solution is to find a SA bank with a US correspondence bank, i.e., a US branch. Citibank and Chase would be good places to start. Barclays is another. By having one of these banks wire the money to your US bank account, you would both create a paper trail that is acceptable to the IRS and Customs, and would avoid lots of hassle down the road.
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So there is no way around the tax, there is no once in a lifetime exemption? or anything like that?
We are in our 70's, no work, no property, no stocks, no bonds, no savings, no retirement and basically no income from SS, just less than $1000/month between the two of us.
Don't waste your time explaining about SA, we are from there, know ALL about it.
The situation is that in Argentina es impossible to get money out of the country "legally" the gov just won't let you, period!
When you say "you have to justify it" wouldn't escrow papers be enough?
You also mentioned " verify it" can you please elaborate?
I need to know what I am getting into.
What would it be the rate of the tax then.
As far as the tax goes, I don't think you will have a problem. You inherited the property. Your basis for tax purposes is the FMV on the date your wife's aunt passed away. How long ago was that? As I said, if the sale was near the time that your wife inherited the property, there would be no gain, perhaps a small loss.
Also, if your income is as low as you have indicated, your capital gain would not be taxable at all if it is small. I would have to know some numbers - sales price, the FMV of the property when the aunt died, dates of each - I could calculate the gain and the amount of any tax.
I am familiar with the trouble people have getting money out of various countries. I have several clients who had accumulated cash in South Africa. They bought boats, jewelry, artwork, precious metals, and shipped/sailed them out of South Africa.
If you brought the cash into the US, declared it, you would have to prove that the money came from legal sources. The escrow papers would help with that. Perhaps you could also get a copy of the will where the property was left to you, and other closing documents. These would also lend credibility to how you got the cash.
The "verify" that I was referring to is to Homeland Security. They are always on the lookout for drug money. If you brought that large sum in, that would be their first thought. So if you did bring it in, make sure you DO declare it, don't hide it. Then if you have your documentation that they can confirm, you should not have a problem.
As I said, if you give me the information I requested, I can calculate your gain and tax.
I look forward to your reply.
Well I might have not presented the case as it maybe I should have.
Because of estate laws with inheritances when my wife's aunt decided to give her the apartment she was alive so there was "a sale" to enable the transfer of the property to my wife's name with the right for the aunt to live there till her death.
There was not an actual payment for the apartment, it was just agreed that the price was an X amount of $ that we have give her thoroughout of all the years financially supporting her.
This was about 7 years back, there is (almost over now) an issue with the title but after 6 years of legal tangles it is just about to have a verdict and clear the title fully.
The aunt passed about 5 months ago.
The property probably would sell (wild guess) around $150k to $175K
We have a few debts over there that we have to pay plus the selling fees, escrow fees, etc.
In all likelihood we wouldn't be bringing all the cash at once, that is a risk I wouldn't take in a million years.
Maybe to make the impact of the gain to spread it out in a couple of years?
I do not know you the expert.
Let me know if you need any more clarifications or precise amounts.
Man! no clue exactly, but conservatively I would say the equivalent of about U$A 2500 a year since around 1980 or 81, do not remember when her husband passed but somewhere around there year more or year less
Do you have any idea as to what your wife's aunt paid for the house when it was originally purchased? Or what it was worth when her husband passed away if he owned it?
I need this to estimate the gain.
You are totally correct in bringing the cash back a small amount at a time.
They bought it 1958 for $275,000 arg pesos at the time. which was about $6500 US dollars
If you want to have fun, check this out http://en.wikipedia.org/wiki/Historical_exchange_rates_of_Argentine_currency
For your information, since then to now the pesos were devaluated a gazillion times and countless zeros removed from its value since 1969 (I believe 13 zeroes)
In any event hope this helps
I just checked and in 1958, the exchange rate was 0.1753, so the ARS275k pesos would be about US$49k, plus the improvements.
Let me know.
Roger, you said:
1) Do you have any idea or even a rough guess as to what these would have been over the years?
Answer; No idea, they did a big serious remodeling in the early 70's which included windows, new baths (2) and kitchen, extra outdoors kitchen and lanai, re-wiring and paint, some flooring too.Impossible to know the cost, there is no way on earth we could figure that out.2): When did your wife's uncle pass away? What was the dwelling worth at that point?
Answer: passed in 1980 or 81, no clue as of the property's worth back thenThanks
After checking in another website it appears to be correct