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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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I am a US citizen who lives in the US. In the 90s, my

Customer Question

Hello. I am a US citizen who lives in the US. In the 90s, my grandmother gave me property in India that I am in the process of selling. I have begun the sales process, have received money from this process in an Indian bank account in Indian rupees, but the sale has not closed. The money I've earned in India has been due to an "intent to sell" vs a closed sale. India does not count this as a capital gain because it has not closed and does not consider any of it to be taxable. My question is: what do I do for my upcoming US tax return? Is this not taxable income the same way it is not taxable income in India? How will foreign tax credits work now and over time given India is not taxing me on this yet? Thanks.
Submitted: 10 months ago.
Category: Tax
Expert:  Lev replied 10 months ago.

My question is: what do I do for my upcoming US tax return? Is this not taxable income the same way it is not taxable income in India?

That amount is NOT reported on your tax return as income - same treatment as in India because if the same will not be finalized - you will be required to refund the money.
Such payment is classified as earnest money

see here - DEFINITION of 'Earnest Money' - A deposit made to a seller showing the buyer's good faith in a transaction.

http://www.investopedia.com/terms/e/earnest-money.asp

You will report the sale transaction AFTER the sale is finalized and the property is transferred to the buyer.

How will foreign tax credits work now and over time given India is not taxing me on this yet?

If the same income is taxed in the US and abroad - she woudl be entitled to claim a foreign tax credit - thus effectively will avoid double taxation of the same income.

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.

      Expert:  Lev replied 10 months ago.

      .

      One more issue which is related to having a foreign bank account - that fact might be subject to FBAR and FATCA filing requirements.

      Who needs to file an FBAR? Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2014 generally must file.

      See here

      https://www.irs.gov/uac/Newsroom/Taxpayers-with-Foreign-Assets-May-Have-FBAR-and-FATCA-Filing-Requirements-in-June

      .
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