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Lev
Lev, Tax Preparer
Category: Finance
Satisfied Customers: 29975
Experience:  Personal Investment, Tax Preparation
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My mother passed away in El Salvador 4 years ago. I became

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My mother passed away in El Salvador 4 years ago. I became the owner of the property through inheritance. I just sold the house at a loss, do I have to file taxes here on it? I have to file taxes there and pay 12% taxes.
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: that the property was acquired through inheritance

Several questions before we may proceed...

You are an US citizen or a resident of the US - correct?
You will need to know the value of the property at the time your mother passed away?
How the property was used after it was inherited ? Was it rented? or it was used as a personal property?

Customer: replied 1 month ago.
1. I am an US Citizen
2. Valued at $196,000
3. Has been vacant and not used at all - have several maintenance bills that I accrued while taking care of the property during the process and had the deed on the property under my name which just finally cleared last year in november.
4. Never rented
5. Sold property for $175,000

Appreciate your clarification.

Basically as US citizen - you are required to report all your worldwide income.

As the property was inherited - the FMV (fair market value) at the time the decedent passed away will be used as a stepped up basis.

That basis is used to determine the gain or loss.

Inherited assets are classified as investment assets unless specifically converted to personal or business use.

So far - you will need to report the sale transaction on your tax return - and will realize a capital loss ~$21k

That capital loss may be fully used to offset other capital gains - however - if you have net capital loss - only up to $3000 may be used to offset other taxable income.

The rest will be carried over to following years until fully used.

Let me know if you need any help with reporting.

Customer: replied 1 month ago.
34;The rest will be carried over to following years until fully used." What does this mean? The rest of what?

Just an illustration example.

For instance you realize capital loss $21,000 in 2017 and do not have any other capital gains.

In this case $3000 will be used on your 2017 tax return to reduce other taxable income and $18,000 will be carried forward to 2018 tax year.

On your 2018 tax return - the situation will be the same - only $3000 will be used on 2018 tax return and $15,000 will be carried to the following year.

Let me know if that helps.

Customer: replied 1 month ago.
Perfect. Thank you!

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Customer: replied 1 month ago.
Please clarity - I read somewhere that you can't get taxed twice for the same thing. Meaning I'm paying 12% taxes in El Salvador already and then file and pay taxes here.

There is no international tax law - and because tax liability is determined separately by each country - potentially - double taxation is possible.

However - in the US - we have a foreign tax credit - means if the same income is taxed in the US and abroad - you will claim a credit for taxed paid in a foreign country - thus effectively will avoid double taxation.

For instance - just for illustration - if your income is subject to 15% tax in the US and 12% in El Salvador - you will claim a credit and will only 3% on your US tax return.

Actual calculations are more complex - and we need to use form 1116 with your tax return.

https://www.irs.gov/pub/irs-pdf/f1116.pdf

I hope that clarifies the issue.