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Five Indonesian siblings have sold their childhood home in

Indonesia this year. One is a...
Five Indonesian siblings have sold their childhood home in Indonesia this year.
One is a US resident since 2007
One is a US resident less than one year
One is a US resident starting in 2013
Two are Indonesian residents..
Their father died in 2000.
How do I deterimine the US tax liablility for the US residents?
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5/2/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,160
Experience: Taxes, Immigration, Labor Relations
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LEV :

Hi and welcome to Just Answer!


As a recipient of inheritance - the person does not need to claim it as income. Regardless of the value. Please see for reference IRS publication 525 page 34 (left column) -http://www.irs.gov/pub/irs-pdf/p525.pdf


Gifts and inheritances. Generally, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you. If property is given to a trust and the income from it is paid, credited, or distributed to you, that income is also taxable to you. If the gift, bequest, or inheritance is the income from the property, that income is taxable to you.

LEV :

Inheritance you received from abroad from a non-resident alien is reported on the form 3520 - http://www.irs.gov/pub/irs-pdf/f3520.pdf . In general, Form 3520 is due on the date that your income tax return is due, including extensions. If you received inheritance in 2013 - the form 3520 is due by Apr 15, 2014. There is no tax liability related to this form.

Customer:

how about income tax liability on capital gains?

Customer:

should I contact a professional? How would I find one?

LEV :

how about income tax liability on capital gains?
As a recipient of inheritance - the person does not need to claim it as income.
There is NO income tax liability and there is no capital gain.
Please see above a reference to the tax publication.

Customer:

even though the father died 13 years ago?

LEV :

even though the father died 13 years ago?
If the father died 13 years ago - that means - you received inheritance 13 years ago - correct?

Customer:

yes

LEV :

That means 13 years ago - that inheritance was not taxable...

Customer:

yes

LEV :

So you need to report the sale transaction on your tax return.
The gain will be (sale price) MINUS (adjusted basis).
The basis for inherited property is the fair market value of the property at the time the decedent passed away. That basis should be adjusted by improvement expenses paid after the property was inherited.

LEV :

Thus if you sell assets abroad - you report the sale transaction and calculate your capital gain - you would need to report the sale transaction on form 8949 - and then - you will transfer results to schedule D. Here is this form -http://www.irs.gov/pub/irs-pdf/f8949.pdf

Customer:

does the date of immigration to the US have any effect? are the calculations done in Indonesian Rupiah or US dollars? do you need documentation to show the cost basis?

LEV :

does the date of immigration to the US have any effect?
Yes - income received from sources outside the US - before immigration when the person was nonresident alien - was not taxable. But income received AFTER the person became a resident alien is taxable regardless of its source.
are the calculations done in Indonesian Rupiah or US dollars?
calculation must be dome if US dollars. All transactions if foreign currencies must be converted base on conversion rate on the day the transaction occurred.
do you need documentation to show the cost basis?
There is no need to provide any documentation with your tax return.
Only if audited or if the IRS ask specifically to provide supporting documents - you will provide them.
All supporting documents and calculations must be kept at least three years.

Customer:

last question? how would I find a tax accountant to help with this problem?

LEV :

Are you currently using any tax preparation service or prepare your tax returns by yourselves?

Customer:

by ourselves

Customer:

My local CPA has no clue

Customer:

so, cost basis from date of father's death, or date of immigration to the US?

Customer:

no tax attorneys in Victoria, texas

Customer:

thank you very much for sticking with me, I really appreciate it

LEV :

so, cost basis from date of father's death, or date of immigration to the US?
The cost basis for inherited property is equal to the fair market value of the property at the time the decedent passed away. That is so-called stepped-up basis.
There is no stepped up basis because of immigration.

LEV :

You may prepare your tax return by your own - that is not an issue.
If you are looking for tax preparation service - enter your zipcode to locate an office
http://www.hrblock.com/


www.jacksonhewitt.com/‎


www.libertytax.com

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,160
Experience: Taxes, Immigration, Labor Relations
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