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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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Do I have to pay tax when I sell my property outside of USA

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Do I have to pay tax when I sell my property outside of USA in Russia?
I am US sitizen since 1999 and have dual sitizenship in Russia.
Hi and welcome to JustAnswer:

As a US citizen you are required to report your worldwide income. When you sell property in Russia, the gain will be taxable in the US. However, you will be entitled to a credit for income tax paid to Russia. I have provided links to Form 1116 Foreign Tax Credit and intstructions. I have also provided a link to the US - Russia Tax Treaty.
Customer: replied 4 years ago.

Thank you for your quick reply. I have a follow up question.

Do I need a proof of how long and in what time frame I lived in that appartment in Russia?

I lived there as a child with my family, but appartment always been in my father's name and only recently Title of ownership been transfered to my name. It's pretty typical of generations in my country to pass the property onto children.

Hi Anna -

If you received the property as gift (your father is still alive), your basis is his cost plus any
improvements he made and holding period is the date he acquired the property. The gain will be taxed as a long term capital gain for federal tax purposes.
Customer: replied 4 years ago.

My father accuired flat from his mother several years ago, his mother passed away this summer. He did not pay for it, but did made some improvements for about 2,000 USD. The price for which appartment unticipated to sell is 80,000 USD. If I understand you correctly, in this case my basis is 2,000 USD.

Hi Anna -

Your basis would be the $2,000 plus your grandmother's basis. This basis could be the purchase price from many years ago or it could be the property's fair market value on your grandfather's date of death.
Customer: replied 4 years ago.

Appartment was given to my grandparents by Russian government in 1964, my grandfather passed away in 1982 and flat price at that time was probably around 10,000 USD. So in this case if I undarstand you correctly my basis will be $12,000 USD. What is the actual % ofTax will be applied to that amount as a long term capital gain for federal tax purposes.

Anna -

Selling price $80,000, Basis $12,000, Gain $68,000. Federal Tax $13,600 (20%). This amount could be lower based on your other income or higher if you are subject to alternative minimum tax.
Customer: replied 4 years ago.

there is also 13% tax in Russia. Which amount considered as Gain, pre tax or after tax? after russian tax paid in russia the gain will be around $69,600. Basis 12,000 USD. US taxable Gain is 57,000 USD. Federal Tax 11,550 USD (20%)

The tax will be $13,600. However you will receive a credit for Russian tax. Your credit will be approximately $8,840 ($10,400 * $68,000/$80,000) so your net US tax will be $4,760.
Customer: replied 4 years ago.

not sure I am following you on the $10,400 number, where did it came from?

13% of $80,000 = $10,400


$80,000 - $10,400 = $69,600

Customer: replied 4 years ago.

all makes scence. Thank you! What type of documents should I keep on file on that sale in case IRS question on why I had increase in cash?

Closing statement
Wire transfer documents
Russia tax return
Customer: replied 4 years ago.

I have not filed any tax return in russia, unless it's something I will need to do following sale of appartment. Would tax info on the sale of appartment suffice?


If the 13% is income tax you will need some type of form as proof of payment to receive credit. If 13% is a transfer tax you can use the tax to reduce your gain, but you will not be allowed a credit for the tax paid.
Customer: replied 4 years ago.

if I understand correctly if there additional % on the wire transfer of dollar amount than that amount could be used to reduce gain?

No, I don't know what type of tax is being imposed in Russia. If it is an income tax, you can use it to take a foreign tax credit. If it is a transfer tax, you can add it to your basis.
Customer: replied 4 years ago.

Thank you. Is there anything my dad as a US sitizen would have to provide/ file for IRS when he signs appartment over to me?

Your dad would need to file a gift tax return. Form 709
MequonCPA and other Tax Specialists are ready to help you
Customer: replied 4 years ago.

Thank you! I appreciate your help very much!

Thanks for the positive rating! Glad I could help.