Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

I am a US citizen living abroad and i have redeemed a goldman

sachs international wholesale fund March...
I am a US citizen living abroad and i have redeemed a goldman sachs international wholesale fund March 2012 (AUD$36000). It was purchased in March 1999 (AUD$50000). what forms do i use to calculate/report this transaction?
Show More
Show Less
Ask Your Own Tax Question
Answered in 47 minutes by:
10/4/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,136
Experience: Taxes, Immigration, Labor Relations
Verified

Lev :

Hi and welcome to our site!
You would need to report the sale transaction on form 8949 - that is a new form starting 2011 - and then - you will transfer results to schedule D. Here is this form -http://www.irs.gov/pub/irs-pdf/f8949.pdf
The gain is equal to (selling price) MINUS (basis).

Lev :

For US tax purposes the sale price is converted into USD based on currency conversion rate on the sale date.
There will be some complication in determination of your basis.
Your original basis is your purchase price converted into USD based on currency conversion rate on that date.
If you had all fund distributions reinvested - these amounts should be added to your basis.

Customer:

the gain is equal to the selling price (in us dollars) and the basis (how do i calculate the basis and convert into US dollars?) so the original basis is the amount of 50000 coverted into usd using an exchange rate in 1999?

Lev :

Yes - the original basis is your purchase price (AUD$50000) converted into USD based on currency conversion rate on the purchase date.

Lev :

There will be additional gain or loss based on currency conversion rate.

Customer:

so is use those two forms and i have a USD gain of aprox $$$ can i offset this gain against foreign tax credits i have accumulated

Lev :

Yes - you may claim a foreign tax credit - if any income is subject of US and foreign income taxes - you may claim a foreign tax credit - thus effectively will eliminate double taxation of the same income. Use the form 1116 -http://www.irs.gov/pub/irs-pdf/f1116.pdf please find instructions here - http://www.irs.gov/pub/irs-pdf/f1116.pdf


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.

Customer:

is the income passive category? I have accumulated tax credit for passive income of 12,000 aprox

Lev :

Yes - for purposes of calculating a foreign tax credit - that is passive income.

Customer:

so i have to include the gain on 1116 form as well?

Lev :

If you have a gain - yes - that will be included into calculation of foreign tax credit.
Also you will include a section 988 gain or loss realized from changing of currency conversion rates.

Customer:

i don't understand the section 988 gain or loss for currency conversion rates. don't i just convert and subtract?

Lev :

In additional to capital gain that we discussed above - you might have a gain or loss because currency conversion rates are changing. That is a separate gain or loss.

Customer:

could you explain the currency conversion rates might be changing? i thought it would be to convert 50k to USD on the date of purchase then the redemption 36k on date of redemption?

Lev :

That is correct for calculating your capital gain or loss.
However - because your transaction are not in US currency - you may have additional gain or loss.
For instance you sold for (AUD$36000) and used that value and currency conversion rate on that date to calculate your gain.
However - for instance - two months later - you used that amount to purchase another shares - and the conversion rate changed - so - you recognize so-called "section 988 gain or loss"

Customer:

i haven't paid tax on this gain but i can apply previous tax credits to this gain from tax paid on interest and dividends?

Lev :

You may apply foreign tax credits carried over from previous years if that income is taxable abroad.

Customer:

it is taxable income but the carried forward tax credits are from interest and dividends - i can use this to offset capital gains ?

Lev :

Yes - all these belong to "passive income" category for purposes of foreign tax credit - and carried forward tax credits fro that category may be used.

Customer:

ok thanks. where do i look for specifics on the currency conversion rate changes?

Customer:

and do i fill in 8949 then schedule d then form 1116 finally form 1040

Lev :

Here is IRS article - http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Currency-and-Currency-Exchange-Rates


Make all income tax determinations in your functional currency. If your functional currency is the U.S. dollar, you must immediately translate into dollars all items of income, expense, etc. (including taxes), that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Use the exchange rate prevailing when you receive, pay, or accrue the item. If there is more than one exchange rate, use the one that most properly reflects your income. You can generally get exchange rates from banks and U.S. Embassies.


If your functional currency is not the U.S. dollar, make all income tax determinations in your functional currency. At the end of the year, translate the results, such as income or loss, into U.S. dollars to report on your income tax return.

Customer:

also i have made losses do i apply those to the basis? this is a loss in australia

Lev :

What type of losses do you have?

Customer:

sorry if you donot convert then i have a loss

Lev :

I am not clear what exactly you are converting and what are losses... Can you clarify with details?

Customer:

the fifty thousand less the thirty-six thousand in Australian dollars.

Customer:

i have to go may i contact again?

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,136
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
1. (AUD$50000) is your purchase price back in 1099 - correct - so if you had any gain or loss on that conversion should be reported on your 1999 tax return.
2. (AUD$36000) is your selling price - you received this amount in 2012 - if you have any section 988 gain or loss depends how that amount was used and when.
3. Your gain or loss on the sale transaction for US tax purposes is NOT calculated in AUD. So - "the fifty thousand less the thirty-six thousand in Australian dollars" - is not your loss. You need to convert into USD each amount separately - and then you will calculate a gain or loss.
4. (AUD$50000) which is your original purchase price - is your basis. Please be aware that you need to add all reinvested distributions - that will reduce your gain or increase your deductible loss.
Ask Your Own Tax Question
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,136
30,136 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Accidentally sent IRS an unsigned copy of our 2016 form 1040
accidentally sent IRS an unsigned copy of our 2016 form 1040 and later received a form 3531 requesting a valid original signature. Should that returned signature be dated to the original submittal dat… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
727 satisfied customers
Figure out how much is my tax liability + my capital gains +
Figure out how much is my tax liability + my capital gains + depreciation recapture tax … read more
Lev
Lev
Tax Advisor
30,136 satisfied customers
Filling out form 1116. Need explanation for a carryover.
I am filling out form 1116 and I am unclear on how to calculate my carryover amount for line 10. Can you please explain how my last year's carryover was 126,426. Thank you… read more
Dr Arthur Rubin
Dr Arthur Rubin
Doctoral Degree
24 satisfied customers
RE: FOREIGN TAX CREDIT We're filing a married joint filing
RE: FOREIGN TAX CREDIT We're filing a married joint filing tax return and have come up against some problems on form 1116. 1) Do we add both our names on the form? 2) On line 3a, it asks for certain i… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,466 satisfied customers
Client (US resident) with foreign salary and taxes paid in
Client (US resident) with foreign salary and taxes paid in foreign currency - Part II of 1116 form for some reason adds taxes paid only in US $ (line "o" through "r") - it does not take taxes paid in … read more
Lev
Lev
Tax Advisor
30,136 satisfied customers
I have a foreign tax credit carryover from 2016 to 2017 and
I have a foreign tax credit carryover from 2016 to 2017 and am wondering if i can take it even though I have no foreign sourced income in 2017 … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,466 satisfied customers
What tax form is filed to report dividends paid by US Corp?
What tax form is filed to report dividends paid by a US Corp which is owned by a Canadian Corp? I think it might be 1042S. I want to know the rate of WH.… read more
abci168
abci168
Principal
27 satisfied customers
International attorney that can help with double Taxation
International attorney that can help with double Taxation treaty between US and Germany. A US Green card holder in the year 2014 worked in Germany more than 183 days as a doctor, but less than 330 day… read more
taxmanrog
taxmanrog
Master\u0027s Degree
698 satisfied customers
I would like help with claiming a foreign tax credit from
Hi, I would like help with claiming a foreign tax credit from Canadian form NR4 … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
727 satisfied customers
Can franking credit on an Australian income tax return be
Can franking credit on an Australian income tax return be used on Form 1116 as tax paid on the franked distributions? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I have a foreign tax credit question... I have cancellation
I have a foreign tax credit question... I have cancellation of debt income of $50k from a foreign lender (England) on a K-1.(Taxpayer is a G.P.) Can I characterize that relief of debt as passive incom… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I am looking at the form 1116 (foreign tax credit). I have
I am looking at the form 1116 (foreign tax credit). I have paid $30,000 in taxes in the UK (I live all year here), the US tax says line 22 on the form can only be 21,000. Where do I report the carry o… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Form 1040 line #44 what taxes--federal income tax + social
form 1040 line #44 what taxes--federal income tax + social security +medicare tax, all or just federal? … read more
Lev
Lev
Tax Advisor
30,136 satisfied customers
I am carrying forward a foreign tax credit but i do not know
Hello i am carrying forward a foreign tax credit but i do not know how to claim it i paid for premium software, yet there is no entry for it … read more
Dr Arthur Rubin
Dr Arthur Rubin
Doctoral Degree
24 satisfied customers
I have to use form 1116 for a foreign tax credit line 14
I have to use form 1116 for a foreign tax credit line 14 code B the amount is 108, I got to putting in the country which is various, where do I put the 108 … read more
Anne
Anne
Master Tax Preparer
1,328 satisfied customers
RE Form 1116 provision for adjustment of foreign qualified
RE Form 1116 provision for adjustment of foreign qualified dividends:I have foreign sourced qualified dividends (QD) from 4 different countries in excess of 30K. Form 1116 requires adjusting the amoun… read more
Dr Arthur Rubin
Dr Arthur Rubin
Doctoral Degree
24 satisfied customers
Trying to find where answer to Foreign Tax Credit wks,
trying to find where answer to Foreign Tax Credit wks, partl, lines 4b(1)b and (1) c … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I had unused foreign tax credit on Form 1116 in 2015. Can I
I had unused foreign tax credit on Form 1116 in 2015. Can I use this carry-forwarded unused foreign tax credit in Itemized deduction (Sch A, 8 other taxes) for 2016 tax return ? I do not have any fore… read more
Mark D
Mark D
Enrolled Agent
Master's Degree
1,300 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x