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I am a Card holder planning to sell foreign assets (property

Hi....I am a Green Card...
Hi....I am a Green Card holder planning to sell foreign assets (property in India)...I am aware that I will have to pay the higher of the 2 tax liabilities (either Indian or American)..I expect my US taxes to be higher as my taxes in India will be reduced by the amount of the expenses/interest/indexation benefits, etc...For the purposes of US tax, what will the taxable amount be (if I invested $100k and am getting back $200k)..with interest/mortgage payments over the past few years?...Thanks
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: No...Its a relatively simple transaction...property acquired by loan from Indian Bank...Interest paid via post tax dollars remitted to India through banking channels
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Answered in 15 minutes by:
11/10/2017
Chad CFP ®
Chad CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Tax
Satisfied Customers: 921
Experience: Managing Director
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Hello, Welcome to JustAnswer! My name is ***** ***** I will be able to assist you today.

If you cost basis (which is composed of your initial investment plus other expenses such as repairs) is a $100,000 and your return is $200,000 then you would have $100,000 of capital gains.

___

If you held the property for over one year then the $100,000 would be taxed as long term capital gains.

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Currently the long term capital gains rate is three separate brackets composed of a 0%, 15%, and 20% tax bracket, based on your ordinary income.

Taxpayers in the 10% or 15% ordinary income tax bracket pay 0% in LTCG

25%,28%,33% and 35% pay 15% LTCG

Tax payers in the 39.6 ordinary income tax bracket pay 20% LTCG

If you fall into the 15% LTCG tax bracket your profit of $100,000 will cost you $15,000 in long term capital gains tax

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If you have any follow up questions or would like for me to expand on my answer above please let me know!

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Customer reply replied 1 month ago
Thanks for the quick response.I will probably fall into the 15% LTCG category (I have had the property for over 6 years).My main concern was the taxable amount.So if I understand correctly:If my initial investment was $100k and I have spent $20k in expenses over the time I have owned the property (mortgage interest/repairs/maintenance, etc) and my selling price is $200k, I will be taxed on $80k ($200k-$100k - $20k) and my US tax liability will be the difference between $12k (15% of $80k) and any taxes I pay the local tax authorities in India (since the two countries have a tax agreement to avoid double taxation)Thanks

The repairs and some maintenance would add to your cost basis but not the mortgage interest. Typically, you would have been able to deduct the interest mortgage in the year you paid the interest mortgage.

Other than the interest mortgage, what you stated is correct.

Your calculation of $80K X 15% = $12,000 tax is correct also and given the US and India does have a tax treaty you will not be double taxed.

Given your scenario, I do believe we have everything covered for the sale of your building in India.

Chad CFP ®
Chad CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Tax
Satisfied Customers: 921
Experience: Managing Director
Verified
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Chad CFP ®
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Category: Tax
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