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My mom is a Mexican citizen and naturalized US citizen. She…

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My mom is a...

My mom is a Mexican citizen and naturalized US citizen. She lives here in the u.s. She is a beneficiary of her Mexican deceased fathers Trust. The trust is 12 acres of land in Mexico. She wants to sell the land and transfer the monies it to the U.S. What taxes are imvolved?

Submitted: 7 months ago.Category: Tax
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12/2/2017
Tax Professional: emc011075, Tax adviser replied 7 months ago
emc011075
emc011075, Tax adviser
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Satisfied Customers: 3,865
Experience: IRS licensed Enrolled Agent and tax instructor
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Hi. My name is ***** ***** I will be happy to help you.

Under the current tax legislation if she sells an inherited property for more than the fair market value at the time of inheritance (date her father passed away) she will have long term capital gains to report.

Generally, if the property is sold within 6 month of inheritance for about the same as the transfer value (at the time of inheritance), there are no tax consequences. But if the value of the land is more than 100K (assuming her father is not US citizen) she will have to report foreign gift/inheritance.

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Customer reply replied 7 months ago
He passed away in 2016. She plans to sell in 3 years. Fare market Value of land is $55 million pesos = $3 Million U.S. Dollars. Does this additional info help? After giving this info, what kind of taxes does she have to pay?
Tax Professional: emc011075, Tax adviser replied 7 months ago

Because early this morning the senate passed a new tax bill and the details are very sketchy, I have no idea what will happens in 3 years. And honestly, hardly anybody knows. But as it stands now, she will only pay capital gains (20%) on the difference between the fair market value + selling expenses and the sales price. The inheritance should have been reported on her 2016 tax return.

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Customer reply replied 7 months ago
She had to report it in 2016 even though the land hasn't been sold that is part of the trust? She is a beneficiary, but the executor of the will hasn't even distributed the land or monies to any beneficiary yet.
Tax Professional: emc011075, Tax adviser replied 7 months ago

You have two issues here. One is reporting inheritance (informational) and the other is actual sale (potentially taxable when sold in the future).

She still needs to report inheritance (not the sale itself) even if she has not sold the land yet.

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Customer reply replied 7 months ago
My last question. I appreciate it. The land in the trust hasn't even been subdivided. She is just a beneficiary equally out of four children. She is entitled to 1/4 of the land or sale of the land, but not subdivisions or titles are even created yet. So are you saying she has to report only that she is a beneficiary of 1/4 of xyz Trust?
Tax Professional: emc011075, Tax adviser replied 7 months ago

Yes. She only needs to report what she is entitled to. In her case 1/4 of the value of the land. She she already filed her 2016 return she should amend it. Since the reporting will not increase her taxes there will be no penalties.

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Tax Professional: emc011075, Tax adviser replied 7 months ago

Is there anything else I can help you with today?

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