Condo sold in India

[Stewart]

I have a client who sold property in India and paid capital gains tax there in 2018.  They transferred funds from the sale to the US which was used in purchasing a condo (in 2019).  I don't believe they have to pay any capital gains tax in US but assume they may need to file something, no tax but file.  looking forward to your feedback.  thanks.

[Intuit_Devin]

Assuming this person is a US taxpayer (i.e. US citizen or resident filing Form 1040 rather than noncitizen/nonresident filing 1040NR), then they must report and pay tax on all gains worldwide. Since they paid tax on the sale in India, they will likely qualify for the foreign tax credit to negate the double-taxation aspects.

Report the sale as you would any other property, then use Form 1116 to report the gain and tax paid to India to calculate the foreign tax credit.

[dilip5106]

I agreed with the reply but make sure to ask the client to file FBAR.

[ybsad]

how about a house sold in another country, which was inherited from deceased parents?  8 children sold the property after 30 years from deceased parents death.  paid local capital gains and proceeds were divided by 8. 

[Intuit_Devin · Accepted solution]

Same principals apply, selling a 1/8 interest in a home is fundamentally the same thing as selling a condo for tax purposes. Report the sale, use Form 1116 to claim any applicable credit.

And that's a good call out by the other commenter that there will likely be an FBAR filing requirement and possibly other foreign reporting requirements. The IRS has more info about foreign reporting requirements here:

https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-a...