inheritance tax?

[ramon44]

What is the name of your state? california, my wife is about ri receive money from the sale of the property that her late father left to her and two brothers this property is in mexico, do you know if she has to pay state and federal taxes? it wil be around 45K us

[LdiJ]

Originally Posted by ramon44

What is the name of your state? california, my wife is about ri receive money from the sale of the property that her late father left to her and two brothers this property is in mexico, do you know if she has to pay state and federal taxes? it wil be around 45K us

She needs to consult a local tax pro. There won't be any taxes on the federal side but only a local tax pro can say if there will be any taxes on the state side.

[tecate]

Is there a gain on the sale? This might be different in each country.

If your wife is a California resident and either a U.S. citizen or permanent resident, the feds and California both levy income tax on her worldwide income, including any gain on this sale.

Mexico can also tax the gain. I doubt whether the Mexican state has income tax.

The U.S. Mexico Income Tax Treaty allows this double taxation for "nonmovable" property but the impact is offset by the U.S. foreign tax credit.

But California does not have a similar credit for out of country transactions.

Use Google to find articles about this.

Then find someone who is comfortable with foreign transactions to give you specific advice.

[LdiJ]

Originally Posted by tecate

Is there a gain on the sale? This might be different in each country.

If your wife is a California resident and either a U.S. citizen or permanent resident, the feds and California both levy income tax on her worldwide income, including any gain on this sale.

Mexico can also tax the gain. I doubt whether the Mexican state has income tax.

The U.S. Mexico Income Tax Treaty allows this double taxation for "nonmovable" property but the impact is offset by the U.S. foreign tax credit.

But California does not have a similar credit for out of country transactions.

Use Google to find articles about this.

Then find someone who is comfortable with foreign transactions to give you specific advice.

Ok....I need to clarify a few points here....

Due to her stepped up basis, "gain" would be a neglible issue...and what tiny amount of gain that might exist, would have most likely been wiped out by selling costs. Therefore there is really no need to address the issue of gain here.

It is more likely that the estate handled the sale of the property, and that her distribution is net of any taxes that Mexico might impose.

Those two issues however, can be addressed when she gets her consult with a local tax pro. The bigger issue is whether or not CA will impose any kind of inheritance tax.