Inheriting Foreign Property

[ncviswan]

What is the name of your state? NY

My question involves taxation on inherited property abroad. My grandfather, a non-US national, left me a house in India several years ago. I sold the house many years later, presumably for a gain from what the house was worth at the time of death. The proceeds were invested in a tax-free municipal bond in India, and I now wish to bring the money back here. All taxes have been paid in India, no taxes paid in the US, and I can provide full documentation. I am a US citizen. What do I owe? I read on some website that as long as the person leaving me the house is a non-US national, the IRS can't tax me on the house. I spoke to some rep at the IRS and he didn't seem to think that was the case (but he didn't seem very knowledgable though so I don't trust him on this). And do I have to pay tax on the interest from the Indian muni-bond? Any ideas? Thanks in advance.

 

[Snipes5]

As you are a US Citizen, you are taxed on your worldwide income. Income is taxable the year it is received. Were you a US Citizen, resident, or green card holder when you sold the property?

The muni bond MAY be taxable in the US. Having money in another country and just bringing it here is not a taxable event. If the muni bond is taxable, it is so whether you bring it here or leave it in India.

I honestly do not know if Muni Bonds from India are taxable in the US, but I can tell you where to start looking. Start with the US-India Tax Treaty (there is one).

Then go see an Enrolled Agent who is very familiar with International tax issues. You will have to do paperwork to transfer the money to the US, but that has more to do with the Patriot Act than it does with taxes.

Snipes

 

[ncviswan]

Thanks for the advice. I am and have always been a US citizen. Your reply covers the part about the muni-bond well, but can you or anyone else address the issue about the inheritance of the house and time sold? Thanks!

Who is an "Enrolled Agent" exactly? And what kind of paperwork is involved due to the Patriot Act? The proceeds from the house are less than $100,000.

 

[Snipes5]

Inheritance is not taxable to the recipient, regardless of its origin (foreign or domestic).

Technically, you should amend your tax return for the year the house was sold, and include the gain as income. You should also be filing a form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, every year.

I don't know what paperwork needs to be done when bringing that quantity of money into the country, I only know that something must be done. You can get information on that most likely from the US Treasury website, www.ustreas.gov.

You can find an Enrolled Agent by going to www.naea.org. An Enrolled Agent is a person who has taken and passed an 11 hour IRS exam covering all areas of taxation, and is therefore quite knowlegeable, but much less expensive than a CPA or Attorney.

You can also find an EA by contacting your nearest H&R Block office.

Before you do anything, consult with an EA.