Foreign inheritance

US citizens have to pay tax on worldwide income, so I'd think that the person would owe capital gains tax on the difference between the value of the land in 1984 and the sale price.

Disregarding last year's momentary phaseout of the inheritance tax, the heir's basis is the value at the time of the decedent's death, right?

R's, John

The basis of the property is the fair market value of the property at the time the person immigrated to the USA. Please note that may not necessarily be the same time as the person became a citizen, but if it was before 1984, then it would the FMV at the time of inheritance. If the basis is the 1984 inheritance, then the date of acquisition would be inherited otherwise, it is the date of immigration.

Note that the foreign country is eligible to tax those gains and the US will grant credit for those taxes. HOWEVER, since the foreign country taxes over a different period than the USA, you will have to allocate those taxes - You are not permitted to claim credit for all the foreign taxes. (And you can't take the foreign earned income exclusion since this isn't earned income.)

Also, you mentioned that he brings over only part of the proceeds from the sale. If that is the case, assuming he keeps the balance in a financial account, he also needs to file the Treasury report on Foreign Financial Accounts -- if the Highest balance in ALL his foreign financial accounts total over $10K at any time during the year.