Inheritence received in a foreign country

My sister-in-law inherited a house form her parent in Iran. Her parent was an Iranian and not a resident or citizen of United States. She is American citizen. She paid the inheritance tax in Iran, sold the house and brought the proceeds To United States. She is wondering whether that 1,000,000 exclusion for inheritance tax will apply to her. If not how is going to report the sale proceeds in her tax return?

Reply to
taxmax
Loading thread data ...

No US estate or inheritance tax is due. She reports the sale on Schedule D of her 1040. The basis is the property's fair market value as of the parent's date of death, and it's long-term since the property was inherited. See IRS Publications 550 and 551.

Phil Marti Clarksburg, MD

Reply to
Phil Marti

Should she file a form 3520 to report a gift from a foreign person? If you receive a gift of more than $100,000 from a foreign person, you must report the existence of that gift on form 3520. No tax is due. However, failure to report the gift triggers a penalty of up to 25% of the gift amount. See

formatting link
0722,00.html.The instructions for form 3520 at
formatting link
a penalty of up to 35%. The inheritance may itself beconsidered a gift. I guess the IRS has the rule to track moneylaundering, or who knows what?

Reply to
removeps-groups

How this gets reported depends upon whether she took title to the property and sold her own capital asset or whether it was sold by the "estate" or some other Iranian entity and the proceeds distributed to her.

If she took title and sold it, then Phil Marti's answer is how she reports it (Schedule D). No 3520 need be filed.

If she never took title and merely received the proceeds, then she completes the 3520 and no Schedule D is required.

Lastly, if the funds were first deposited into a foreign account in which she had a financial interest in or signature or other authority over, then she also needs to file a TD F 90-22.1.

Reply to
Alan

An inheritance is not a gift. Form 3520 does not apply.

A gift is a voluntary transfer. Death often isn't voluntary.

Reply to
D. Stussy

The 3520 is for gifts and bequests. However, see my other reply as it is not clear from the fact statement how the transaction(s) should be handled.

Reply to
Alan

report "Receipt of certain large gifts or bequests from certain foreign persons."

Reply to
Stuart A. Bronstein

"Stuart A. Bronstein" wrote in news:Xns9C7CA29C8E81Cspamtraplexregiacom@130.133.1.4:

I (and my sister in equal portions) inherited our father's estate. I don't think there was a specific "bequest", and in this case not a gift. Just about all of my portion has come to the US by now, an I have reported the capital gains as (value of assets tranferred to the US in US$ on day of transfer) less (value of same in US$ on day of death). I did file the TD F

90-22.1 multiple times, but not anymore since there isn't enough left in Holland to warrant it.
Reply to
Han

I've only seen the form once in my career, and that was in the gift context.

Reply to
D. Stussy

On Sep 3, 6:08 am, Phil Marti wrote: [snip]

Should she also file the form for foreign taxes paid (1116, I believe) to offset any taxes due on the capital gain?

Reply to
dapperdobbs

The only fact in the original post was that inheritance taxes were paid. No mention of foreign income taxes being paid. As to the capital gain... that's US income tax, not foreign income tax.

Reply to
Alan

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.