Tax on Foreign Property

A forum question posted by AskTaxGuru.com Junior Member Rotodummy:

Hi,


I am a resident of US and have been filing my tax returns regularly.
I had a commercial property in India bought in 2000 for about 11000 USD and sold recently in 2009 for about 35000 USD. I have purchased a residential property from the proceeds of this sale and in fact transferred more money to complete the acquisition of the new property.
Do I have to pay any Capital Gains tax?
If not taxable, do I have to mention any reference of the same in my 2010 returns, which quite frankly, I did not mention.

Answered by Moderator, Wnhough:

“Do I have to pay any Capital Gains tax?”

----> I guess so; as a US person( a US resident), you are subject to US taxes on your world wide income and US source income. You pay tax on your LTCG to Indian taxing authority(ies) in India and you can claim your LTCG tax paid in India on your US federal return as long as your US tax rate is higher than that in India by filing IRS form 1116. I guess you can’t claim your Indian LTCG tax on your US state return, BUT only on your federal return. This means that your LTCG is subject to double taxation to both India and your US state. For Foreign Currency Conversion between Indian Rupee and $ US, you may need to use weighted average currency value.You report your foreign tax credit on 1040 line 8, other taxes, I guess or on form 1040 line 47.REMEBER: foreign taxes that are not eligible for the foreign tax credit may be eligible for the foreign tax deduction.

To read more of the answer, click here and join in the discussion or place your comments below.

Stock Split

A forum question posted by AskTaxGuru.com Junior Member WHANSMA:

If bought 50 shares of XYZ stock at $10.00 per share back in 2005. It splits 2 for 1 when it gets to $50.00 per share. I now have 100 shares worth $25.00 per share. Since the stock is not doing well in 2010 I sell 50 shares to try to cut some of my loss. I sell at $5.00 per share. I know this is entered as Long Term on Schedule D but am confused as to what the cost basis total should be? (Column E).


Thanks


Wayne

Answered by Moderator Wnhough:

“I know this is entered as Long Term on Schedule D but am confused as to what the cost basis total should be? (Column E).”----> In general, regardless of the type of stock split, it usually affects the stock basis price at which you purchased the stock. So, failure to take this issue into account when computing your capital gains and losses can result in substantial under reporting of income on your 1040 to the IRS. You must use the post-split basis as you only sell part of your basis. As you bought 50 shares of stock at $10 per share and it splits two for one, then you own 100 shares with a basis of $25 per share, 100*$25=$2,500=$50*50. If you sell 50 shares at $5 per share, then your basis will be $1250;50*$25, plus commission that you paid when buying the stock, and your sale price will be $250, $5*50, minus commission. So, your LTCL is $1,000; $250-$1,250=($1,000)

What do you think? Join this discussion here or post your comments below.

How much of the Capital Gain is excluded on "Sales of Qualified Business Stock"?

According to the current tax rules, there is a "100% exclusion on gain from sale of qualified stocks acquired after September 27, 2010, and before January 1, 2012.

The requirements are that the stock must be held at least 5 years in order to qualify for zero capital gain tax on the sale. The 100% exclusion applies for both regular tax and the alternative minimum tax.