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I sold some property overseas and used the money to buy a house in New York. Will I have to report that money as income and pay taxes on it?

2007-01-25 05:25:57 · 5 answers · asked by CJ 3 in Business & Finance Taxes Other - Taxes

5 answers

Yes, you need to report the profit on the sale of the property even if it is in a foreign country. Because you are a resident and citizen of the US you have to pay taxes on the sale. You are, of course, entitled to the standard $250,000 (or $500,000 if married) deduction on profits if the home was your principal residence.

Also, you're going to have to pay taxes on the proceeds of the sale in the foreign country in which the property was located. However, you'll be able to claim those taxes as a credit (dollar for dollar reduction, not just deduction) on your US taxes. You'll need to form a Foreign Tax Credit form, which you can get from the IRS at www.irs.gov.

So, though you'll pay taxes twice you'll get refunded the difference and the net will be the same as just paying once.

Make sense? Well...that's tax law.

Note: I am an attorney, but not a tax attorney.

2007-01-25 05:39:10 · answer #1 · answered by mugwumper 2 · 0 0

You will have to report and pay taxes on your PROFIT. If you had a net gain after considering all expenses, then you will need to report that as a capitol gain. You would probably be well served by hiring an accountant to do your taxes.

You can try to get away without reporting it, but if you used it to purchase property here, they will catch you. It is cheaper just to pay the tax owed.

2007-01-25 05:33:24 · answer #2 · answered by J.R. 6 · 0 0

Absolutely. As a US tax resident, you are subject to tax on worldwide income. So you are taxed on all of your income regardless of where you earned it. Also, if you paid off a foreign mortgage when you sold the foreign property, you may have to recognize a foreign exchange gain on the mortgage payoff as well.

2007-01-25 05:42:35 · answer #3 · answered by jseah114 6 · 0 0

I think you should call the irs and ask. Or call a tax preparer. I think you have to claim it but, then use it as a major purchase for buying the house in NY>

2007-01-25 05:31:53 · answer #4 · answered by ruth4526 7 · 0 0

no, i wouldn't.

2007-01-25 05:33:45 · answer #5 · answered by Miki 6 · 0 1

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