If money is wired into my account as a result of a property sale in Mexico, is this taxable here in the U.S.?

Question

Cash is being wired from the Administrator of the Sale of the property as a result of a family inheritance. This is taking place in Mexico and I am here in the U.S. Do I need to report this in my tax return? How would I do this? If you know, is there a limit of money one can be given as a result of a property sale outside of the U.S.?

Answer 1

Yes - you do need to report the sale. The inherited property became your asset. If the sale price and the cost basis of your inheritance was the same, then you have no gain. Cost basis of any property given by inheritance is automatically the FMV of the property. You can ask the executor or the person who prepared the decedent's Estate Tax Return, form 706; all assets of the estate are reported on this return @ it's FMV (at the date of death). If one wasn't filed because it wasn't required (requirement, if you have assets worth more than $1Mil for yrs 2002-2003, $1.5Mil for yrs 2004-2005, $2Mil for yrs 2006-2007); than you should inquire the basis w/the executor of the estate. So if you recently inherited this property and turned around and sold it - you may not have a gain and won't be paying taxes on it. BUT you still need to report it on your Tax Return.

Answer 2

Inheritances are not taxed at the Federal level. If your state levies an Inheritance Tax you'll have to pay that. The tax would apply whether you left the funds in Mexico or brought them back to the us.

If the property gained in value between the date of death of the decedent and the date it was sold then you would have capital gains taxes to pay at the State and Federal levels.

Answer 3

The US taxes citizens on their worldwide income. This would include profits from the sale of property in Mexico. Your profit would be anything above the value of your share as of the date of death of the relative who owned it. You could even have a loss on the transaction. Get professional help when you do your tax return.