Hello. I was hoping someone could give me an answer on my situation.
I am planning to sell a house in Albania (Europe). This house was given to me as a gift by my parents. If I sell this house, the Albanian government will hold 10% of the total sale in taxes.
Now the question is: When I wire transfer this money in the U.S., do I have to report this money to IRS even though I paid the Albanian government 10%? From what I understand, the IRS will need 20% of the total amount. So I lose 30% in this deal, and if true ... I wouldn't really want to sell the house with such a huge loss in taxes.
Any ideas in this subject are appreciated.
If you are a resident of the US (i.e. a citizen or permanent resident/green card holder) then you pay income taxes on income "world wide". If you paid taxes on the gain in another country, then you may and probably qualify for a foreign tax credit for taxes paid to Albania (we have no tax treaty with Albania). There is not a 20% tax to the US if you are filing world wide taxes here in the US; it's the tax bracket you are in based upon US tax laws and the top capital gain rate is 15% and on top of that you also would get the credit for taxes paid overseas. Also, if your parents gave you the house, their basis is your basis so the gain may be far less than you think. However, you will have a complex tax comutation if you sell it and you should get a preparer very well versed in this type of tax return.
Eric P. Rothenberg, P.C.
Orsi Arone Rothenberg
160 Gould Street-Suite 320
Needham, MA 02494-2300
Follow my Tweets at http://twitter.com/Tax_Esq
When you pay income taxes to a foreign country, ou should received a credit for the taxes you paid to Albania. Your individual income rate will be based on our US tax bracket which is based on your worldwide income less your personal exemptions, itemized or standard deduction and any other adjustments to you income.
See you tax preparer to have you taxe computed before you decide to sell the house and have a projection prepared both with and without the sales for 2012.
Phillip M. Smith Jr.
Los Angeles Tax & Business Attorney
Call: 855 IRSTAXBIZ
The previous attorneys are correct. You are taxable on all worldwide income, but you will receive a credit for taxes paid in the foreign jurisdiction. Also, treaties between the two countries might be relevent. They will sometimes define which country can tax the transaction.
In addition to the other answers, you can also elect to deduct the taxes paid to the foreign county. Unfortunately, you have to grind the numbers to be sure. The answer will depend on what the other numbers on your tax return look like. Don't forget the new form we now have to file if we own any equity!!! See Form 8938, “Statement of Specified Foreign Financial Assets” (November 2011) Certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will report information about those assets on new Form 8938, which must be attached to the taxpayer’s annual income tax return. Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad (see below).
And be sure to mark Yes at the bottom of schedule B of Form 1040, and you might have to file form Form TD F 90-22.1.....The IRS has made this a big deal for some taxpayers. be sure you "over" comply.......I only wish I could make this up!!
No client-attorney relationship is being created by this posting. Please contact an attorney with questions about your case.
*-*-*-*-*-*--*DISCLOSURES REQUIRED BY LAW*-*-*-*-*-*-*-* ANSWERS FOLLOWING !!!
FIRST, THIS IS REQUIRED BY LAW.......REQUIRED BY STATE BAR OF TEXAS:
Not Board Certified By The Texas State Board Of Specialization In Taxation
Not Board Certified By The Texas State Board Of Specialization In Estate And Probate Law
THIS TOO IS REQUIRED BY THE IRS:
REQUIRED NOTICE UNDER U.S. TREASURY DEPARTMENT CIRCULAR 230:
To the extent that this document and the attachments hereto, if any, may contain written advice concerning or relating to a Federal (U.S.) tax issue, United States Treasury Department Regulations (Circular 230) require that I (and I do hereby) advise and disclose to you that, unless expressly stated otherwise in writing, such tax advice is not written or intended to be used, and cannot be used by you (the addressee), or other persons, for purposes of (1) avoiding penalties imposed under the United States Internal Revenue Code or (2) promoting, marketing or recommending to any other persons any of the transactions or matters addressed, discussed or referenced herein. Each taxpayer should seek advice from an independent tax advisor with respect to any Federal tax issues, transactions or matters addressed, discussed or referenced herein based upon his, her or its particular circumstances.
Get free answers from experienced attorneys.
24,185 answers this week
2,447 attorneys answering
Get answers from top-rated lawyers.
24,185 answers this week
2,447 attorneys answering
Don't speak legalese? We define thousands of terms in plain English.Browse our legal dictionary