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Tax liabilities when foreign property is sold

Jacksonville, FL |

For tax purposes, I am a resident alien, but I am not a U.S citizen.

My mother and brother have sold our residential house in our home country. The house belonged to my father. When he expired, my mother became the owner with me and my brother as nominees. For part of the sale price, they have received as a cashier's check made out to my mother, brother and me by the buyer's bank from where buyer took the loan to buy the house. The cashier's check has names of all three of us.

My mother and brother want to open a Certificate of Deposit(CD) in my home country with the cashier's check. My mother and brother have never visited U.S and have no tax liabilities in U.S.

1. For U.S. taxes, do I owe any taxes or not since I was only nominee for the house?

2. If I owe U.S. taxes, do i have to report the full amount of cashier's check which is U.S (20K USD) or just 1/3rd(7K USD) only since the cashier's check is made out to me, my brother and mother for FBAR filing http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-(FBAR) 3. If I owe U.S. taxes on bank interest from the CD opened by my brother and mother in my home country, do I have to report full amount of interest earned or 1/3rd since I am one of the three holders in the CD on form 1040? 4. If no U.S. taxes are owed, since I was nominee of the house, what documents should I have to satisfy revenue service? Would registration documents of the property where my name is listed as nominee suffice? Or, would more things be required? P.S. We lived in the house for 10 years.

Attorney Answers 2

Posted

If you did not own the home, then you do not owe U.S. income tax on the property. If you were a part-owner, then you have to report your share of the gain. However, on your father's death, your basis equalled the date of death fair market value of the property, so there may not have been much gain for U.S. tax purposes. If there was interest earned on a C.D. of which you were a one-third owner, then you owe U.S. income tax on that one-third. The documentation you need for the home is the escrow from the sale. The documentation you need for the C.D. is the interest statement. Please hire a competent CPA in Jacksonville.

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Posted

Thanks Bruce, I was nominee not part-owner. After my father's death ownership transferred from my father to my mother who listed me and my brother as nominees for the house. The Certificate of Deposit(CD) is opened with my mother as first holder, brother as second holder and me as third. Operating mode of the CD is "Former or Survivor" which means I receive the amount in CD ONLY if the first and second holder cease to exist. It is like a nominee for a property. The interest on CD will be going to my mother's savings account.

Posted

In general, whatever gain occurs on assets you own and sell are taxable. And whatever interest your receive is also reportable. In this case, you may be a 1/3 owner in the property and the CD and would be taxed accordingly. But this is a gross oversimplification of the issue. When assets are cross borders, the applicable concepts get even less simple. You really should consult with one of the international tax attorneys for details.

Good luck.

Evan A. Nielsen is licensed to practice law in California and handles federal tax matters throughout the U.S. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.

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Posted

Thanks, I was a nominee for the house. I did not own it. It was owned by my mother.

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