Property sale in India in december

[Desilva]

Hi
I sold a property in India in December 2017.
1. should I report its capital gain in my 2017 us tax return ?
should I wait to file my tax return in India in June 2017 and then report this in 2018 USA tax return?

2.what happens if I purchase another property in India with the proceeds from December sale by April 2018?as I understand there will be no capital gain tax In India on my December property sale if I purchase another. But gains are to be reported in USA 2017.

3. Unlike India where there is indexation to reduce the capital gain, Is there anything in USA tax law that allows to reduce the capital gains? Or it simple sale price in 1998 dollars minus purchase price in 2017 dollars?

apologies if this has been asked before.
thanks
D

[greyfri]

Hi
I sold a property in India in December 2017.
1. should I report its capital gain in my 2017 us tax return ?
should I wait to file my tax return in India in June 2017 and then report this in 2018 USA tax return?

2.what happens if I purchase another property in India with the proceeds from December sale by April 2018?as I understand there will be no capital gain tax In India on my December property sale if I purchase another. But gains are to be reported in USA 2017.

3. Unlike India where there is indexation to reduce the capital gain, Is there anything in USA tax law that allows to reduce the capital gains? Or it simple sale price in 1998 dollars minus purchase price in 2017 dollars?

1) Yes, you should report in 2017 tax return. You can file an extension for the US return, then file after filing Indian Tax return (so you know how much credit you can take)
2) Yes, you will have to report gains in the US even if you don't pay taxes in India. And you get no tax credit in the US then, so there may not be any benefit from buying a new property in India.
3) No indexation in the US. But it's sale price in 2017 $ - purchase price in 1998 $. There may not be that much cap gains because the Rs value has fallen against the $$.

You can also add capital improvements over the years to the basis of the house.

[wd40]

3) No indexation in the US. But it's sale price in 2017 $ - purchase price in 1998 $. There may not be that much cap gains because the Rs value has fallen against the $$.

Seriously? What do you think US dollar is? Bitcoin? USDINR in 1998 for Rs 39. Now it is not even doubled. The property is probably gone up 20 or 30 times.

Even FD returns in India after paying taxes has hands down beaten USD FD in this time period. Property returns is a no brainer.


Sent from my Redmi Note 4 using Tapatalk

[Desilva]

Thanks for your response.
1.i did fly to India to vacate the rental property and complete the sale.
Can this cost be deducted ?

2.Also since I live in nj, would the process be the same as federal for state to? First file nj taxes with extension. Then file India taxes and then claim credit for India taxes paid?
Thanks

[greyfri]

Thanks for your response.
1.i did fly to India to vacate the rental property and complete the sale.
Can this cost be deducted ?

2.Also since I live in nj, would the process be the same as federal for state to? First file nj taxes with extension. Then file India taxes and then claim credit for India taxes paid?
Thanks

1) Yes

2) NJ does not give a foreign tax credit. Most states don't.

[Desilva]

Yes to 1?
that would only be if I itemize and am not using standard deduction. Correct?
thanks

[greyfri]

Yes to 1?
that would only be if I itemize and am not using standard deduction. Correct?
thanks

Generally you can deduct ordinary and necessary expenses of travel to rent out a property, and it shouldn't matter if you itemize.

However, you actually sold the property so it's a little different for you. If you put the sale on schedule D, I think you might be able to add it to the property's basis as a cost of selling the property (it's a little bit of a gray area). Or you might be able to deduct it as an expense from your rental income for the year.

If the salep price is reasonably large, you should talk to a professional about filling out your return anyway.

[Desilva]

We finally decided to cancel the property purchase. So my capital gains from property sale in December end are taxable in India also. After speaking to ca in India we know how much, how and when to pay in India. We need to pay by march 15 in India.

now can I get credit for those capital gains paid in march in India for my April tax filing in USA?
i need to know the sequence better.

thanks
Desilva

[greyfri]

We finally decided to cancel the property purchase. So my capital gains from property sale in December end are taxable in India also. After speaking to ca in India we know how much, how and when to pay in India. We need to pay by march 15 in India.

now can I get credit for those capital gains paid in march in India for my April tax filing in USA?
i need to know the sequence better.

thanks
Desilva

This is actually a little complicated. You can claim a tax credit either when the foreign tax is accrued, or when it is paid. However, whatever method you use, you must use in subsequent years. So you can claim for 2017 (accrued foreign taxes), or you can claim for 2018 (actually paid foreign taxes). You might want to see which works better for you. Given possibly higher tax slab in 2017, it might be more advantageous to claim a credit for 2017.