Transferring Money from India from sale of inherited property

If you received an inherited assets in India from an Indian citizen or resident, you will not be subject to inheritance tax. However, you will have to comply with certain reporting requirements.

Income from the inherited assets such as interest, dividends or capital gains will be taxed in the US in the hands of the inheritor. Capital gain from sale of inherited property is calculated as the difference between sale proceeds and the fair market value of the property as on the date of death of the bequeathor.The inheritor can claim the benefit of double taxation treaty and claim foreign tax credit for the taxes paid in India, if any.

Reporting Requirements

Form 3520 (Annual return to report transactions with foreign trusts and receipt of certain foreign gifts)

As per IRS regulations, Form 3520 must be filed only in cases where a US citizen, resident or Green Card holder receives inheritance (or gifts) of more than $100,000 from a foreign person or estate. Even if there is no tax liability at the time of inheritance, US residents, citizens and Green Card holders who inherit property in India must file Form 3520 along with their tax return This applies to financial assets such as cash, investments and also physical assets like property

There are two reasons you must file Form 3520.First, it establishes a trail of your receipts, Secondly, it establishes the 'basis' of your inheritance. Form 3520 must be filed when you get a title on the property

Form 8938 ( Statement of Specified Foreign Financial Assets)

Form 8938 requires US residents, citizens and Green Card holders to report any foreign financial assets such as bank balances, mutual funds, shares etc. if the aggregate of such assets exceeds $50,000 for single taxpayers or $100,000 for married taxpayers and need to file with your federal tax return .

Form TD F 90-22.1 - Foreign Bank and Financial Account Reporting (FBAR)

The FBAR is a report to be filed in addition to your tax return. You must file the FBAR if you are a US resident, citizen or Green Card holder and had, at any time in the tax year, an aggregate balance of more than $10,000 in all your overseas bank and financial accounts. The due date for the FBAR is June 30th for the previous tax year.

If you need any more information regarding the above topic, contact me at 630-663-1500.