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Foreign Tax Credit - Other Gross Income

Forum|Forum|2 years ago
April 5, 2024
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Hello

I inherited property in India and there, capital gain is calculated from original price. In India, I have capital gain of $50,000 calculated by converting Rs into $ with the exchange rate as of sale date.

In US, capital gain is calculated from the price you inherited the property. So that amount will be $10,000.

My question is, while entering Foreign Tax Credit in TurboTax, Other Gross Income - Should I enter 50,000 or 10,000?

And since Capital gain in India was taxed at 20%, should I multiply it by .5405 and enter that amount i Foreign Qualified Dividend and L.T. capital gains?

Best answer by pk12_2

@vk29 , having read through your post and reply from my colleague @DaveF1006 ( and agreeing with in general ), I am surprised by some statements:

(a) India uses an indexed valuation and thus the Capital gain amount is generally lower i.e. the owner's basis is indexed year over year, in contrast to US basis ( acquisition cost [plus cost of improvements during the holding period).

(b) For US purposes, :

(1) your basis is stepped up ( to FMV ) the time of passing of the decedent, if you received the asset by inheritance.

(2) you tell TubroTax that you have sold a house ( under Personal Income; I will choose what I work on ; then go down the list of income categories and choose sale of assets/ business and follow through with all the questions. Turbo will ask for whether it is your home ( choose not my home ), basis ( FMV at death of the decedent ) etc.

(3) then under deductions and credits tab, choose Foreign Tax credit --- this will bring up form 1116, where the foreign income doubly taxed is "gross income from foreign sources" ) = your capital gain per US rules) and the foreign taxes you paid. Category of foreign income is passive.

Does this make sense ? Is there more I can do for you ?

Namste ji

pk

DaveF1006

First of all, if you haven't entered this transaction as an investment sale in Turbo, do so or else your foreign tax credit will not be accurate. To enter, if you haven't done so.

Go to federal
Wages and income
Go to investment income
Go to Stocks, Cryptocurrency .......
Classify this as other
Follow all prompts that follow to determine what your capital gains is on the sale.

Now when you report the Gross income in the Foreign Tax Credit section. You will report what the house sold at. You do not need to make any other calculations on your own as Turbo Tax will do that for you.

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V

vk29Author

I have entered Sale in Wages and income - Proceeds and Fair market Value when previous owner passed away. And that difference is $10,000 which will be my Capital Gain in US from that sale.

But when entering Foreign Tax Credit - Other Gross Income, do I enter 10,000 (Capital Gain per US laws) or 50,000 (Capital Gains per India laws)

P

pk12_2Answer

Employee