Sale of foreign property which was given as gift from my father

Forum|Forum|2 years ago
March 31, 2024
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In 2023, I sold a condo given to me by my father few years ago. I am US citizen. He was not. I understand that I have to pay capital gains on this sale. I assume I calculate the gains by subtracting the value of the condo when it was given to me from the sale price (minus real estate agent fees). Do I also have to submit form 3520 (foreign gifts and list the sale price)? Since the income from the sale was deposited first into a foreign bank before being transferred to my us account, I understand I also have to file FinCEN Form 114. What about forms 8949 and 8938? Do I also need to complete these forms?

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Best answer by pk12_2

@MJ154 , I am sorry for your loss.

On the 3520, you can either file it with a note explaining that it was an error and mail it to the address shown on the form. TurboTax does not support this form., if the valuation of the asset was above US$100,000. You can also ignore this and take the risk that IRS does not check on this ( this is because when you recognize the disposition of the asset on your 2023 filing , you will need to answer how you acquired the foreign asset). Either way it is risk but I like the first option better.

A point to note is the condition under which your father gifted you the asset --- if there was stipulation that you cannot do certain things ( like sell ) till your father has passed -- in the US this Life Estate -- then the gift is constrained and therefore not quite a gift till the passing of the donor. In such a case I would argue that the basis should be the FMV at the time of passing ( whether he used it or not ).

If that is the case you should perhaps consulta tax attorney to be able to homologate Polish and US laws.

If not , then my earlier statements stand.

Is there more I can do for you ?

BTW -- if this has answered your query, please accept the answer so the thread closes.

pk12_2

Employee

@MJ154 , the gift of an asset and the recognition thereof requires -- (a) recognition by filing form 3520 for the year ( contemporaneously) that the event took place. So when was this gifted / titled in your name? In which country ? (b) generally the basis of the property transfers from the donor to the donee i.e. if the donor acquired for US$XXXX and put in improvements of US$YYYY then his/her basis would be US$ZZZZ ( sum of US$XXXX and US$YYYY). The receiving person's basis at the time of donation would be also US$ZZZZ..

Thus the gain on disposition ( for the donee/recipient) would be based US$ZZZZ not on FMV at the time of transfer from donor to donee.. Note that in some countries the Capital gain is based on an indexed value of the asset -- not so in the US.

If the proceeds rested in a foreign bank account that you own and/or have signature authority over, then both FBAR ( form 114 at FinCen.gov ) and FATCA ( form 8938 ) would come into effect.

To make this answer more focused, please consider answering my questions.

MJ154Author

The property was given to me in 2012. I did not know it had to be reported to irs so no forms were filed at that time; The property value was listed in the formal agreement. No improvements were made to the property and it was kept vacant awaiting possibility of my father moving in there. After my father passed last year, I was free to finally sell it. The property was in Poland. I did not have to pay any taxes there, since it was a gift and I kept it long enough to qualify for exemption.