<laxmiv[at]yahoo.com> wrote:

- quote -

This might be worth doing a bit of research on, just to
eliminate anything you might be missing. I think she would
be taxable on this, but remember to use US rules for
figuring basis. So, she will not get the zero gain on the
Indian return, some gain will have to be figured.

A couple of things to think about:
1) Are we sure about the dates. For example, was she still
a non-resident when the house was sold?
2) I see no reason why the housing exclusion would not
apply.
3) Can any "improvements" be added to the basis? How about
selling costs and such?
4) Was she married at any time while she owned the home? If
the client's father died in there somewhere, his half of the
house's basis might be "stepped-up".
5) With the affect of both Indian tax and US tax, would
there have been some benefit in NOT rolling the gain to an
Indian bond, paying some tax there, claiming a US tax
credit, and also having some of the money freed-up and not
subject to an Indian tax in the future. (Although the
answer to this will depend on Indian treatment of capital
gains, her potential tax rate there, and other questions.
Also, the point may be moot at this point, since it might be
too late to reverse the bond purchase. This may be a
possibility, though, if this is a 2004 transaction we are
talking about.)

Bryan

--
-------- Bryan Kellar, EA
Oregon Tax Help, Inc. Portland, Oregon
www.oregontaxhelp.com
www.canadatax.org

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One of my client's mother who recently became a US resident,
has sold her residence in India. Her basis in the house is
about $125k and she sold it for $628k.

So she has capital gains of about $500. She has invested the
$500 in some Indian Government Bond to avoid paying capital
gains tax in India.

My question is what is her tax liability in the US? Her
Indian income tax return shows zero capital gains after
making the adjustment for the investment.

Can I go by the Indian tax return for US tax purposes? Or do
I calculate capital gains on the property like any property
sold in the US? In that case, she will have capital gains of
$500K. She may be able to exculde $250K since it was her
primary residence before she moved here.

She has no US income and very little interest income in
India.

Please help.

Sincerely,

Laxmi Vidyasagar

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