USA Cost basis for asset recovered via inheritance abroad that was previously confiscated by foreign government (nationalized)

Feb 3, 2020
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United States
Hello, have a question about a cost basis for an asset (property -- land & buildings) that was confiscated by government (nationalized) in the 1940s and recovered in the 2000s. The challenge is that it was part of inheritance. In summary:

Region: Eastern Europe
- 1949 a fully functioning/producing factory was nationalized by the communist government
- 1970s founder/owner passed away and his wife and children received inheritance -- the said property was NOT part of the estate/inheritance (as was owned by communist government ).
- 1990s wife passed away and the children inherited her estate -- again, the said property was NOT part of the estate/inheritance
- 2000s -- the children (now US citizens) of the owner recovered the property (now only dilapidated buildings and land, not a functioning factory anymore) from government after lengthy court process

The property is up for sale. What should the cost basis be for capital gains calculation for the children?
Normally, the cost basis is the value on the day a person inherited property. However, during the times of inheritance, the property was not part of the estate.

Would appreciate advice or a resource where to seek such advice.

Thank you!

Werner Reisacher

VIP Member
Jun 30, 2017
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If I understand correctly, the beneficiary of that inheritance US residents for ta purposes. Please make sure that you also include in your investigation about the tax situation the legal implications regarding "foreign bank accounts" better known as FATCA rules and regulations and the duty to report foreign financial investments to the IRS and the US Treasury .

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