Foreign inheritance: do I have to pay capital gains?

Discussion in 'Tax' started by Mike Gorund, Jun 25, 2004.

  1. Mike Gorund

    Mike Gorund Guest

    My mother passed away in 2003. The legal aspects of the
    estate have recently been finalized, requiring probate by
    courts in both Ireland and England. In her will, my mother
    left all her estate to my 2 siblings and me. The estate
    consists of stocks, a house, and cash. Since she died, both
    the stocks and the house have appreciated in value, and
    there has also been appreciation because the estate is based
    in Europe, and the euro has risen relative to the dollar.
    Because the house is the most valuable item, worth more than
    either the stocks or cash, my brother is going to buy out
    the interest of my sister and me in the house. In the
    settlement, I will receive cash (from the estate and from my
    brother), my sister will receive the stocks and cash (from
    my brother) and my brother will receive the house. Will I
    have to pay a capital gains tax on the increase in value
    between the time my mother died and the date I receive a
    settlement from the estate? Also, I have to file form 3520
    to report a foreign inheritance >$100k. Am I right to assume
    the tax year for filing that form will be this year (2004)
    when I receive proceeds from the estate?

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    Mike Gorund, Jun 25, 2004
    #1
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  2. Mike Gorund

    Dan Evans Guest

    (Mike Gorund) wrote:

    > My mother passed away in 2003. The legal aspects of the
    > estate have recently been finalized, requiring probate by
    > courts in both Ireland and England.
    >
    > Will I
    > have to pay a capital gains tax on the increase in value
    > between the time my mother died and the date I receive a
    > settlement from the estate?


    I believe that the answer should be "yes," although I know
    of no specific authority on point.

    Specifically, I have never seen anything in Subchapter J (or
    its regulations) about how a beneficiary of an estate should
    report (or calculate) income or gains from an estate when
    the estate is a foreign estate.

    But the general rule of section 61(a)(15), that gross income
    includes income from "an interest in an estate or trust"
    would seem to require the inclusion of the gain unless there
    is a code section, regulation, or treaty that excludes it.

    *Dan Evans
    *Author of the Tax Protester FAQ
    *http://evans-legal.com/dan/tpfaq.html

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    << The Charter and the Guidelines for submitting >>
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    << ------------------------------------------------->>
     
    Dan Evans, Jun 27, 2004
    #2
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  3. Mike Gorund

    Dan Evans Guest

    (Mike Gorund) wrote:

    > My mother passed away in 2003. The legal aspects of the
    > estate have recently been finalized, requiring probate by
    > courts in both Ireland and England.
    >
    > Will I
    > have to pay a capital gains tax on the increase in value
    > between the time my mother died and the date I receive a
    > settlement from the estate?


    I believe that the answer should be "yes," although I know
    of no specific authority on point.

    Specifically, I have never seen anything in Subchapter J (or
    its regulations) about how a beneficiary of an estate should
    report (or calculate) income or gains from an estate when
    the estate is a foreign estate.

    But the general rule of section 61(a)(15), that gross income
    includes income from "an interest in an estate or trust"
    would seem to require the inclusion of the gain unless there
    is a code section, regulation, or treaty that excludes it.

    *Dan Evans
    *Author of the Tax Protester FAQ
    *http://evans-legal.com/dan/tpfaq.html

    << ------------------------------------------------->>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org >>
    << ------------------------------------------------->>
     
    Dan Evans, Jun 27, 2004
    #3
  4. Mike Gorund

    Dan Evans Guest

    (Mike Gorund) wrote:

    > My mother passed away in 2003. The legal aspects of the
    > estate have recently been finalized, requiring probate by
    > courts in both Ireland and England.
    >
    > Will I
    > have to pay a capital gains tax on the increase in value
    > between the time my mother died and the date I receive a
    > settlement from the estate?


    I believe that the answer should be "yes," although I know
    of no specific authority on point.

    Specifically, I have never seen anything in Subchapter J (or
    its regulations) about how a beneficiary of an estate should
    report (or calculate) income or gains from an estate when
    the estate is a foreign estate.

    But the general rule of section 61(a)(15), that gross income
    includes income from "an interest in an estate or trust"
    would seem to require the inclusion of the gain unless there
    is a code section, regulation, or treaty that excludes it.

    *Dan Evans
    *Author of the Tax Protester FAQ
    *http://evans-legal.com/dan/tpfaq.html

    << ------------------------------------------------->>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org >>
    << ------------------------------------------------->>
     
    Dan Evans, Jun 27, 2004
    #4
  5. Mike Gorund

    Dave Woods Guest

    "Mike Gorund" <> wrote:

    > My mother passed away in 2003. The legal aspects of the
    > estate have recently been finalized, requiring probate by
    > courts in both Ireland and England. In her will, my mother
    > left all her estate to my 2 siblings and me. The estate
    > consists of stocks, a house, and cash. Since she died, both
    > the stocks and the house have appreciated in value, and
    > there has also been appreciation because the estate is based
    > in Europe, and the euro has risen relative to the dollar.
    > Because the house is the most valuable item, worth more than
    > either the stocks or cash, my brother is going to buy out
    > the interest of my sister and me in the house. In the
    > settlement, I will receive cash (from the estate and from my
    > brother), my sister will receive the stocks and cash (from
    > my brother) and my brother will receive the house. Will I
    > have to pay a capital gains tax on the increase in value
    > between the time my mother died and the date I receive a
    > settlement from the estate?


    Yes.

    > Also, I have to file form 3520
    > to report a foreign inheritance >$100k. Am I right to assume
    > the tax year for filing that form will be this year (2004)
    > when I receive proceeds from the estate?


    Yes.

    --
    David M. Woods, EA, ChFC, CLU
    Woods Financial Services
    Norwood, MA 02062
    www.woods-financial.com

    << ------------------------------------------------->>
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    << messages to this newsgroup are at www.asktax.org >>
    << ------------------------------------------------->>
     
    Dave Woods, Jun 27, 2004
    #5
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