england5954

Try to make this as short as possible. Lived in Florida for 20 years. I have a brother who lives in the UK. After our father passed away last year, the house that my parents lived in was signed over to my brother an myself. We have a prospective buyer for the house. My question is, how does the taxes work for me. I know there will be capital gains tax in the UK, but not sure what I will need to do. Can anybody point me in the right direction. Don't think there is a qualified attorney/lawyer in Panama City that could help me out with this.

Cook_County

You will have filed a 3520 for the inheritance and have a step up in basis.

Your liability on the gain since the date of death is to US income tax not UK CGT.

JAJ

Comments, including but not limited to:
1. The receipt of the inheritance (share of the house) is not a taxable event for U.S. federal income tax purposes and there is no federal tax on receipt of inheritances. It appears that Florida does not have a State inheritance tax.

2. As someone else has said, a form 3520 must be filed with the IRS - but, as far as I know, only if the value of what has been received exceeds $100k. Which probably is the case if it's real estate in the U.K.

3. Perhaps research what the deemed value of the inheritance is. The IRS may consider a joint share of a house at 50% of the value (even if fair market value of a half-share of a property is much less than that).

4. Capital gains tax in the U.S. will be based on the difference between the value of the inheritance, and the sale proceeds. Both amounts converted into USD, at the relevant exchange rates. Depending on how long it has been since the inheritance, it may be a short term or long term capital gain.

5. Non-residents in the U.K. are currently not subject to U.K. capital gains tax on U.K. real estate, although this will likely change from 2015.

england5954

Thank you both for responding so quickly. Have a lot of researching to do me thinks :-). Have already received some of the money from the estate. The house is what is going to be the headache.

RICH

I suggest you look for an accountant rather than a lawyer.

england5954

Already on the hunt for a CPA. Thanks.

JAJ

Perhaps note some/all of the following points:
Choosing a Tax Accountant-USA : British Expat Wiki

england5954

Appreciate the link JAJ.

Pulaski

Meaning your liability for CGT is based on the fair market value on the date you inherited it, not the historic cost.

S Folinsky

I have no idea how Florida's state tax system works. That said, the Federal system taxes the estate, not the individual inheritance. Also, on the capital gains end of things, the Federal system has a tax free "step-up" in basis at time of death. If my spouse and I were sell our house, we would have a capital gains assessment [exacerbated by the previous "carry-overs" under prior law], but our kids will not be taxed on the capital gains if we die before sale. [My understanding is that the surviving spouse also gets the step-up].

jmood

Does this mean that if the property's value does not change between date of inheritance and date of sale there will be no US federal tax to pay?

What happens when the OP brings that money into the US? Still the same tax treatment, i.e. if as above, then no federal tax to pay?

Cook_County

If the property value remains the same in Sterling there could still be a gain or loss is dollars depending on fluctuations in exchange rates; but costs of sale might assist reducing any gain for US tax purposes.

Bringing money to the US is not a taxable event.

jmood

So then do we just show an appraisers letter to the IRS to prove fair market value at date of inheritance? If it is a non US property it seems pretty open to manipulation, no?

It's just that this seems too good to be true. I won't have to pay US tax on anything I inherit outside of the US and then sell.

JAJ

It's self-assessment so you don't have to show anything unless you are audited. If you are audited, then normally assets are valued as part of the probate process and you would submit a copy of that documentation as evidence of fair market value in foreign currency at time of inheritance. If you have to file a form 3520, this is also part of the process of establishing a cost base, to calculate capital gain on future sale.

Note that you should keep this evidence (of value at time of inheritance) permanently.

Why is it too good to be true? It would be the same if you inherited property within the United States. Unless your state has an inheritance tax.