I live in US and my parents live abroad. Being the only son, I will inherit their home after they pass away. When this will happen I intend to sell it. How will I be taxed on this? Is there a way to minimize the tax I have to pay?

Thank you,
Cuptor

You will get a "step up" in basis on the property inherited. If the value of the property is more than $100,000, you need to report the inheritance on IRS Form 3520, Part IV, but you will not be taxed on its receipt.

What do you mean by "step up"?
Also my question is about the tax I will pay when I will sell it.

Step up means that the tax basis (your tax cost) will increase to equal the fair market value of the property you inherit on the date of death. Thus, if you sell the property immediately after you inherit, you will have no U.S. tax imposed because there will be no gain.

Thanks a lot.

Cuptor:

Your parent's "basis" for the property is what they originally paid for it, plus the cost of whatever improvements they have done to the house over the years. If your parents were to sell the property and pay U.S. capital gains on the sale, they would pay taxes on the difference between the basis and the proceeds of the sale.

Now, under current tax law, when your parents die, the basis is "stepped-up" or brought up to the fair market value of the property at the date of their death, or, in some cases, to the six-month anniversary of their death.

The net result is that the difference between the stepped-up basis and the proceeds from the sale is often ZERO after the costs of the sale (commissions, closing costs, etc.) are factored in. If there is no profit, there is NO capital gains to tax.

My parents sold property abroad and received about $80,000 after paying the taxes in the other country. My question is how much taxes will they have to pay in the U.S for that sale.

They will be liable for the capital gains tax. The gain is the difference between what they paid for it and the $$80K they sold it for.

They WILL be able to a Foreign Tax Credit (Form 1116) for the taxes they paid overseas on the sale.

What if my parents, who have green cards and file US tax return, sell their private apartment in Russia (say for $700K, with a basis of $50K), and use the proceeds to purchase a new primary residence in the US (say for $200K)? Would they still be taxed on the full gain amount ($650K) or the difference ($450K) ? Is there a way to minimize tax in this situation ?

Did your parents use the private apartment as the primary home for at least two of the past five years? If so, they probably qualify to exclude $500,000 of the gain from the sale of the apartment.

Further, they can claim a tax credit for any taxes they paid to Russia on the sale.

The combination of these two benefits will probably result is ZERO taxes being due.

I am US citizen and my wife is a green card holder. We are living in Vietnam for more than 5 years. We intend to relocate to live in the US and will sell our primary house in Vietnam. My wife was inherited this house from her parent a few years ago. When we sell the house in Vietnam, do we have to pay tax on capital gain or income tax in the U.S?

Thank you
CKat

Your Vietnam house meets the primary home exclusion, since you lived in the house as your primary home for two of the last five years.

This allows you to EXCLUDE up to $500,000 of the gain on your sale. If the proceeds from the sale is LESS than $500,000, you do not even have to report the sale on your tax return.

If the sale price is MORE than $500,000, then you have to calculate the capital gain to see if the gain is more than $500,000.

If it is, then you pay taxes on the gain that is MORE than $500,000.

If it is not, then you do NOT have to report the sale.