[AlextheUser]

Hello, I'm a U.S. citizen and I'm trying to sell a house for about $100,000 in Russia. I inherited that house from a relative only over a year ago.
Now I know I can avoid double tax. But can anyone tell me how much tax would I need to pay based on information that I gave? Where would I need to look for that sort of tax information?

I appreciate any help or direction. Thanks

[AlextheUser]

Also, since I'm selling house in Russia, does that mean that I will have to pay taxes in Russia for sure?

[AlextheUser]

The more I read about international tax laws the more I'm confused.

What exactly does double tax relates to? Sales tax, capital gain tax, or money transfer tax ?(probably not the latter)

I checked the transfer tax for both Russia and U.S. and I'm pretty sure don't have to pay that (though I'm not sure whether I'm suppose to show it on form 3520 or 3510 since sale is about $ 100,000).

I realize that nobody here probably knows about sales tax in Russia so I'll have to figure that out somehow from tax expert (though few that I asked tell me you MAY or MAY NOT pay it, which just makes no sense to me... since you either pay or you don't).

What I still don't know is - do I have to pay income tax on this sale (its sale from inheritance)? Do I pay capital gain tax here AND in Russia?

[AtlantaTaxExpert]

You DO have to pay any sales, transfer and/or capital gains tax in Russia first.

You would then report the sale on Schedule D, subtracting the property's basis from the sales price to determine a capital gain or loss.

The basis is:

-the Fair Market Value of the property at the time of your relative's death PLUS

- costs of the sale (reak estate agent commissions, transfer costs, title, etc.).

If you have a capital LOSS, report it, but do NOT deduct it.

If you gave a capital gain, report it, then claim a passive income Foreign Tax Credit using Form 1116 for the Russian capital gains tax you paid earluer.

[AlextheUser]

Thank you so much for clearing that up.

I wonder if you can help me clarify this - where exactly does Double Taxation come into play? I thought that I don't have to pay taxes in one of the two countries. (is foreign tax credit a sort of a double taxation tax relief?)

[AtlantaTaxExpert]

The Foreign Tax Credit is designed to relief the potential double taxation.

However, I suspect it will never come into play because, usually, the cost of the sale puts any gain to a loss on the Schedule D. If you report a loss, there are no taxes on the U.S. return.