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The sale will be considered a capital gain to you, so the tax owed depends on the difference between the sale price (after expenses) and your cost basis. Inherited property has a cost basis equal to its fair market value on the date of death of the person you inherited it from. So it's important to know what that figure is. The tax rate on capital gains for most people is currrently 15%. |
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ebaines is correct. 1. You will report the sale on Schedule D (Form 1040). The capital gain is long term capital gain irrespective of when you inherited it. 2. Your cost basis is the fair market value of the property on the date of death. 3. If you paid any taxes on this sale in Ecuador, you will file Form 1116 to claim foreign tax credit. Thus you may owe little taxes in the U.S. return. |
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To further expound on this issue, because of the stepped-up basis cited by ebaines, it is likely that you will owe NOTHING when everything is said and done, because you will add to the basis the costs of the sale, to include the sales commission paid to the agent.
I have done multiple Schedules D for such sales, and it is not unusual at all for the sale of an inherited property to actually produce a paper LOSS when the costs of the sale is factored in. |
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