[progtick]

Friend made long-term capital gain by selling an inherited property in a foreign country. He is way past-due for filing tax for this gain, because he simply hasn't been able to get an accurate report of fair-market-value yet at the time of inheritance. (It's one of those countries where you have to show up there to get such reports.)

What are some ways he could file a return by October 15 deadline this year? It would still be one-year past-due. To make matters "worse", he hasn't filed taxes in his homeland either for similar reasons, so he can't take foreign tax-credit yet, but I'm sure he'll owe no federal taxes after the foreign credit. He may still owe some state taxes.

So two issues:
1)Cost is unknown yet - so how to compute capital gain? Is it okay to go with an estimate for now? What if it's really off?
2)Tax in unpaid to the foreign country yet - how to claim its credit? Is it okay to ignore it for now and revise/amend it later once the taxes to foreign country are paid?

[ebaines]

I would suggest that he file and pay the capital gain based on his best, defensible estimate of what its value was at the time of inheritance. Perhaps if he called a real estate agent in the region where the property is located they could give him an idea as to how property values have changed over the years. If his numbers are "reasonable" it's doubtful that the IRS will complain. Later when he gets a more accurate estimate he can file an amended return, form 1040-X.

And no, he cannot take a credit for foreign taxes if he has not paid any foreign taxes. That would be like taking a deduction for a child when you have no children. If/when he pays foreign taxes he can take a deduction in the year that he pays those taxes - if he pays foreign taxes sometime in calendar year 2012 he deducts them on his 2012 tax return, not his 2011 or 2010 return.