[vkg]

I am a US citizen and I have a residential plot in India that I purchased in the year 1981 with Indian rupees before immigrating to US. I am planning to allow a builder to construct an apartment complex in my plot with an agreement that I will get 40 % of the apartments as my share towards consideration for the value of the plot. I may get 4 apartments as my share and I intend to sell them. The construction may take about 18 months, so I will get payments in the form of advances and final payments from retail buyers at different times during that period of 18 months. What will be the tax implications in India and US? Will it be treated as a long term capital gain?

Thanks,

[AtlantaTaxExpert]

I cannot comment on the Indian tax issues.

For U.S. taxes, it appears to be a long

[AtlantaTaxExpert]

Long-term capital gain with installment payments.

[IntlTax]

Sounds like a partnership for US tax purposes. You are contributing property and sharing 40% of the profits. No legal entity is necessary to create a partnership for US tax purposes. You would need to file Form 8865 in the year the partnership is created.

If all of the apartments were sold for cash and you were to get only cash (instead of apartments) I would think that your 40% share of the income would be taxable as ordinary income (although I would need to look at this further). If taxable as ordinary income if all the apartments were sold for cash, I don't think that taking your profits in-kind as apartments would convert the income to capital gains.