Foreign Rental

Technical topics regarding tax preparation.
#1
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Clients are filing under the IRS Streamline procedures and have several properties overseas (18). Wife is US citizen. Husband is Green card holder since 2004. Husband owns 16 of the residential rental properties (some since 1991 and few since 2015) and wife has two inherited properties.

They have filed and paid taxes in foreign country and therefore foreign tax credit will apply. My confusion is how to calculate the depreciation basis for these properties and which date to use as placed in service? I am filing returns from 2013 to 2016.

-Which date should I use as Placed in service? Should I calculate the basis from 2004 or 2013?

-And what should I use as the depreciation basis? I have the FMV given by the clients and the assessed values from the foreign filed tax returns. I do not have the original purchase price and improvement details made since 1991.
 

#2
gmhksgp  
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What you haven't addressed were when the couple were married and whether any election was made prior to the husband acquiring a green card to file a joint tax return. In general, a tax position would likely need to be taken as to when the properties were placed in service for US tax purposes. In terms of basis, the usual rules should apply. I would also question why they omitted the reporting for all these years, whether the omission was non-willful, etc., which are the conditions for Streamlined Procedures.
 

#3
Smktax  
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gmhksgp wrote:What you haven't addressed were when the couple were married and whether any election was made prior to the husband acquiring a green card to file a joint tax return.


So the taxpayer has had a green card since 2004 and you feel that his advisor should be addressing years prior to 2004?
 

#4
gmhksgp  
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Smktax wrote:
gmhksgp wrote:What you haven't addressed were when the couple were married and whether any election was made prior to the husband acquiring a green card to file a joint tax return.


So the taxpayer has had a green card since 2004 and you feel that his advisor should be addressing years prior to 2004?


That depends on when they got married and whether §6013(g) or (f) election was made. If they qualify for Streamline Procedures, those prior years would not be relevant in terms of back-filing but I would take that into account in assessing the degree of willfulness and risk associated with this client.
 

#5
Smktax  
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Would they be more willful or less willful if such an election was made?
 

#6
gmhksgp  
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That tells us the number of years their returns may be deficient and what might be the best course of action to rectify that, if not through the Streamlined Procedures. The election, in itself, is not an indication of willfulness.
 

#7
Guya  
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Is this the domestic streamlined or the foreign streamlined? Why start back in 2013? Did the clients expatriate in 2016? The depreciation basis is the lower of cost or FMV. For the green card holder you could use an alternative date that the green card was activated, but only for s877A purposes.
 


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