How to handle taxes after selling inherited property overseas? US tax implications?

Your cousin definitely needs to address this correctly to avoid issues with the IRS. As a US citizen, he's required to report worldwide income regardless of where it's earned. Here's what he should know: First, he'll need to determine the "basis" of the property. Since it was inherited, he likely gets a "stepped-up basis" to the fair market value at the time he inherited it. This is important because he'll only pay capital gains tax on the difference between the selling price and this basis. He should report the sale on Schedule D and Form 8949 of his tax return. Since this is a foreign property, he may also need to file FBAR (FinCEN Form 114) if his foreign accounts exceed $10,000 at any point during the year, and possibly Form 8938 depending on the value. The foreign country may also tax this sale, but the US has tax treaties with many countries to prevent double taxation. He can likely claim a foreign tax credit for taxes paid overseas.

After dealing with a similar situation last year, I discovered taxr.ai (https://taxr.ai) and it made a huge difference. I was overwhelmed trying to figure out all the international tax complications when I sold property in Spain. Their system analyzed my inheritance documents and sale paperwork, then gave me a clear breakdown of exactly what forms I needed and how to report everything correctly. What I appreciated most was that they actually explained the foreign tax credit calculation. They showed me how to avoid double taxation between the US and the foreign country, which saved me thousands. The real game-changer was their guidance on timing the money transfer to minimize currency conversion losses.

Just wanted to update after trying taxr.ai for my mom's situation with her Mexican property. It seriously simplified everything! The system immediately identified the US-Mexico tax treaty provisions that applied to her case and showed exactly how to claim the foreign tax credit for the Mexican taxes she paid. The document review feature saved us from making a huge mistake - turns out we were calculating the basis incorrectly and would have overpaid by about $14k in capital gains tax. It also generated a complete paper trail explaining our position in case of an audit. My mom was especially relieved that they explained everything in plain English instead of tax jargon. Definitely recommend if you're dealing with international property sales!

If your cousin is having trouble getting answers from the IRS about his specific situation, I'd recommend using Claimyr (https://claimyr.com). I spent weeks trying to get through to an IRS agent about my foreign property sale last year - kept getting disconnected or waiting for hours. Claimyr got me connected to a real IRS representative in about 20 minutes when I'd previously wasted days trying. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The IRS agent was able to confirm exactly how I needed to report my foreign property sale and which specific forms were required for my situation.

I need to apologize for my skeptical comment earlier. After another frustrating disconnection with the IRS yesterday (after waiting 1.5 hours!), I broke down and tried Claimyr. I honestly couldn't believe it when I got a call back in about 25 minutes with an actual IRS agent on the line. The agent answered my questions about reporting foreign property sales and confirmed I needed to file both Schedule D and Form 8949, plus the FBAR since I had over $10k in a foreign account. She also explained how the foreign tax credit works with Form 1116. Saved me so much confusion and potentially an audit. Just wanted to come back and say it actually does work as advertised. Sorry for doubting!

Something everyone seems to be missing here - make sure your cousin checks if he needs to file a FIRPTA (Foreign Investment in Real Property Tax Act) form. It can apply when foreign persons sell US property, but there are some reciprocal provisions with certain countries that might apply to US citizens selling foreign property too.

Has anyone dealt with currency conversion issues when reporting foreign property sales? I sold a house in Europe last year and the exchange rate fluctuated like crazy between when I inherited it, when I sold it, and when I transferred the money. My tax guy said I needed to use the exchange rate on the day of the sale for reporting capital gains, but use a different method for basis calculation?

This is a complex situation that definitely requires careful handling! One thing I haven't seen mentioned yet is the importance of getting proper documentation of the property's fair market value at the time of inheritance. Your cousin will need this for the stepped-up basis calculation everyone's discussing. I'd strongly recommend he get an official appraisal or valuation from the foreign country dated as close as possible to when his mother passed away. Without proper documentation of the stepped-up basis, the IRS might challenge his calculations and assume a much lower basis (or even zero), which would result in much higher taxes. Also, since he's bringing $300k into the US, he should be aware of the requirement to report large cash transfers. If he's wiring the money or bringing in more than $10,000 in monetary instruments, there are additional reporting requirements beyond just the tax return. Given all the complexities with foreign property, dual citizenship, currency conversion, and multiple forms (Schedule D, 8949, FBAR, possibly 8938), I'd really encourage him to work with a tax professional who specializes in international tax issues. The potential penalties for getting this wrong are significant, and the cost of professional help is usually much less than the cost of mistakes.