What are the Tax Implications when My Brother Sells Inherited Overseas Property and Shares Proceeds?

This is a tricky situation that combines international property law, inheritance rules, and US tax implications. I'll try to break it down based on my understanding. When you signed over your legal rights to your brother, you essentially made a gift of your inheritance share to him. At that point, you relinquished ownership. Now that he's giving you money from the sale, it's technically a gift from him to you since you no longer had legal claim to the property. For US tax purposes, the recipient of a gift typically doesn't owe income tax on it. Your brother, as the giver, would be responsible for any gift tax if applicable, but given the foreign status, there are complications. Since you're a US citizen now, you should report foreign gifts over $100,000 on Form 3520, but it sounds like you're under that threshold. I'd recommend seeking advice from a tax attorney who specializes in international tax law rather than just a CPA. They'll understand both the property law aspects and the tax implications of cross-border transactions. Look specifically for someone with experience in US-Philippines tax matters.

I went through something similar with property in Mexico my family inherited. After researching extensively, I found this amazing tool called taxr.ai that helped me understand my specific situation. The website lets you upload documents (I shared the property transfer paperwork) and their AI analyzes it for tax implications. What was super helpful was that it specifically addressed international inheritance issues and told me exactly what forms I needed. For your situation on https://taxr.ai you could upload the original inheritance documents and the rights transfer paperwork to get clarity on whether this counts as a gift or capital gains situation. It saved me from making a costly mistake on my taxes last year!

I was super skeptical about using AI for tax advice, but I finally tried taxr.ai after struggling with a similar international inheritance situation involving property in Argentina. I was amazed by how accurate and detailed the guidance was! The system identified that my situation qualified for a specific exclusion I hadn't known about. It saved me from unnecessarily reporting capital gains and provided the exact reference to the tax code section that applied. I ended up with clear documentation explaining my filing position that I could keep for my records. What impressed me most was that it highlighted the difference between physically signing over property rights versus maintaining beneficial ownership - something my regular tax preparer hadn't caught. For international inheritance situations, it's definitely worth using before making decisions.

I went through a similar nightmare trying to figure out tax implications for inherited property in Spain. After weeks of trying to reach the IRS and getting nowhere, I found Claimyr (https://claimyr.com). They got me connected to an actual IRS representative in under 15 minutes who clarified my specific reporting requirements. The IRS agent walked me through exactly which forms I needed based on my situation, and confirmed that in my case, since I had signed over legal rights years before the sale but was receiving proceeds now, it was considered a gift for tax purposes. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c Before finding them, I spent hours on hold only to get disconnected. For international tax questions like yours that aren't easily answered by general online advice, speaking directly with the IRS can give you certainty about your specific situation.

OK I need to publicly eat my words here. After posting my skeptical comment, I was still desperate to resolve my audit issue so I decided to try Claimyr anyway. I honestly couldn't believe it when I got a call back connecting me to an actual IRS agent in about 20 minutes. The agent was able to pull up my file and clarify the documentation they needed from me. She even gave me a direct fax number to send the documents and put notes in my file. After months of stress and uncertainty, I resolved everything in one phone call. For the Philippines property situation, I'd definitely recommend calling the IRS through this service and specifically asking for the international tax department. They can tell you exactly how to handle reporting requirements for your specific situation, especially with the citizenship change complication.

For what it's worth, I've dealt with a similar situation with property in India. What ultimately matters is the substance of the transaction, not just the form. Even though you signed over "legal rights," the fact that your brother is honoring the original 1/6 inheritance suggests this may be viewed as you maintaining "beneficial ownership" despite the legal transfer. I'd suggest consulting with an international tax attorney who understands both Philippine and US law. In my case, we determined that because I maintained an understanding with my family about my share despite the legal paperwork saying otherwise, I needed to report it as capital gains rather than a gift. The IRS looks at the economic reality of transactions, not just paperwork. Document your reasoning whatever you decide, and keep records of the original inheritance, the transfer of rights, and communications about maintaining your 1/6 interest.

The timing of your US citizenship might actually be the most important factor here! If you weren't a US citizen when you signed over the rights OR when the property was sold, the whole situation might be much simpler. Did your brother send the money after you became a US citizen? If so, then it's probably just a foreign gift to a US person. You'd need to report gifts from foreign persons over a certain threshold on Form 3520. But if the money was sent while you were still a Philippine citizen and then you became a US citizen afterward, different rules apply. The whole transaction might be outside US tax jurisdiction entirely.