foreign inheritance property

Cebusguy

My wife and I file jointly. My wife's father, who is European, died last year and she and her sister jointly inherited some cash (from bank account) and some land in Europe. They are selling the land and her sister (who lives in Europe) will receive the money then wire transfer my wife's share to her (my wife is a naturalized US citizen). She already has transferred my wife's share of the cash. As long as the land sells for less than the cost basis of the inherited land, does she have to report it to the IRS? The amount will be over $10 K by a little bit. Same question for the inherited cash she received. From the IRS website, my understanding is that since it is an inheritance, as long as it is not more than the cost basis and any foreign inheritance taxes are paid then it is not taxable in the US. Is this correct?

TriciaD

Dear Cebusguy, 

Foreign inherited income is typically not subject to taxation. However, any income generated from these assets, such as interest, dividends, or rent, must be reported on your tax return. For further clarification, please refer to this IRS interview: IRS Inheritance Tax Interview. 

Additionally, when you sell inherited land, the sale must be reported on your tax return in the same manner as the sale of U.S. land, regardless of whether the transaction results in a loss, gain, or neither.