Client is a US citizen & inherited land in Japan. He paid inheritance tax to Japan of about $124,000. He has sold the land. There will be a gain on the sale. Can the inheritance tax be added to basis or must he claim the amount on the 1116 or schedule A?
After talking to another EA & reading TTB page 11-11, credit can be claimed for tax paid to a foreign country on income that is also taxed by the US. Since an inheritance tax is not based on income & is not taxed by the US, I would consider this an acqusition cost & add it to basis.
After talking to another EA & reading TTB page 11-11, credit can be claimed for tax paid to a foreign country on income that is also taxed by the US. Since an inheritance tax is not based on income & is not taxed by the US, I would consider this an acqusition cost & add it to basis.
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