How do I avoid paying hefty taxes on the sale of foreign property?
I have relatives in the Philippines that sold some real estate property there. From the proceeds, my 84 year old mother is about to receive a check of about $100,000 for her share. She lives with me in the USA. How do we avoid paying US taxes on this foreign property sale? We don't want to give to charity or buy any more property in the US.
I assume your mother is a U.S. person who has lived with you for at least a couple of years. This may not apply to your case, but if the property in the Philippines was your mother's principal residence for at least 2 out of 5 years, she may benefit from certain tax exclusions from the sale. Otherwise, unfortunately, I don't believe that you could avoid paying the U.S. income taxes unless there are no gains from the sale. However, the good news is that the taxes you need to pay may be less than what you expected.
Firstly, you only pay taxes on the gains. To keep it simple, if your mother spent $60,000 in total on this property and received $100,000 from the selling proceeds, the gain is the difference which is $40,000. The potentially tricky part here is to figure out what we called the cost basis of this piece of property because of the different accounting standards in two countries.
Secondly, if the property was held more than one year and sold for a gain, it may qualify for the long-term capital gains treatment with a lot lower tax rate. You could find the 2017 tax brackets here.
For your case, in summary, depends on the cost basis and whether it qualifies for the long-term capital gains treatment, if your mother doesn't have any other income in 2017 and the tax filing status is married filing jointly, she may not even need to pay any taxes from the sale at all.
Based on the limited information you provided, I can only give you some general guidance here. I recommend you to consult a tax professional for your specific situation.