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Value of Inherited Land in India

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Level 5
last updated ‎June 03, 2020 4:12 PM

Not expecting a good answer but - client inherited 8 acres and 64 cents (had to look that one up) in India in 2016.  Of course no appraisal was done at date of death.  We have a tax assessment from around the date of death but I cannot find (a) what % is the assessment to actual market value in India, or (b) any way to look up historical values.  If no one has an answer I may have to take sales price and look up annual inflation numbers and do a calculation to come up with my best guess.  Or can anyone else come up with a better way to come up with an inherited basis?

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Level 14
last updated ‎June 03, 2020 4:12 PM

Ask the lawyer(s) who handled the estate/deed transfer in India in 2016?


ex-AllStar
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Level 5
last updated ‎June 03, 2020 4:12 PM

Thanks.  No one has a clue and apparently in many of the low income parts of India there are no formal court filings.

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Level 12
last updated ‎June 03, 2020 4:12 PM

I would compare the current tax assessment against the sales price to get that ratio you want for historic valuation. See if that makes sense.

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Level 15
last updated ‎June 03, 2020 4:12 PM

I wouldn't take that for an answer.  India has a very well established legal and tax system.  If your client doesn't understand how to ask the relevant questions, have your client authorize you to speak with the attorney and a qualified accountant (perhaps by referral) in India.

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Still an AllStar
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Level 10
last updated ‎June 03, 2020 4:12 PM

That just means 8.64 acres.  India has a capital gains tax, but unfortunately for you, it doesn't apply to farm land.  Adjusting for inflation won't tell you much, unless you also adjust for currency fluctuation.  But farm products have suffered from deflation the past couple years in India, so farm land may have followed that trend.

If the value of the land had gone down since 2016, I would expect a client to tell me that sad story.  If it had increased greatly, perhaps because it became more likely to have rezoning approved, I would expect a client to be reluctant to fill me in on those details.  Your starting point is zero basis.  Tell that to your client, and then listen for helpful facts that IRS would accept in an audit.  Why wasn't it sold in 2016?  Why was it sold in 2019?  

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Level 15
last updated ‎June 03, 2020 4:12 PM

Well, well, well.  If the land was sold in 2019 and the OP is trying to dig up a basis now, I think the client is in trouble.  I just thought they're somehow working on the 2016 return.

It sounds to me a F.3520 wasn't filed for 2016 when the property was inherited.  No tax would have been payable on the foreign bequest but the penalty would amount to 5% of the bequest for each month of failure to report, limited to a total of 25%.

The taxpayer may also have omitted to file a F.8938 if the inheritance was in a foreign estate and the max aggregate value of the SFFA exceeded the applicable threshold.

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Still an AllStar