Inheritance and Property Rights/inheritance from abroad

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Question
QUESTION: Dear Sir,
I am a naturalized US citizen living in the US.
My sister is Austrian and lives in Austria.

She wrote a testament and declared me her only inheritor.
She owns an apartment.  Since I live in the US I will sell the property when I inherit it.  Where will the inheritance tax have to be paid then:  In Austria or in the US?

How much will the inheritance percentage be?  I am her only sister.

Thanks n advance for your reply....j

ANSWER: Congratulations on becoming a US Citizen and welcome to the USA.  We are sorry for your loss however.

I can't speak to Austrian law and you need to engage counsel there;  however there is no "inheritance tax" in the US;  there is an estate tax for estates above $5 million so if you're in that situation, you must get tax advice;  if you're not, you might still get tax advice as to whether you are taxable for any gains on sale.

Normally, when a US decedent dies, the tax basis (what they paid, generally speaking) on their property "steps up" to the value as of the date of death and it is that value on which profit is calculated.

Not sure if it works that way in Austria and there may be taxes payable there.

For example, in the US if one buys a house for $10,000, owns it solely, and it increases to $300,000 on death, and is sold for $300,000 there is no capital gain -- the $10,000 basis "steps up" to $300k in this case.

Please feel free to follow up with any further questions.



---------- FOLLOW-UP ----------

QUESTION: Thank you so much for your fast and expertise reply.
Can you tell me if the inheritance taxes are due in Austria or the US?
TIA, j

ANSWER: I can't tell you about Austria, but if the inheritance is less than $5 million there is no US estate tax payable.

---------- FOLLOW-UP ----------

QUESTION: Dear Sir,

I have a follow up question.

I researched and was told that since 2008 no inheritance tax is levied in Austria, unless the inheritance amount is very high, in the millions. Equally to the US.

If I sell the inherited property worth approximately $ 100.000.00  (onehundred thousand dollar) in what country is the income tax due?
How much will it be if paid in the US?

The property is in Austria, Europe, and I am a US citizen and live in the US.
Thank you in advance for your time and expert reply. J

Answer
You might want to get some tax advice on this or at least a second opinion.  I do not know how Austria calculates its taxes.  If this property was in the US a gain on sale is generally calculated on the profit, which is generally defined as the basis (cost) deducted from the net sales price.

What I don't know and you need to find out is if the basis 'steps up' upon death;  for example if the property was bought way back when for $10,000 and is worth $100,000, net after all sales expenses  today;  if the owner was alive there might be a $90,000 gain to be taxed; however if the basis 'steps up' as of the date of death, which might well be the case, then the starting point is the value today, $100,000 and if the sale is for $100,000 gross, then there is no tax payable.

I do recommend getting tax advice on this -- but there will be no "inheritance tax" payable to the US tax agencies.  

Inheritance and Property Rights

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LEE HORNER ESQ.

Expertise

Probate estate and trust questions regarding California and Arizona estates.

Experience

I've been practicing real estate, probate estate and trust law in California since 1985 and in Arizona since 2005. I do NOT do homework questions. I am unable to advise on questions involving the laws of other states.

Organizations
Arizona and California State Bar Associations and the Ninth Circuit Court of Appeals.

Education/Credentials
Business degree from the University of New Mexico Juris Doctorate from Lincoln Law School of Sacramento, CA

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