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I am a US citizen. I inherited a property in India in 2018 and sold it in 2023 with no gain/loss in Indian currency.

But when I convert the cost and the sale price to US dollars, I get a loss because of the increase in the exchange rate.

On US tax return, do I show it as a loss or do I not report this event at all?

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  • Were you a US citizen in 2018? Were you a US resident for all of those years? Was this "real property" (meaning, land + buildings), or something else? Do you have other sources of income from India? Do you have other investment income in the US? Have you been filing tax returns in both countries regularly? Dec 6, 2023 at 20:57
  • Many questions, I know, but there are a lot of potential complications. The quick answer is simply that your cost basis + proceeds amount should be shown in their USD value at those dates, as the Rupee value is effectively irrelevant for US reporting purposes. However, there could be a lot more of value to say. Dec 6, 2023 at 20:57
  • I am a US. Citizen since 1994. The property was a small house in a village. I have no other income from India. I have investment income in the US. I file tax returns regularly only in the US.
    – user65985
    Dec 6, 2023 at 21:45
  • Even though I did not encounter a loss in India, can I report a capital loss on US tax return?
    – user65985
    Dec 6, 2023 at 21:47
  • Okay it seems this is probably the simplest version of possible outcomes - it appears that yes, this should be allowed as a capital loss when you factor the USD cost basis on the day you inherited vs the USD sale value when you sold it. INR value is not really relevant for the IRS. Lack of tax or credit in India for the flat sale makes filing pretty straight forward as well. Keep all your records and calcs, I assume this would be relatively high chance of audit given rarity. Dec 7, 2023 at 13:44

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As far as the US is concerned, all economic activity you report on your tax return occurred in USD. Any time a transaction occurs in another currency, it should be converted to the USD equivalent at the time of purchase / sale / receipt.

This means that at the time you inherited the property in India, the value at that time in INR should be converted to USD at the exchange rate on that day. That becomes your USD cost basis. At the time you sold it, likewise you should convert the INR value on the day of sale, into USD.

It seems like INR dropped 20-30% from 2017 to 2023, so that would imply you should expect to show a capital loss on your property for US filing purposes - even though no INR gain/loss occurred.

Save screenshots of whatever site you use to pull the exchange rates, and save a copy of the Excel file or math proof for the values. This should be filed with your other papers for your US tax return this year in case you get audited.

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