Do I need to report to IRS or will I have to pay tax on the transferred money? I need to mention that the property abroad was bought by me BEFORE becoming a US permanent resident, and it was sold by me AFTER becoming a US citizen/permanent resident. The property was never reported to IRS.

So question remains: Will I need to pay taxes on the money transferred from abroad?

  • From IRS perspective they have no visibility of your property transaction. This is simply an inflow of cash from abroad, your previous domicile. If they ask where the funds originate from, technically they do not originate from the sale of a property, but the original source is where you acquired the funds in the first place to originally purchase the property (of course they may be cap gains). However, for disclosure I have no idea on what you are/not supposed to declare to IRS before and after becoming citizen so this is just a change of perspective of your question. – Attack68 Jul 15 '18 at 8:30
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    Transferring money will not generally incur taxes. The bank will have to report it, though. If you’ve made a capital gain on the sale, then that does incur US taxes; your immigration status at purchase makes no difference. – Peter K. Jul 15 '18 at 12:20
  • I honestly think it's just "your money" coming from overseas. You moved your furniture, your cat, and now your money. Leave it at that. – Fattie Jul 15 '18 at 13:45

Money transfers (where you own the money before and afterwards) are irrelevant to the IRS. You pay taxes for income, not for moving your own money around.

Your problem will be that you neglected to include it in your tax filings for the previous years, that's effectively tax fraud (and you could have even cheated yourself). You cannot simple ignore it in tax filings because 'it's in another country' or because 'you had it before'.
At the moment of sale, the money you get is compared with the buying price (even if that was decades ago before you ever thought about the US), and the gain is taxable income.

The recommendation is clearly to get your previous years' tax filing adjusted to include it. That's some effort, so maybe you should work with a CPA that has some experience.

Note: those are unfortunately hard to find and expensive for properties outside of the US, I tried for a long time and ended up doing it myself with tax software.

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