hi, question on foreign real estate

usacanada1 · Post by **usacanada1** » Tue Oct 18, 2005 11:46 am

Hello everyone, my husband and I need some answers regarding real estate.

I'm a US citizen, he's Canadian and we're currently residing in Canada. We're moving to the U.S. and in the middle of immigration. We're filing U.S. back taxes for 2003 and 2004 because I didn't know I was supposed to do those while living in Canada.

We own two condos and rent to students. What we need to know is this: If you co-own real estate outside the United States, do you need to file a form Schedule E and form 4562 for depreciation? The instructions don't say anything about foreign real estate. Specifically, if there is no profit or loss (taxable income is $0). It seems like a lot of work to fill out all those forms each year for each property if the value in line 17 of the 1040 will be $0 because of depreciation and other write-offs, and the property isn't even in America.

Any help at ALL would be greatly appreciated. Thank you!

nelsona · Post by **nelsona** » Tue Oct 18, 2005 12:45 pm

Foreign rental properties also need to be depreciated, even though CRA does not require it. IRS doesn't mention foreign property because it doesn't distinguish between the two.
<blockquote id="quote">quote:<hr height="1" noshade id="quote">...and the property isn't even in America<hr height="1" noshade id="quote"></blockquote id="quote">
It was probably that attitude that put you in the situation you are in now having to back-file.
As you have become painfully aware, the US doesn't care where you or your property are: they want their cut.

nelsona non grata... and non pro

P.S. I dare say it would be impossible for your net rental income to be exactly $0 on both properties...

usacanada1 · Post by **usacanada1** » Tue Oct 18, 2005 12:55 pm

<blockquote id="quote">quote:<hr height="1" noshade id="quote">As you have become painfully aware, the US doesn't care where you or your property are: they want their cut.<hr height="1" noshade id="quote"></blockquote id="quote">

Yeah, I realize that, and of course we make passive income every month. But as I said, after depreciation and write offs, the bottom line is 0.

But I guess what you're saying is that it doesn't matter. The US wants to know the numbers anyway. Gotcha.

nelsona · Post by **nelsona** » Tue Oct 18, 2005 1:34 pm

The reason they want to know your rental income (and it will NOT be zero), is that you must recapture that depreciation when you sell.

nelsona non grata... and non pro

usacanada1 · Post by **usacanada1** » Tue Oct 18, 2005 1:57 pm

Ok, my husband just explained it better to me and I get that it will not be 0.

<blockquote id="quote">quote:<hr height="1" noshade id="quote">is that you must recapture that depreciation when you sell.<hr height="1" noshade id="quote"></blockquote id="quote">

Ahhhh. Ok.