We were interested in purchasing foreign rental property in my wife's home country to provide income for her mother who still lives there. The income from the property would go directly to her. We wanted to know the tax consequences for this(on the U.S. side). Could someone provide a resource for this information?

All you have to do is to inform your Tax Professional that you have a rental property in the foreign country. You have to claim the income and deductions along with the allowable depreciation, using the applicable existing US tax laws governing depreciation of residential rental property.

Rental profits would be subject to US tax based on your applicable Individual tax rate.

Rental losses in excess of $25,000 would be disallowed on your personal tax return and if your Adjusted Gross Income is in excess of $150,000 then all rental losses would be disallowed.

Also, remember that the all amounts have to be converted into US Dollars and so you have to use the applicable exchange rate prevailing during that time period.

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Ask TaxGuru Please refer to the legal disclaimer.

" The income from the property would go directly to her. We wanted to know the tax consequences for this(on the U.S. side)."----> Who owns the property? If you actually own it UNDER either YOUR NAME or YOUR WIFE'S NAME , Then as a US citizen or a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U.S. tax return. You must report these amounts whether from sources within or outside the United States( though all of the rental income from the property directly goes to your mother in law); You , if you had made big gifts exceeding $1.13,000 million before, may be subject to gift taxes on the rental income for your mother in law.( if the amount exceeds $13,000 per annum)
As you pay taxes on the rental income to the foreing tasxing authority, you can claim tax crediton it as long as there is tax treaty between US and the foreign country.
Also if you send( transfer) your money exceeding $10,000 to the foreign country via wire transfer to purchase the rental property there, your bank will automatically report the money to the IRS.That doesn't mean to pay any form of taxes on the money transfered overseas from the US .Federal law requires that all banks in the US report any cash deposits/ transfers made in excess of $10,000 in the hopes of discouraging money laundering, rather than tax evasion. "wires" from/to abroad require the same information.

Hi,
You have to do is to inform your Tax Professional, that you have a rental property in the foreign country. You have to claim the income and deductions along with the allowable depreciation using the applicable existing US tax laws governing depreciation of residential rental property.

You have no issue on tax. You have to just tell your tax Professional and he will guide you that what you have to give and take. you can have that property at any instant just by doing this.

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