rental in Germany

[schirallicpa]

Client is not a US citizen, but has residency.  She is from Germany and has a rental in Germany that she owns jointly with her sister who is still in Germany.

Is this just a regular Schedule E?

(I would be inclined to let the sister report it all in Germany, and pay her the tax difference.)

 

[Lion EA]

There are people who know more about this. But until they jump on -- from memory -- as long as she's a tax resident here, her reporting is pretty much Schedule E from her standpoint. However, the property being out of the US gets some depreciation differences, maybe no MACRS, straight-line only, longer life (40 years or ADS life?). It's the overseas property that might be different....

I'm sure you've looked at FBAR and FATCA and banking rules on transferring monies into her US account, if she's doing that.

Yeah, if she and her sister get along, letting sis report it and paying your client her profit less a property management fee is a good thought.

[TaxCPANY]

I agree with Lion EA in every respect except the life of the property:  Foreign residential property generally must(*) be depreciated under the Alternative Depreciation System.  Property placed in service before December 31, 2017 had a 40-year ADS life.  TCJA changed the life of property placed in service after December 31, 2017 to a 30-year life.  [Section 13204 of the Act, amending IRC Sec. 168.  Top of page 139 of the online pdf of TCJA.]
(*  Some commentators argue that "shall" means "may" and so the IRC lets tax preparers elect different depreciable lives.  I disagree with that arcane conclusion and would not file a return employing it without including a Form 8082.)

[schirallicpa]

Thank you!  I knew the depreciation would be different.  She's worried about staying in US and wants to make sure she's reporting everything she's supposed to.  Is this something that would make a difference in determination of her residency? Or with her visa?  

[BearAhamN]

First I would check Visa type and SPT. A US taxpayer ( via Citizen, GC or  SPT) reports worldwide income and gains wherever derived. Yes it's a regular schedule E except the fact that you report share of income and expenses and depreciate under ADS (30 years for foreign rental using lower of cost or FMV date assets were place in service). Foreign real estate direct holding/ownership is not an asset under FATCA. So value of property is not considered when testing for SFFA F8938  and for FBAR filing requirements. Passive FTC may be available if taxes are paid/accrued on the RE net income in Germany. IRS pub 519