German inheritance, tax paid

[Margaret CPA in OH]

Client inherited about $500,000 from sister deceased in Germany. This was cash and proceeds from sale of house (still waiting on the information as the house was rented for a while - should be interesting). He had to pay 25% inheritance tax and wants to deduct it on his US return.

I think that, since the inheritance isn't included in income, he shouldn't get a tax deduction. Or is the inheritance, because it's foreign, to be included? New to me!

[Pacun]

Client inherited about $500,000 from sister deceased in Germany. This was cash and proceeds from sale of house (still waiting on the information as the house was rented for a while - should be interesting). He had to pay 25% inheritance tax and wants to deduct it on his US return.

I think that, since the inheritance isn't included in income, he shouldn't get a tax deduction. Or is the inheritance, because it's foreign, to be included? New to me!

Check the tax treaty between US and Germany. Inheritance needs to be included in US taxes and a credit for foreign taxes paid should be taken. In any event, check the tax treaty.

[Margaret CPA in OH]

Thanks, Pacun. Can't imagine why I didn't think of that! Wrongly assumed it would not be taxable here. So now I've downloaded way more pages to browse than I want to but need to. I smell extension in a major way... Thanks again for the reminder kick in the uh...

[Pacun]

No worries, that's why we have this forum.

I have noticed something... it is easy to guide people towards the correct treatment of taxable events, but it is very hard to prepare that one return. Can you share your findings, such as what forms you file, what credits you get, etc?

I have the feeling that I have a distant uncle in Germany and I will inherit millions in the near future and I want to be prepared.

As you can see, we are different because you stated " I'm just pondering so that I know what to do when I win the big one" when referring to lotto winnings.