How is the sale of a Cayman Islands property taxed?

ProSeries

I have a client who I am doing a mess of returns for. As I am getting closer to the end, I found that he sold a rental property on the Cayman Islands, which the income from had been reported on a 5471. He had a holding company (an LTD) formed in the Cayman Islands that collected the rent and held the deed to the property. Where and I how do I report this? I assume it's a Capital gain, but becasue the revenue that has been generated by the property hasn't been reported as normal income, and things like depreciation have not been deducted, I'm not quite sure how to handle this.

Can anybody give me some insight?

Thanks

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3 Replies

essjay

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05/21/11 5:24pm PDT

I believe that if you stick to the general rule of thunb, you can't go wrong. First, there is no tax in the Caymans, so the depreciation ( a US rule) would not apply. This leaves you with a capital gain.

I hope that he has declared ownership (sched B) every year and has reported any annual profits)

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that rnethod which best pays the treasury..." Judge Learned Hand - U S Court of Appeals

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AzQBPro

Contributor

05/21/11 6:08pm PDT

I forgot to mention one important point. Since several years prior to this sale, he was living in the UK. That is why he was filing the 5471's. He hasn't filed a schedule B since at least before 1999 (the first year I've seen).

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essjay

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05/21/11 8:06pm PDT