V.   US Citizens with Properties Restituted

Because US citizens and tax residents are taxed on worldwide income, those US individuals (often those with dual citizenship) who receive property in restitution from foreign countries and subsequently sell, are subject to US taxation (and possible payment of estimated taxes) on gains realized. In these cases, it is most important to understand that the tax laws of the two countries differ. For example what are allowable as deductible repairs in the host country may not be allowed by IRS in calculating ones annual taxable profit. However, of certain repairs allowed as a deduction in the host country, may for US purposes be used to increase the tax basis for purpose of computing any eventual taxable gain. Additionally, a step-up in basis may be available if the property (or right to obtain property) was acquired by way of a testamentary bequest. One should also remember that though restituted property may be sold under foreign laws without paying any taxes, the very same property may be subject to US capital gains tax. However, there are tax planning techniques for minimizing such tax.