How are people handling the upfront payment from investment for US taxes

Tax and legal
1

Just curious how people are handing the upfront payment from our investment from quantum, trying to get paperwork in order and just was not sure how to classify this payment (int, div, cap gain, other,) and where to report it on the US tax forms especially if it is an other category. my understanding is that would have to declare pre PT tax amount and use the PT amount in the foreign tax credit/deduction.
Thanks for your insight

2

I have to make caveat that a) I’m not an accountant and b) that I haven’t received my payment yet and don’t know how my accountant will handle it, so please only pay attention to my advice in the absence of anyone else more qualified.

I would treat the payment from Quantum as rental income, because the agreement we all signed was a lease to Quantum to build and operate a hotel. Rental income is listed under schedule E, and then you would declare the PT taxes paid under the foreign tax credit like you said.

3

Hi Adam
Thanks for the response, understand about not being an accountant…
Mathew

4

I am an Australian tax resident, but I am doing the same thing (the whole amount is Foreign Rental Income and I am claiming credit for taxes paid in Portugal)

5

Are you deducting any expenses from the earned rental income like legal and notary fees to purchase the property?

Obviously, GV related expenses are not a part of this.

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Everyone has a different situation and standard disclaimer I am not cpa nor tax advisor…

I took it to my accountant and it opened a bunch of questions that I could not answer nor provide documentation for …mostly regarding depreciation and the fact that the building is being rehabilitated into a hotel….given the options of possible IRS audits because of lack of convincing documents for “rental property” I just took it as an non 1099 INT payment…

hope that helps

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7

I am Australian and so pay tax under Australian rules.

So not sure this info helps you.

I treat the upfront payment as Foreign Rental Income.

I have added costs during acquisition of the property to the cost base for calculation of capital gains (and capital gains tax) at the time the property is sold.

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