# Declaring US capital loss on sale of inherited mutual fund in France



## noblesse

Hi again,

I've come up with something that has me totally confused on both the US and France ends!

In 2012, I inherited 66 shares of a US mutual fund that consisted of municipal bonds. Over the course of the years, I received US tax exempt dividends AND return of capital distributions from this fund. However. as all good things come to an end, in June 2021 the fund was redeemed.

The share value on the date of death was $979.43 and on the date of the redemption was $96.26, a considerable difference. One might think that this was a straightforward capital loss.

I've done a bit of research on the US side of things, and know I have to declare these 'proceeds' on form 8949 and on Schedule D and that I need to use the Qualified Dividends and Capital Gain Tax Worksheet (because I also have qualified dividends), and that a redemption is the same as a sale. So far so good, except for having to fill in the forms and worksheet.

One thing I haven't found any information about is whether I have to take the return of capital distributions into account when figuring the amount of my capital loss? The return of capital distributions have certainly not been to the value of the shares when I inherited them, and the value of the fund at redemption is necessarily low because it was at the time of redemption, so can I really just subtract the sale price from the DOD value?!

The other problem is on the French side. I have found out that gains/losses on the sale of inherited shares, etc., are treated differently than those purchased, but the key to that treatment is either the value of the shares when they are inherited (which would be in the inheritance documents) or whatever les Impots believe the value to be when sold (I've found several court cases where the difference in those values led to a moin-value turning into a plus-value!).

Of course in my case the inheritance was received in the US and I do have the DOD price. Should I just figure the capital loss on Form 2074 (Déclaration des plus ou moins-values réalisées en 2020) and not say anything about the shares being inherited? ALL my investments are inherited!

One would think that such a large capital loss would raise some eyebrows, although I'm sure there is a limit to the amount of loss you can apply in one year. I do plan to email the local tax office about this, but since the French don't really do mutual funds the situation is gong to be a bit complicated to explain.

I had hoped that this would be the first year I didn't have to meet the nice people in Loudéac after receiving my Avis, considering that I've had to do that the last two, but somehow I think I'll be visiting again later in the summer. At least this time we won't HAVE to wear masks!

All contributions to the solution of this quandary will be gratefully accepted.


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## Peasant

Find an accountant?


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## noblesse

Just to update:

I decided to declare my huge capital loss on Form 2074, which turned out to be a bit of a nightmare.

In the end, I filled in everything the best I could, left a note explaining my difficulties and stating the figures involved, and made the online declaration.

I then made an appointment with the tax office to see if they would fill in the forms for me. I soon discovered, to my relief, that the forms involved were as difficult to fill in for the tax 'experts' as they were for me, given that they had changed considerably from the year before.

In the end, the nice lady (we're old friends now as this was my third visit) filled them in as best as she could, and also played around with the dividends. These had always been simple to declare, but again, the form had changed so that entering them where the form wanted led to them being declared twice on the 2047.

I was there for almost an hour, but the declaration was made and both of us crossed our fingers that it would be accepted.

Moral of the story, never hesitate to talk to the local tax office!


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