Tax on Funds Gifted

AtlantaTaxExpert · Oct 23, 2006, 08:41 PM

You will owe no taxes.

You MAY have to explain to the IRS from where you got the money!

How much we talking about?

youngshwa · Oct 24, 2006, 11:51 AM

About $200K; give or take. So, does this mean, I do not have to put it on my taxes either? Is it because there is a max limit on it?

AtlantaTaxExpert · Oct 24, 2006, 01:28 PM

No, you do NOT have to put it on your taxes. It is NOT earned income, nor is it interest or dividends, nor is it rental or royalty income.

It is a gift, and the receiver of gift do not have to pay taxes. Only the giver pays taxes, and then only if they are a resident or citizen of the United States.

Now, if $200K shows up in your savings or checking account, the bank will report that deposit transaction to the IRS and usually to the state tax authorities, who may then come back to you and ask from where did you get the money. A memo from the bank that wired the money into your account should be sufficient to explain the money source.

The reason they want to know where the money is coming from is due to money laundering by drug cartels and other organized crime elements, terrorism funding and other tax-evasion issues make it necessary for any transction of $10,000 or more to be checked on by the U.S. Treasury. A phone call to the originating bank should produce the required explanatory documentation. Be sure that the memo cites the date of the transaction and the wire transaction number so it matches your bank records. Also, request that a bank officer name and phone number be on the memo so the IRS can cal and verify.

It's a pain, but given the current environment, totally understandable.

youngshwa · Oct 24, 2006, 02:01 PM

Quote:

Originally Posted by AtlantaTaxExpert

No, you do NOT have to put it on your taxes. It is NOT earned income, nor is it interest or dividends, nor is it rental or royalty income.

It is a gift, and the receiver of gift do not have to pay taxes. Only the giver pays taxes, and then only if they are a resident or citizen of the United States.

Now, if $200K shows up in your savings or checking account, the bank will report that deposit transaction to the IRS and usually to the state tax authorities, who may then come back to you and ask from where did you get the money. A memo from the bank that wired the money into your account should be sufficient to explain the money source.

The reason they want to know where the money is coming from is due to money laundering by drug cartels and other organized crime elements, terrorism funding and other tax-evasion issues make it necessary for any transction of $10,000 or more to be checked on by the U.S. Treasury. A phone call to the originating bank should produce the required explanatory documentation. Be sure that the memo cites the date of the transaction and the wire transaction number so it matches your bank records. Also, request that a bank officer name and phone number be on the memo so the IRS can cal and verify.

It's a pain, but given the current environment, totally understandable.

THANK YOU for the information !

AtlantaTaxExpert · Oct 24, 2006, 07:13 PM

Glad to help!

ahfei · Oct 26, 2006, 08:18 PM

Quote:

Originally Posted by youngshwa

If funds are are gifted to you from someone abroad - out of the US, is there a threshold in which I do not have to report it for tax purposes? Any insight would be helpful.

I'm glad someone posted this since I've been wondering about this myself. If I'm a US permanent resident, but my parents are not, is there anything I have to consider relating to estate tax? Since estate tax is technically paid by the donors, can I assume that I will be able to inherit my parents' assets without any US taxes should something happen?

Thanks in advance.

AtlantaTaxExpert · Oct 27, 2006, 02:05 PM

That is correct. The inheritance/estate taxes of the country in which your parents will be assessed. After that, your inheritance will be free of U.S. Taxes.

ahfei · Oct 27, 2006, 02:27 PM

What a relief! Thanks AtlantaTaxExpert for the generous help!

AtlantaTaxExpert · Oct 27, 2006, 05:14 PM

Glad to help!

Tax on Funds Gifted

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