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hrm126913 · Oct 19, 2006, 04:38 AM

Good day to all -

I have been informed that I may be receiving a very large inheritance from another country. I am trying to find out if I will have to pay taxes on this amount and/or any other fees. It would be deposited directly into my bank account here and is WELL over 10,000 - which I know has to be reported to the IRS. If there would be a tax would it be at the 35% rate?

RickJ · Oct 19, 2006, 04:58 AM

According to the IRS's Publication 950,

Originally Posted by irs

No tax on the person receiving your gift or estate. The person who receives your gift or your estate will not have to pay any federal gift tax or estate tax because of it. Also, that person will not have to pay income tax on the value of the gift or inheritance received.

hrm126913 · Oct 19, 2006, 06:31 AM

Originally Posted by RickJ

According to the IRS's Publication 950,

This is not a gift from me but a "gift" to me in the form of an inheritance so does this still apply?

RickJ · Oct 19, 2006, 07:08 AM

That section is regarding gifts and inheritances. Maybe I read it wrong, but check out the publication in it's entirety to be sure:
http://www.irs.gov/publications/p950/index.html

Also, we do have a Tax Expert that frequents this board... so hang tight, I bet he'll be along shortly.

AtlantaTaxExpert · Oct 19, 2006, 10:47 AM

Gift and estate taxes are linked in that they are wealth-transfer taxes. For this reason, they share the same exemption (currently about $1.5M).

So what RickJ said is accurate: you will pay NO tax on your inheritance because the estate, not the heirs, pay estate taxes, just like the giver, not the recipient of the gift, pays the gift taxes.

That said, there is one instance where the IRS will go after the heirs for estate taxes. That is when the estate fails to file the estate tax return and pay the taxes, and the executor is financially unable to pay the back-due taxes. Then the IRS goes to the heirs to get their "pound of flesh"!

andreakathryn · Jul 8, 2009, 05:37 PM

Hi There - I have a similar question about this. I am getting a living gift from Canada and am also worried about tax implications. I understand that the estate is required to pay taxes BUT, in Canada, there is no estate/ inheritance tax... In a situation like this, can the IRS still come after me? What is the best way to deal with this?

AtlantaTaxExpert · Jul 9, 2009, 08:37 AM

Both inheritances and gifts from a foreign country are NOT subject to federal income or gift taxes from the IRS.

You WILL have to fill out paperwork when the money is wire transferred to you, but that is just to show the paper trail (source of the money), not to pay taxes.

IntlTax · Jul 10, 2009, 11:09 AM

If the gift exceeds $100,000 in any year, you should report the gift on Part IV of Form 3520. Penalties can apply if the gift exceeds $100,000 and is not reported.

dorenah · Dec 23, 2009, 11:38 AM

This discussion happened in 2006 and now it is 2009, soon to be 2010. Have IRS requirements changed? We live in California and my husband is inheriting over $300k over a period (real estate sale taking time) from Australia. Will we be required to pay any taxes (state and federal)? How does the "estate" pay the federal taxes? Basically that means taxes will have to be paid from that amount of money when it is declared?

AtlantaTaxExpert · Dec 24, 2009, 11:41 AM

The law has NOT changed; advice as posted in 2006 is still valid.

fxtraderpro · Feb 3, 2011, 02:31 AM

Hello, so I am in USA I am receiving gift in the form of money from friend in Spain. Your telling me that person is Spain will have to pay the IRS tax just because? I don't view that as right when their not a citizen here.

AtlantaTaxExpert · Feb 3, 2011, 03:08 PM

NO taxes will be owed on the foreign inheritance.

You MAY have to report the income on Form 3520, but that is informational only. No taxes are due.