I am employed in the US but not a US citizen. My mother, who is not a US citizen either and lives overseas, would like to gift me money by sending it as a wire transfer from her account overseas to mine in the US. Assuming the amount is between US $50K - $100K, what would be my IRS Tax filing/declaration requirements if any? Would I have to actually pay any taxes?

In the U.S. the person who receives a gift does not pay the tax. Your parents can send you gift of any amount, you don't pay any gift tax. Since the donor is a foreign person (no SSN or ITIN), they need not worry about the U.S. tax on donor of the gift.

However, since it is coming from a foreign country, the IRS wants to make sure that it is a actually a gift. So you must file File 3520 Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts if the amount in 2008 is more than about $100,000.

Thank-you for the response!

So, in essence, if the gift I receive in 2008 is less than US $100,000 then I do not have to file anything to IRS, correct?

You probably will have to fill in some information forms when you either get the money via wire transfer or when you deposit the check at the bank.

Other than that, no.

There is a risk that the gift could be treated as though it took place in the U.S. and that the gift was not a gift of intangible property. If this circumstance exists, then your mother would be subject to U.S. gift tax on the amount in excess of $12,000.

This risk can be avoided by you opening a foreign bank account, having your mother transfer into your foreign account, and then you wire transfer the funds to your U.S. account. This approach requires that you have a foreign bank account and therefore you must file Form TD F 90-22.1. Because gift taxes can be significant, you should seriously consider this approach.

1) my mother is not a US citizen or US resident or a US SSN holder.

2) She is overseas and this would be an International Incoming Wire transfer (for me) from her Bank overseas into my US based bank account.

I would think this would then be considered a gift that did not take place in the US and I would be exempt from any filings so long as it was less than US $ 100K.

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To the earlier post:
I checked with the Bank and they claim not to require any forms to be filled out in the case of an incoming international wire transfer. Not sure if they are correct in that or not. I have known them to make mistakes in the past.

I am not suggesting that the law behind rule this makes sense. I understand that your mother is not a US citizen or US resident or a US SSN holder. This means that she cannot benefit from the unified credit to exempt $1 million of gifts from gift tax. Therefore, gifts in excess of $12,000 are subject to gift tax.

If the property is tangible property situated in the U.S. when the gift occurs it would be subject to U.S. gift tax. Under legal principles, a gift cannot be a completed gift until it is accepted. You would be accepting the gift when it is received in your U.S. bank account.

You are the transferee of the property. If the IRS determines that gift tax is due and your mother doesn't pay it, you can be held liable for her gift tax under transferee liability rules.

I am simply pointing out the risk. If you choose to take the risk, the gift taxes could be substantial.

I am not suggesting that the law behind rule this makes sense. I understand that your mother is not a US citizen or US resident or a US SSN holder. This means that she cannot benefit from the unified credit to exempt $1 million of gifts from gift tax. Therefore, gifts in excess of $12,000 are subject to gift tax.

If the property is tangible property situated in the U.S., when the gift occurs it would be subject to U.S. gift tax. Under legal principles, a gift cannot be a completed gift until it is accepted. You would be accepting the gift when it is received in your U.S. bank account.

You are the transferee of the property. If the IRS determines that gift tax is due and your mother doesn't pay it, you can be held liable for her gift tax under transferee liability rules.

I am simply pointing out the risk. If you choose to take the risk, the gift taxes could be substantial.


Hi IntlTax, I don't quite understand how the wire transfer/cash can be considered tangible property situated in the US if it was sent from abroad?

The definition of tangible property is effectively what the IRS says it is.

Also, remember that in tax situations, the burden of proof rests with the taxpayer, NOT the IRS, so if the IRS interprets the tax law a certain way, it is up to the taxpayer to prove otherwise, often in tax court, which is ALWAYS an expensive proposition.

That is why IntlTax is advising care in handling this situation. I concur with his advice that the actual transfer of the money from mother to son be handled in a foreign bank account in a foreign country. That way, there is NO QUESTION regarding IRS jurisdiction.

The definition of tangible property is effectively what the IRS says it is.

Also, remember that in tax situations, the burden of proof rests with the taxpayer, NOT the IRS, so if the IRS interprets the tax law a certain way, it is up to the taxpayer to prove otherwise, often in tax court, which is ALWAYS an expensive proposition.

That is why IntlTax is advising care in handling this situation. I concur with his advice that the actual transfer of the money from mother to son be handled in a foreign bank account in a foreign country. That way, there is NO QUESTION regarding IRS jurisdiction.


Thanks for the clarification AtlantaTaxExpert.
So if the money transfer from mom to son is done abroad, is there any filing/reporting needed to be done? (proof of gift)? And once the money is transferred from own foreign account to own US account, anymore filing/reporting needed?
Maybe I have a wrong perception all along but wouldn't a foreign account w/ such large sum of money raise some IRS eyebrows as well?

If a foreign bank account is created by the U.S. recipient, then an FBAR would need to be filed. No reporting requirements to report a wire transfer. If the gift is in excess of $100,000, then Form 3520 must be filed by the recipient. If this is truly a gift, then there is no IRS concern.

If a foreign bank account is created by the U.S. recipient, then an FBAR would need to be filed. No reporting requirements to report a wire transfer. If the gift is in excess of $100,000, then Form 3520 must be filed by the recipient. If this is truly a gift, then there is no IRS concern.


What can be used as proof of "truly a gift"??
Would a letter from the donor suffice?

There is no one answer to prove it is a gift. The IRS and the courts look to all of the facts and circumstances. A letter from the donor would be helpful. Gifts from mothers to sons are common. As long as the mother didn't acquire the funds being gifted in a related transaction, it is unlikely that the gift would be challenged. If there were no family relationship between the donor and the donee, the IRS may look at the transaction further to confirm that there wasn't something else going on.

Thanks IntlTax.
Is there a limit on how much cash gift a donee can receive a year? Regardless of donor's status?

No. There is no limit on the amount that can be received. Amounts in excess of $100,000 must be disclosed on Form 3520, Part IV, but no tax is due.

Intltax,

May I also ask you a few question on this topic?

1. Does the frequency of the gift matter? Lets say a standing order for $10k the 1st of every month is set up, could the IRS then see this as income rather than a gift?

2. Would it matter is that non-res, non-dom, non US citizen mother was to own a home and spend several months a year (under 6 months) in the US?

3. could you list a few options that could cause the IRS to view a gift as something other than a gift?

As long as it is truly a gift, the frequency should not matter.

If the nonresident alien mother owns real estate in the U.S. you should understand that she will be subject to U.S. income tax on the rental income and gains from the property, and, more importantly, that she will be subject to U.S. estate taxes. The exemption from U.S. estate taxes for nonresident aliens is only $60,000. Thus, she could easily be subject to U.S. federal estate taxes (and possibly state estate taxes, depending on where the property is located).

As stated in the Supreme Court case of Duberstein, a gift results from a "detached and disinterested generosity," --- "out of affection, respect, admiration, charity or like impulses." In other words, if there is a quid pro quo for the "gift", then it may not be a gift.

IntlTax,

Thank you. To further the US held property issue. The home is only for her private use and she has no other income of any kind within the US. The $60k limit on estate tax for non-res aliens brings up a very interesting point, I was hope the $2mil estate tax exemption was across the board. Are there any ways to minimize this estate tax over $60k for non-res aliens, such as gifting or even an living trust outside of the US?

There are some ways to avoid the U.S. estate tax for nonresident aliens owning U.S. real estate. However, the strategies are complex and each strategy has its own costs/issues. This topic is more complex than can be meaningfully discussed on a bulletin board such as this. I recommend that you speak with a tax attorney that has some experience in this area.

Intltax,

Thank you very much. Its very reassuring to have a resource like this with people like you to help, thanks.

Dear IntlTax:
A little twist on the subject. Mother is a US resident but no property or income in the US. She purely spends several months here to visit children. She goes back home and sells off a property that in effect is inheritance of the children. She now wants to wire the proceeds to the US citizen children. Is still a foreign bank and the idea of gift to child be applied here with no tax implication?

Calviny:

Despite what is often projected by the media and scare ads by tax representation firms, the IRS is NOT all-knowing and all-powerful. They have NO WAY of monitoring transfers of fund between foreign banks. The laws of many foreign nations specifically prohibit the banks from revealing transfer information to the tax agencies of other nations.

This being the case, the IRS cannot tax money transfers about which they know nothing.

Globalguy, If mother is a U.S. resdient she will be taxed on her worldwide income in the U.S. regardless of whether the money is transferred to the U.S. She may or may not be considered a resident of the U.S. for gift tax purposes. This depends on whether she is domiciled in the U.S.

I became recently US Citizen, before I came to USA 10 years ago, I had invested $20 k in a Foreign Bank's CD, and due to the ongoing worldwide banking crisis, I would like to transfer that money to my accounts in US.
1- Are there any Tax implications or fillings necessary to my situation?
2- Would the scenario be different if my father US Citizen -who is owns with me in that acct.- Wires the money as a Gift.
Thank you in advance for your help.

You should have been reporting the interest income from the foreign bank account on your U.S. tax return and you should have been filing Form TD F 90-22.1 to report the existence of the foreign bank account. You may have a currency gain when you bring the money to the U.S.

You should speak with a tax advisor to determine whether you or your father are considered the owner of the account. Likely the person who put the money in the account would own the account, for gift tax purposes.

IntlTax,

You are very knowledgeable, and your comments are always clear.

If the money is in a joint account, between mother (non US resident) and son (us citizen) in a European Bank account. The overseas account was recently (say 1 year ago) made into a joint account, prior to which it was in the Mother's name only, however, no 3520 filing was done since then, because of lack of knowledge of such a requirement. What are the ramifications and measures to rectify?

Also, for financial safety reasons, specifically due to the global financial crisis, they now want to transfer the money to the US, what specific steps would you recommend, given the lack of 3520 filings earlier and the desire to rectify. Does it matter if the amount is large, say $500K+?

IntlTax,

You are very knowledgeable, and your comments are always clear.

If the money is in a joint account, between mother (non US resident) and son (us citizen) in a European Bank account. The overseas account was recently (say 1 year ago) made into a joint account, prior to which it was in the Mother's name only, however, no 3520 filing was done since then, because of lack of knowledge of such a requirement. What are the ramifications and measures to rectify?

Also, for financial safety reasons, specifically due to the global financial crisis, they now want to transfer the money to the US, what specific steps would you recommend, given the lack of 3520 filings earlier and the desire to rectify. Does it matter if the amount is large, say $500K+?

Any thoughts... Anyone?

If your mother is NOT a U.S. citizen living abroad, then reporting the transactions late should not be a problem.

However, making the bank account a joint account probably makes the earnings of that account subject to U.S. income taxes under the son's name.

The larger the account size, the more likely the IRS will take notice.

LA, The penalties for failing to simply report various transactions to the U.S. IRS can be huge. As a result, I usually err on the side of over-disclosure so that an IRS agent is less likely to feel that you are trying to hide something.

For U.S. tax purposes, simply making your mother's non-U.S. bank account a joint account between her and you is not treated as a gift. See Reg. 25.2511-1(h)(4). The gift would be made when/if you withdraw cash from the account.

Form 3520, Part IV is intended to report gifts received by U.S. persons from non-U.S. persons generally in excess of $100,000. Thus, unless you have withdrawn over $100,000 from the account during any year, you would not need to file Form 3520. Having said this, I would likely still report the transaction with an explanation of the circumstances on Form 3520 (in the spirit of over-disclosure). As ATE indicates above, reporting on Form 3520 late is often not a problem.

Even though a Form 3520 may not technically be required, a Form TD F 90-22.1 (FBAR) would be required. Again, reporting late is often not a problem.

Importantly, moving the bank account to the U.S. could be a problem. If no gift has occurred until you withdraw cash and you withdraw cash from a U.S. bank account, the gift may be treated as having occurred in the U.S. and your mother may be subject to U.S. gift tax to the extent the gift exceeds the annual exclusion ($12,000 for 2008 and $13,000 for 2009).

Your mother, as a nonresident alien, will not qualify for the $1,000,000 life-time gift exclusion. U.S. gift taxes can get very high very fast.

Wow! You guys are good and know your stuff. Many Thanks.

IntlTax, continuing on your thoughts/suggestions if the money is transferred to the US to buy a property in a joint name (mother & son) does that help towards the non-disbursement to prevent the gift occurrence you mentioned? Also, if the mother were to become a permanent resident, would she then be eligible for the life-time gift exclusion?

Also, it was suggested that the money could best be moved into a corporation owned by the mother (and the son held a minority stake) then there would not be any gift tax event. Would you agree?

Incidentally, this is for a friend (really!) but for simplicity - pun intended - if you would like to assume it is me, we can continue with that assumption...

Note to LA Simpleton:

This will be my last post, because IntlTax's expertise on these issues far exceeds mine.

That said, making your mother a permanent resident just to get the lifetime gift exclusion seems to be NOT the best reason to try to become a resident alien in the U.S. because, once residency is established, ALL world-wide income becomes subject to U.S. taxes.

Definitely something to consider!

There is a risk that the gift could be treated as though it took place in the U.S. and that the gift was not a gift of intangible property. If this circumstance exists, then your mother would be subject to U.S. gift tax on the amount in excess of $12,000.

This risk can be avoided by you opening a foreign bank account, having your mother transfer into your foreign account, and then you wire transfer the funds to your U.S. account. This approach requires that you have a foreign bank account and therefore you must file Form TD F 90-22.1. Because gift taxes can be significant, you should seriously consider this approach.

IntlTax: I have a virtually identical situation to the original poster. It looks like the safest way is to stay under the (now) $13,000 limit. My question: if the gift amount exceeds $13,000, how about if I, my wife, and my kids each receive $13,000 gifts from the same person (my parents)? Or is the limit per family and not per individual? Would it be safer in this case to have separate bank accounts for the different receivers?
An additional question: If we also want to receive an additional, independent gift from my parents-in-law, is there any problem? (They are even from different countries.)
Thank you very much for your support.

There is NO reporting requirement for the transfer of funds from mother to son in a foreign country under a foreign account.

Once the money gets transferred to the U.S. account, some reporting is required, but that should be inconsequential.

ATE, not sure what you mean - no reporting for gift to son's foreign account. A gift that takes place outside the U.S. is not a gift for U.S. tax purposes? Why not?

Johnny, gifting amounts less than $13,000 to each person per year is fine. If you want to rely on the annual exclusion of $13,000 for multiple persons, the gifts should be wired into each person's own bank accounts. Gifts made independently from parents and from parent-in-law should be treated separately.

My earlier comments about setting up a foreign bank account may have been overly conservative. I now think that a wire transfer from a nonresident alien's foreign bank account to a U.S. person's U.S. bank account should generally not be subject to U.S. gift tax because the incoming wire should not be treated as tangible property. If there are any other factors, however, that create uncertainty, I would prefer that the money be transferred into a foreign account of the U.S. donee.

IntlTax, I am very grateful to your extremely quick responses. Sorry I could not reply earlier.

From your first post I was a little confused. That's maybe because this thread has already taken so many turns and twists. Your second post sounds very promising. Nevertheless, since the matter is very important to me, let me present a few more details.

My mother is not a U.S. citizen and not living in the U.S. I am not a U.S. citizen, but I legally live and work in U.S. and I am considered a citizen for tax purposes. My mother would like to make a gift to me and my family, ideally by wiring money from a bank account. The bank account is in a third country (not in the country my mother lives); I hope this does not provide any additional difficulty.
As the amount exceeds $13,000, we were wondering whether independent gifts below $13,000 made to me, my wife, and our children would allow us to receive the gift without having to pay taxes. Right now, we only have one checking account for the family (the kids are toddlers anyway). So should we better set up independent bank accounts for each of the receivers, so that it looks more plausible to be independent gifts? Would gifts from my mother to my wife (daughter-in-law) qualify as a gift for tax purposes? Is any additional proof required (letters from my mother)?
As we want to buy real estate, soon, my mother-in-law also wants to make a gift from -- believe it or not -- yet another country to my wife (her daughter). This gift would be below $13,000. As I understand this would not be a problem, as the $13,000 is per donor, and not per receiver of gifts per year.
This case may be a little more complicated than usual. I appreciate any help I can get here. I am also willing to pay for counseling if this is indicated in my case. So, where would I find qualified help? Conducting everything legal has the highest priority for me.

I am grateful to your help or advice.

The fact that the money is coming from a third country should not be a problem. If the amount received by you or any individual in your family exceeds $100,000, you need to report the receipt of the gift on Form 3520, Part IV.

If the gift is really to you and your wife, you should not treat it as a gift to your children. This would be improper and is not recommended. This could be perceived as trying to avoid the reporting requirements (a definite no-no).

IntlTax:
Thank you very much again for your help. I have one more question. My parents are married and have a joint bank account. Can each of them make gifts of $13,000 per year and donee, or are they counted as one person? (Married couples often do taxes jointly, so I wasn't sure whether my parents would count as one or as two persons.) So, for instance would it be possible for me to receive a gift from each of them in the amount of $13,000 / year, even if the money comes from the same account which they own jointly (via international wire)?

Hi, Thank you for a great source of information.
We are US residents and filling our taxes here for the past 10 years.
My mother in law is non US resident and lives in the UK and files her taxes there, but have a apartment in FL where she stays few months a year. (but no rent or any other income generated in the US). She also have a US bank account.
Last year she gave us over 1M as a gift to buy a new house, (The funds were wired from third country account to my mother in law US bank account and from there to our bank account), and we indeed used the money and bought a house with it in last year.
We haven't filed our taxes for last year yet. Do we need to fill out 3520? Do we or my mother in law could be subjected to any US taxes on this transfer if reported?
Thanks.

Your mother in law stays in the U.S. for a few months in a year. So you must check if she meets Substantial Presence Test or not. If she meets SPT, then she is considered resident of the U.S. and must file gift tax return, and there may be other filing requirements.
Read Your U.S. Tax Return: Substantial Presence Test (http://taxipay.blogspot.com/2008/04/substantial-presence-test.html)

If she does not meet SPT, she is nonresident, then you must file Form 3520; there is no choice. Your mother in law does not have any U.S. tax filing requirement.
Your U.S. Tax Return: The U.S. Gift Tax (http://taxipay.blogspot.com/2008/03/us-gift-tax.html)

An inheritance that was given to me from an overseas individual I am not related to, has been decided to be split into three pieces, one of which will be mine. I repeat that the money in question has legally been decided in country to be entirely mine, and it is my choice to split the proceeds of this inheritance between us. When my portion is wired here to me, is there any IRS or government forms or information I need to give the government about this transaction to avoid taxes and any legal issues?

I want to transfer money(40,000$),with my bank,here in New York, to my brother,in israel,to but an apartment in israel.
I paid tax for this money.
Is it going to be a problem with IRS?

No, it should NOT be a problem.

I don't know if it is too late to weigh in on this and ask a question, but I am confused about Intltax's answer.

"This risk can be avoided by you opening a foreign bank account, having your mother transfer into your foreign account, and then you wire transfer the funds to your U.S. account."

If this person opens a foreign bank account and his mother wires the money to that account, and then HE wires it to his US account, won't it be difficult to prove this money was a "gift" since he will be in essence sending the money to himself? Also, once he opens the foreign account, won't be liable for taxes/explanation in THAT country for the money that his mother has wired to him?

I'm just wondering if doing it this way invites a lot more paperwork and a lot more problems- not to mention this person would have to travel overseas to open the account... no?

Thanks in advance...

There are NO taxes on these types of transfers, at least from the U.S. side of the equiation, and if the transfer is from one account to another account that you both own, then proving the gift is not even an issue, since the IRS has no way of determing from where the money originates outside of the U.S.

If the foreign donor gives 50K twice in separate tax years, then the donee doesn't have to report to IRS anything, right?

Yes, that is correct.

Will a gift $5k cancel the food stamps for a low income U.S. student?
(he has $1k/month income and he is receiving that gift)

That is NOT a tax question, but rather a regulatory question as to whether a gift negates someone's eligibility for food stamps. For this reason, I cannot answer.

I need some tax advice.. my mother is looking to gift me a property in the UK. I am a US citizen by naturalization. The property is worth approximately $450K and she has held it for 15 years. The original value of the property was $200K. She has spent some money over the years on the house.. it has never been rented out or declared as a rental property in the UK. When/if she transfers it to me she will have to pay capital tax on the transfer of approx $50K. What are the capital gains taxes I would pay if I was to dispose of it without living in it (is it valued at the original value at time it was inherited by her? Or at the final value at time of transfer to me ? Can I deduct the capital gains tax she paid in the UK? I I was to live in the house for 2 years ywould I avoid the capital gains tax ? (during which time I would not be resident in the USA. WOuld I have to declare this as Income or capital gains tax if I was not returning to the US ? What would happen if in the interim I rented the property out ? Would that impact the final valuation for capital gains tax ?

Many thanks for any advice anyone can give me.. I would also be interested in any recommended reading or sources of tax advice going forward.

Generally, you would pay capital gains tax on the DIFFERENCE between the sales price (but ONLY when you sell it) and the purchase price of $200K plus the cost of the improvements.

There will be NO tax due on the gift itself because your mother presumably is NOT a U.S. citizen.

If you returned to the U.K. and lived in the house for at least two years, then the capital gain would likely be exempt under the exclusion for the sale of primary homes.