Hi,

I am an alien resident. My parents were aliens, who passed away in a car crash in 2010 in our home country. In their will, they left their house to my sibling on the condition that my sibling pays me a certain amount of money. My sibling is a US citizen, and hence was able to pay me a major part of my inheritance amount in US dollars from her US account to my US account. I received this money one year after my parents' death.

What are the tax implications for this transaction both for me and my sibling? Does my sibling have to file a gift tax form? How should I declare this money in my tax forms? Would it have been better for me to take the cash in my home country and then bring it here myself? Do I need to prove that this is my inheritance by supplying the will or death certificates?

Thanks for the help!

The transfer of the money from your sibling is YOUR share of the inheritance. There is NO U.S. inheritance tax, and the estate tax does NOT apply because your parents were NOT U.S. citizens or residences. There are also no gift taxes, because it is NOT a gift, it is an inheirtance.

No INCOME taxes are due on this money at either the federal or the state level.

There MAY be a state inheritance tax; this is impossible to say for sure since you did not share in which state you are currently living.

Overall, I suspect there are NO tax implications whatsoever. Now, if the money transfer exceeds $100,000, you may need to file Form 3520 to explain to the IRS the source and nature of the money transfer, but that is an information return only; no tax will be due.

Thank you, that is a relief! I live in Connecticut. My parents lived abroad. My sibling lives in New Jersey. Would that make a difference?

CT has no inheritance tax, and NJ does not tax inheritances that children receive from their parents. So at least regarding US federal or state taxes it seems you and your sibling have no issues.

Thank you ebaines and AtlantaTaxExpert!

I concur with ebaines; you seem to be home free.

Glad to help!