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TaxQuestion3 · Aug 27, 2011, 01:02 PM

Hello,

I am a US Citizen and Resident and have a property located abroad that I am selling. I prefer to receive dollars and a buyer abroad my agent has found (not a US Citizen nor Resident) is willing to pay in dollars but can only do so from his international business account that is in another country. Is that even legal? I guess that may be an issue that he has to deal with in accordance with the respective countries' regulations as they pertain to him for using business proceeds for a personal property purchase. But should I be concerned with this from a US regulatory and IRS perspective? I understand that I will owe capital gains taxes on this sale and have no issue with this. But is there some restrictions regarding the source of funds for the international wire transfer? I do not have knowledge at this time about his business or businesses (he might split the payment in two) nor where the money will be wired from. Assuming I am protected from any sort of scam or anything like that, what regulations or reporting should I pay attention to? I do not think form 3520 applies as this is a property sale and not a gift or trust transaction.

Thanks in advance for your help.

Fr_Chuck · Aug 27, 2011, 05:07 PM

Why not have them wire the money to a bank in the US for theirself, and their agent or theirself, then provide the funds in bank check for closing.

Have you talked to your bank about bank transfer issues ?

TaxQuestion3 · Aug 30, 2011, 04:55 PM

Chuck, thanks for the reply. I appreciate it.

That is a good suggestion, and it was raised by my agent as well. So far the buyer has refused. Maybe he is looking to avoid taxes by taking a distribution? I guess the question is are there any particular regulations or laws on receiving payment from a "third party" for a transaction, particularly if the wire comes from abroad?

I did not even think to talk to my bank, but I will do so. I had thought that they would only be able to answer on whether it was technically possible to receive said wire transfer, and I believe that it is, as they are not aware of the name that would be on the sales transaction? Any suggestions on what group in the bank to talk to? I am afraid of the general phone representatives giving me clearance to go ahead for said reason without that necessarily being the case.

TaxQuestion3 · Sep 5, 2011, 09:22 AM

After more thought, I guess this is more of a legal question than a tax question? I am having a hard time distinguishing between the two. If a moderator can weigh in, does this need to be moved to the legal discussion group?

Of course, if any of the other great tax experts can weigh in I would appreciate it.

Thanks in advance!

Fr_Chuck · Sep 5, 2011, 05:04 PM

Also of course, the purchase paper work would be admended to show that the payment is coming from XX and that the buyer agrees to the liability of this and that the sale would be void if for any reason the transfer of funds is improper or illegal.

TaxQuestion3 · Sep 5, 2011, 06:50 PM

Hi Chuck - Thanks for the reply.

So to clarify, when you say "show that the payment is coming from XX", XX should be the business account(s), which may differ from the individual's name?

You mention, "liability, improper, and illegal". This is what I am concerned about. Are these the buyer's issues, or are they my concern too because I am taking payment? My thinking is by law either I can do this or I cannot. If I cannot, I fear amending the paper work will not 100% protect me and instead put me in some grey area that is up to interpretation. Feel free to correct me if I am wrong.

Thanks again.

MukatA · Sep 5, 2011, 10:58 PM

The money must not be from illegal sources including money laundering, extortion, gambling, drug...

TaxQuestion3 · Sep 6, 2011, 05:20 PM

Hi MukatA,

Thanks for weighing in. I do understand that the source of funds should be legal. I guess my question is how do I prove that? Is that my burden, or is that something the buyer has to deal with if questions are ever asked?

So I will have sold the property to person A, and the sales documents will reflect that. Now the received wire of funds will be from a different country from possibly a different name (a business). Now obviously this will be for the purchase of the property as my accounts will not have received any other money, so this money is therefore for the property. Well, of course this is obvious to me, but is this obvious to the IRS?

Would it be better to receive funds into my own account in the foreign country where the buyer's funds are located (again, different from the property location), and then wire the funds from my foreign account to my account here in the US? Or is that just circumventing the issue and making it more cloudy?

Thanks!