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QAEngineer · May 21, 2008, 03:40 PM

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?

MukatA · May 21, 2008, 05:42 PM

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.

QAEngineer · May 22, 2008, 08:05 AM

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?

AtlantaTaxExpert · May 22, 2008, 10:07 AM

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.

IntlTax · May 22, 2008, 03:24 PM

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.

QAEngineer · May 22, 2008, 03:37 PM

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.

IntlTax · May 22, 2008, 06:35 PM

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.

calviny55 · Aug 27, 2008, 07:29 PM

Originally Posted by IntlTax

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?

AtlantaTaxExpert · Aug 28, 2008, 09:35 AM

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.

calviny55 · Aug 28, 2008, 10:51 AM

Originally Posted by AtlantaTaxExpert

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?

IntlTax · Aug 28, 2008, 07:03 PM

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.

calviny55 · Aug 29, 2008, 10:39 PM

Originally Posted by IntlTax

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?

IntlTax · Aug 30, 2008, 05:43 AM

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.

calviny55 · Sep 2, 2008, 09:47 AM

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

IntlTax · Sep 2, 2008, 10:15 AM

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.

Sykes · Oct 15, 2008, 06:15 AM

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?

IntlTax · Oct 15, 2008, 06:26 AM

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.

Sykes · Oct 15, 2008, 06:49 AM

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?

IntlTax · Oct 15, 2008, 06:58 AM

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.

Sykes · Oct 15, 2008, 07:01 AM

Intltax,

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