Discussion:Inheritance or gift from foreign national
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Discussion Forum Index --> Tax Questions --> Inheritance or gift from foreign national
| 16 June 2006 | |
| Is there a tax or limit of any kind when receiving an inheritance or a gift from a foreign national that is not a US resident? I have a client whose mother is a citizen of and lives in Lebanon. She is worth a few million dollars. My client has told me that he heard from a friend's accountant that there is a $500,000 limit on gifts and inheritance from a foreigner without tax. I find no reference to this in the IRC. | |
| 16 June 2006 | |
| You have to be careful with transfers. Cash, for example, wants to be transferred into an account in client's name in a foreign country. You do run into problems if you do it here. Basic reference is Notice 97-34 | |
| 16 June 2006 | |
| What do you mean "you run into problems if you do it here"? We're not looking to do anything against the law or to evade taxes. I'd just like to know if it is subject to some kind of a gift or estate tax. | |
| 16 June 2006 | |
| Notice 97-34 states that you must disclose gifts from foreign individuals over $100,000 but it doesn't say anything about a tax. | |
| 16 June 2006 | |
| Says a lot about penalties for failure to report, though. Not the clearest area of the law and not a specialty of mine. If the transfer is not done in US, none of this applies. I believe the annual exclusion applies and tax doesn't start until cumulative total is over $1,000,000. My understanding is that anything over annual exclusion requires 3520. | |
| 16 June 2006 | |
| Warren, we are dealing with 2 different issues here.
A gift in excess of $100,000 from a nonresident alien must be reported on an information return -- use Form 3520. Secondly, if a nonresident alien makes a gift to a resident of property that has a U.S. situs, the gift is subject to gift taxes. For example, if the NRA alien draws a check on a U.S. bank account made payable to a resident or citizen of the U.S., the gift is subject to gift tax. A similar rule would apply to a gift of U.S. real estate. | |
| 1 August 2006 | |
| A US corporation's stock has US situs for estate tax purposes, but not for gift tax purposes. | |
| 1 August 2006 | |
| That's what I get for not bothering to look it up. All intangibles are excluded from gift tax for non resident aliens. | |
| 16 August 2006 | |
| So what happens when nonresident alien's gift is subject to US gift tax and said nonresident never sets foot in US and has no assets in US? Does that mean IRS can go after the resident donee? Is this codified in the IRC? | |
| 17 August 2006 | |
| Eagle996, if the nonresident alien has no assets in the US, I don't see how he would be subject to gift tax.
However, a donee can be held liable for unpaid gift taxes. See Code Sec. 6901(a)(1)(A)(iii). | |
| 30 January 2007 | |
| Riley, above you state "if the NRA alien draws a check on a U.S. bank account made payable to a resident or citizen of the U.S., the gift is subject to gift tax." I believe that there is an exception to gift tax for intangible property. I believe that cash (actual currency) may be considered tangible property. Do you know if there is any authority regarding whether money in a U.S. bank account is tangible or intangible property? | |
| 30 January 2007 | |
| I believe that cash on deposit in the United States is considered to be intangible property under Internal Revenue Code § 2511(b)(2)(A). However, cash in a safe deposit box is considered to be tangible property. See Rev. Ruling 55-143. I believe that a check drawn on a U.S. bank and presented for payment in the United States becomes tangible property when it is presented for payment and honored by the bank. The obvious solution to the check problem is to simply make a gift of the entire bank account. | |
| 30 January 2007 | |
| I'm kind of with Riley on this one. Silly once upon a time ruling that bills and coins are tangible property. There are indications that a check drawn on a foreign account and cashed in US escapes (PLR 821005). | |
| 13 February 2007 | |
| Hi Riley
You wrote A US corporation's stock has US situs for estate tax purposes, but not for gift tax purposes. Can You give me some reference to this inreseting law does it apply to a US C corporation too or only to public corporation's | |
| 13 February 2007 | |
| Technically, the code provides that the gift tax will not be imposed on transfers of intangible property by a nonresident alien. You will need to look at Internal Revenue Code § 2511(b)(1) in connection with Internal Revenue Code § 2501(a)(2).
In contrast, the code provides that the estate tax will be imposed on transfers of stock (issued by a domestic coproration) by a nonresident alien. You will need to read Internal Revenue Code § 2103 in connection with Internal Revenue Code § 2104. | |
| 13 February 2007 | |
| Hi Riley
One more Question Is a trustee personally liable for gift taxes to a Trust? | |
| 13 February 2007 | |
| Hi Riley
One more Question Is a trustee personally liable for gift taxes to a Trust? | |
| 14 February 2007 | |
| THANK YOU RILEY
In that case , would a shareholder in a USA "c" Corp. that holds rental properties still be intangible property even the underlying assets are real estate It is not a public Corp, just 10 shaerholders Thanks again for your help | |
| 21 May 2007 | |
| Hi Everyone,
This is very interesting. I have a new client who is a US citizen but has relatives in India who are not. One of his Uncles has transferred ~$450,000 to an escrow company for the downpayment on my client's first home. I was going to prepare form 3520. There should be no gift tax consequences since the donor is not a US citizen, right? Thank you! | |
| 21 May 2007 | |
| Are the funds coming from a U.S. bank account? If so, may be a taxable gift. | |
| 21 May 2007 | |
| Hi Riley,
The funds are coming from overseas going directly to the escrow company. | |
| 22 May 2007 | |
| I think you are telling me that the check or wire transfer will not be drawn on a United States bank. If such is the case, then there will be no gift tax reporting issues. | |
| 22 May 2007 | |
| Question. If escrow fails to close, who has the right to the money? | |
| 5 July 2007 | |
| Hi
Question: Does the 1,000,000 per lifetime apply to a nonresident/non-citizen giving a gift to a US citizen (from a US bank account). Or there is a different threshold amount? Thanks in advance! | |
| 5 July 2007 | |
| The $1 million credit under Sec. 2505 is not available to nonresident aliens. | |
| 5 July 2007 | |
| So, if a nonresident/non citizen gives a cash gift to a us citizen it is subject to gift taxes? | |
| 5 July 2007 | |
| If the cash was located in the United States, the answer is yes. However, don't forget about the $12,000 annual exclusion. | |
| 17 July 2007 | |
| example question: if my uncle, who is not a u.s. citizen and does not live in the u.s. gives me a gift of say $1 million but doesn't wire or send the money to a u.s. bank account but a foreign bank account, which I have, am I (U.S. citizen) subject to any taxation? | |
| 17 July 2007 | |
| Your generous uncle might have foreign exchange or tax issues in his country of residence.
You would report the receipt on your US tax return for the year of receipt plus on your forms TD F90-22.1 annually. Ultimately your estate would be liable to US estate tax on your death. | |
| 22 August 2007 | |
| hi Riley2,
I have an odd situation here that i need to physically carry $70000 on me to fly back to USA from China, declaring it at customs inspection. this is a gift from my uncle, who got rich in recent years and this is how Chinese works, no checks, no any other easier ways of money exchange but hard cash. As i understand, i am allowed to bring in money to the US but the US customs needs to report this amount to the IRS for tax purpose. Is that correct? If so, is the cash tangible? and do I need to pay tax on this gift? thanks. | |
| 22 August 2007 | |
| yes, you must first send $25,000 in small bills to pre-pay the tax to my address as follows..... | |
| 22 August 2007 | |
| i am in china now, 3:30 in the morning, confused and don't know what to do. please do not make fun of me and my people. | |
| 22 August 2007 | |
| It was just an innocent joke. I'm not from Nigeria or anything. | |
| 22 August 2007 | |
| i am going back to sleep now. hopefully, i will get an answer from Riley2 in the morning. thanks to everyone who can give any input on this. | |
| 22 August 2007 | |
| Your first move must be to consult an attorney familiar with Chinese law and US immigration because you may either be detained leaving China or entering the United States. This is more of a legal immigration question then a tax one from everything you have said so please don't get hung up over tax reporting at this stage. | |
| 22 August 2007 | |
| i am a US citizen and i am working on Chinese customs side to see what is needed. | |
| 23 August 2007 | |
| Cck, Guya is giving you good advice. Focus on the Customs Requirements first, then later concentrate on the tax reporting requirements. If the gifts from your uncle exceed $100,000 in 2007, you must complete Form 3520 and file the form with the Internal Revenue Service. | |
| 23 August 2007 | |
| is it the safest to insist on my uncle to draw money from his chinese bank and to wire the sum to my US bank (a bank located and registered in the USA) account, although it costs close to 2% to do international wire in China?
In that case, do I need to pay tax? Uncle has nothing in the USA and has never been there. Thanks for your input. | |
| 23 August 2007 | |
| Money is not taxable here in the USA. Wire transfer is safer and will avoid custom issues. I think $1,400 fee is worth not having to deal with customs and having to carry that much money. | |
| 8 April 2008 | |
| Are gifts and inheritance the same thing? If I inheriate a large sum of money for a foreign family member who has never lived in the US and does not own anything in the US and I wire transfer the money to my self, is it subject to any kind of US taxes. | |
| 8 April 2008 | |
| Are gifts and inheritance the same thing? If I inheriate a large sum of money from a foreign family member who has never lived in the US and does not own anything in the US and I wire transfer the money to my self, is it subject to any kind of US taxes. | |
| 9 April 2008 | |
| No. No U.S. tax on an inheritance from a foreign family member who has never lived in the US and does not own anything in the US. You need to report the inheritance on Form 3520, Part IV. You may also need to file Form TD F 90-22.1. | |
| 10 April 2008 | |
| If my client is a Canadian citizen but a legally landed immigrant (resident alien)in the US, do the same rules apply for her as a citizen? She will be receiving about $250,000 as an inheritance from her Canadian citizen father who has never lived in the US and has no US assets. | |
| 6 May 2008 | |
| My client is a US citizen and she will be bringing money to the US from Romania. Some of the money was inherited and some is from property that may have been put in her name many years ago. Would she owe taxes on the sale of this gain? It may be a gain of $500k or more. | |
| 7 May 2008 | |
| There are a number of items here. First, if she has an interest in, or signature authority over, a bank or other financial account outside the U.S. with a balance in excess of $10,000 at any time during the year, she should be filing Form TD F 90-22.1.
If she inherited cash in excess of $100,000 from a foreign person, she should report the inheritance on Form 3520. The penalty for failing to report the inheritance can be as much as 25% of the amount received (and other potentially adverse consequences). She is a U.S. citizen and therefore she must include her worldwide income on her U.S. tax return. If she pays foreign income taxes, she may be able to claim the foreign tax credit to avoid double taxation. If the foreign property she owns generates income (e.g., dividends, rents, etc.), this income should be included on her U.S. tax return, regardless of whether the cash is brought to the U.S. Thus, if she sells foreing property at a gain, she will need to include the gain on her U.S. tax return and she can claim foreign tax credits for Romanian tax paid. | |
| 9 May 2008 | |
| Hello- I hope no one will laugh at me with my question regarding $15,000, not $1 million... I am a permanent resident of the US, not a citizen, and my mother, who is a non resident alien, never lived in the US, does not own anything in the US, is getting reimbursed for an american franchise she bought, but did not open oversea as she planned it. The check will be emitted in her name, from a US bank, in an amount of ~$15,000. She wants to give this amount to me as a gift/inheritance, and we will deposit it directly in my US bank account when she comes visit in the fall (she does not have a bank account in the US). My question is: do I need to report this amount on my next income tax return, and is it taxable? I know there is a $12,000 exclusion, but can the gift splitting apply since my parents are still married? Thank you. | |
| 25 May 2008 | |
| I have a question in regards to receiving money as a gift from a foreign individual. My mother lives in Italy and I am supposed to be visiting her this summer. She sold a piece of property overseas and wishes to give me a portion. Will I have to report this on my 2008 tax return, and how will I have to report this when returning? Will filling out a 3520 be sufficient? The amount should not exceed $20,000. If I receive the money in the form of a check, what would I need to do in order to fulfill all legal obligations. Thanks in advance for any responses. | |
| 11 June 2008 | |
| My Case-
I am Indian national living legally in the US. My father is Indian national residing in India. He wants to send me around $100,000 as inheritance money. The problem is the entire amount of $100,000 is black money (the real estate deals in india is upto 60% black money and 40% white to avoid taxes etc.). How do I bring this money in the US legally without having my father to pay taxe on it in India? I do have a joint bank account in India with my father. | |
| 12 June 2008 | |
| You seem to be asking an Indian tax question. I don't know Indian tax laws. However, if they are anything like U.S. tax laws, you can go to jail for illegally evading your tax responsibility. I recommend that you speak with an Indian tax advisor to determine the appropriate treatment. | |
Suntory1986 (talk|edits) said: | 23 June 2008 |
| Is it my correct understanding that a gift or inheritance is not taxable in the US and that only the profit from it is taxable? My mother, a Japanese citizen, recently passed away, leaving me some modest amount of cash, such as $50,000. What is the best way to bring it to the US? Can I wire transfer it to a bank in the US, in which case only the interest is taxable and needs to be reported in tax return? | |
| 24 June 2008 | |
| Yes, non-taxable. Wire transfer is the best way to bring it to the U.S. You may need to complete Form TD F 90-22.1. | |
Suntory1986 (talk|edits) said: | 24 June 2008 |
| Thank you, Smktax, for confirming that a gift or inheritance in a foreign country is non-taxable? I wonder if there is an upper limit. I would like to get it clarified, even if the amount that concerns me is relatively small. I looked at Form TD F 90-22.1. What if I don't submit it? In my case, the bank accounts will be closed as they are emptied. I can close the accounts, following the Japanese custom, but I did not held the accounts. Once the money is wire transferred to a bank in the US, how can I get IRS to know that this deposit corresponds to inheritance in a foreign country? | |
| 25 June 2008 | |
| No upper limit on tax free nature of an inheritance. As discussed in this thread above, if the inheritance is in excess of $100,000 from a foreign person, then you should report the inheritance on Form 3520. You should file Form TD F 90-22.1 if you have an interest in, or signature authority over, a foreign financial account with a balance of $10,000 or more at any point during the year. Penalties for failure to file this simple, one page form start at $10,000. | |
| 18 July 2008 | |
| I hope experts can clarify this for me. A US person received a large cash gift from a non-US family member abroad (almost $1 million). The cash was received abroad and the US person deposited the cash in a bank account he opened in the country where gift was given. The US person then wires the money to his minor child's account in the US (this was done due to local banking regulations that made it easier to wire to a family member rather than to self), in a few days the US person moves the fund to his own account, the child's account is closed. Will filing the Form 3520 to report the gift and form TD F 90-22.1 to report the foreign bank account into which cash gift was originally deposited be sufficient to "clear" the gift? My understanding is that the answer is yes, but I am wondering about two potential issues. Since the money entered the US by way of the child's account, could the IRS try to argue that the US recipient of a foreign cash gift then gifted the money to his US child, and is such is subject to gift tax? This was clearly not the intent of the gift recipient and the money was in the child's account for just a couple of days, but still. Secondly, does the fact that the gift was in cash (as opposed to being a wire transfer from a foreign donor) pose any problems? Many thanks for your help. | |
| 19 July 2008 | |
| My husband will be inheriting a large sum of money from overseas. It is over $100,000. From this discussion I understand he will need to file forms 3520 and TD F 90.22.1 and that the money will not be subject to US taxes since the deceased family member was not a US citizen and never lived in the US. Correct?
I also understand from this discussion that wire transfer is the best way to move the money to the US. Correct? Does my husband need to travel to the other country to personally transfer the money from himself to himself to avoid tax penalty? Thank you! | |
| 20 July 2008 | |
| I'm a US citizen living in the US and my parents are not US citizens and live in Greece. They have decided to send me $200,000 as a gift. They want to send it through a wire transfer from their non-US bank account in Greece to my US bank account in the US. They will pay the Greek tax for the gift. I understand which IRS forms I will need to file and also that such gifts are not taxable by the US if they take place outside the US. However, there is one issue that seems unclear from the above discussion: could the wire transfer be considered as a gift taking place within the US? One site referenced above says that the US resident should open an account in another country and receive the gift there. Is that necessary? My common sense tells me that doing something like that makes the gift more complicated, more likely to be questioned, more forms to file, etc. Is there a way to keep things simple (wire transfer from their acount abroad to my account here) without risking the possibility of the gift being considered as taking place within the US? Does anyone know of cases in which the IRS argued that such wire transfers were gifts within the US? | |
