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Can my Canadian parents gift me 200k for a down payment on a house without either of us paying additional tax?
For income tax purposes gift is not taxable income in the US regardless the amount - as a recipient of a gift you do not need to claim it as income. There is no any amount limit. Please see for reference IRS publication 525 page 30 - http://www.irs.gov/pub/irs-pdf/p525.pdf
Your parents - if they are US residents may need to file a gift tax return if the gift amount is above $12,000 per person per year (for 2008) , but there would not be any gift tax unless the lifetime limit of $1,000,000 is reached.
If your parents neither US citizens nor US residents - - US gift tax requirements would not apply to them.
Canada does not tax gifts given to adults in form of money and there is no limit. However if your parents instead of money - would gift you a property - such as real property or securities - your parents would need to report the gift on their Canadian tax return the same as if it was sold at fair market value to you.
See Pub IT209R at http://www.cra-arc.gc.ca/E/pub/tp/it209r/it209r-e.html for more information.
"Your parents - if they are US residents may need to file a gift tax return if the gift amount is above $12,000 per person per year (for 2008), but there would not be any gift tax unless the lifetime limit of $1,000,000 is reached."Could you please clarify this? If they are US resident the limit is $12,000 or $1,000,000. I am a little confused. Also, are you sure that since they are Canadian neither they nor I will have to pay any additional tax. I am a US citizen living in San Diego but my mother is Canada living abroad (father American/Canadian deceased). Thank you.
There is no limit for the amount of gift.
The gift tax return is filled by the donor - and is required if the amount of the gift is above $12,000 (for 2008) per person per year.
Filing gift tax return doesn't mean that the person would owe any gift taxes. During the lifetime, the person may gift up to $1,000,000 of taxable gifts without paying any gift taxes - but still would need to file a gift tax returns. The gifts below $12,000 per person per year are considered not-taxable gifts and do not require any gift tax returns.
Since your mother is neither US citizen nor a resident of the US - she is not under jurisdiction of the US law - and doesn't need to file an US gift tax return.
In case you transfer the money to US - if the amount is more than $100,000, you are required to file form 3120 - http://www.irs.gov/pub/irs-pdf/f3520.pdf (see instructions for details - http://www.irs.gov/pub/irs-pdf/i3520.pdf) to declare transfer from the foreign country. There is no tax associated with this form.
"In case you transfer the money to US - if the amount is more than $100,000, you are required to file form 3120 - http://www.irs.gov/pub/irs-pdf/f3520.pdf (see instructions for details - http://www.irs.gov/pub/irs-pdf/i3520.pdf) to declare transfer from the foreign country. There is no tax associated with this form."
My mother has already transferred the money to the US this year, but it is still in her account. Does she have to file the 3120, or do I?
Yes - she need to file that form. That is for information only.
The purpose of the form 3120 is not the taxation, but to eliminate money laundering.
Also - as your mother has US bank account and the gift would take place in the US - in general - it is subject of the US jurisdiction and the US gift tax law, however under the US-Canada tax treaty - taxation should be based on the place of residence - so because your mother lives in Canada - no US gift tax return is required.
One clarification, My mother no longer lives in Canada she is now a resident of France (she has a UK and Canadian passport) how does this affect the us gift tax return? Also my mother used to live in the US with my father (who was American, but passed away) , so she used to file US tax up until 1988 does this affect the gift tax in any way?
As long as your mother is not an US citizen and not a resident of the US - and the gift is from outside the US - she is not under the jurisdiction of the US tax law.
The only issue may be in question that she would make a gift on the US territory...
The US-France tax treaty doesn't directly address the gift tax - http://www.irs.gov/pub/irs-trty/france.pdf
We are a little in the gray area... but I think that as long as she is a Canadian citizen - the US-Canada tax treaty may be used - as far as the IRS concern - she is not an US resident and all above should apply.
Since she is Canadian does she have to pay any kind of Canadian tax?