Thank you for getting back to me.
In my response I focused primarily on the assumption that the donor was a resident alien or was treatable as one. This is because, in this environment, where we have to rely only on the written word, it is sometimes hard to getting meaning across, and I was not certain of the status of all the players in your question and their status in the U.S.
So in light of the new information you have provided. You had the opportunity to actually speak to someone. I wished we had that ability in this environment, but unfortunately JA does not allow us to contact each other outside this venue,. some day we may have an ability to connect headphones to the computer and talk to each other.
so in light of the new information.
1. You have confirmed that the donor is the German National. So with respect to the German National. If you receive a gift FROM overseas, that is from a German National transferring money and tangible gifts from overseas, you do not have to declare these gifts until they are are 100,000 or more. Note closely the following:
The declaration IS NOT for tax purposes, but for security issues related to money laundering and anti-terrorism. The document you complete is eventually sent to the security department of the U.S. Treasury. http://www.irs.gov/pub/irs-pdf/f3520.pdf
If the home was gifted to you as ownership, then there is an exception if the property has a situs in the United States. Non-resident aliens can be required to file a gift tax return for tangible property such as reals estate, where the property has a situs in the U.S. So if any tangible property including gifts of cash form a U.S. bank Account, can be treated as a gift from Non-resident Aliens and subject to gift tax reporting if it exceeds 12,000 dollars. REFERENCES follow: (a) IRS Private Letter
Ruling (PLR 821005); (b) Internal Revenue Code
§ 2511(b)(1); (c) Internal Revenue Code § 2501(a)(2). (d) Internal Revenue Code § 2511(b)(2)(A
RENTS as gifts: Non-resident aliens, do not have to report gifts for gift tax or other purposes for intangible gifts. But remember, my answer was based on a presumption of having residence in the U.S. or being treated as a resident for tax purposes.
So if he were a resident or is considered a resident for tax purposes, then the gift is reportable on a gift tax return if its FMV is more than 12,000 per year.
Please note the specific definition of a gift by IRS Publication: 950:
"You make a gift if you give property (including money), or the use of ... property, without expecting to receive something of at least equal value in return." The general rule is that any gift is a taxable gift.
However, there are many exceptions to this rule.
Generally, the following gifts are not taxable gifts:
- Gifts, excluding gifts of future interests, that are not more than the annual exclusion for the calendar year,
- Tuition or medical expenses you pay directly to a medical or educational institution for someone,
- Gifts to your spouse,
- Gifts to a political organization for its use, and
- Gifts to charities."
Again, we go back to the status of your fiance.
If he is not treated as a resident for tax purposes, then only tangible gifts that are located in the U.S. are considered reportable on a gift tax return.
If he is treated as a resident for tax purposes, generally determined to have been in the U.S.for 183 days or more, then he would have to report that gift tax return for all gifts, including the use of the property at FMV if it exceeded 12,000 dollars in value. BUT
AGAIN, there is no tax liability as long as he has not exceeded 1 million dollars in life time gifts. (while as a resident for tax purposes). My answer before was in relation to the donor, with respect to the gift tax exclusion. Recipients of gifts, except for very rare situations, never pay tax on gifts they receive.
I disagree with the IRS agents comment that the situation of the rent will never occur. There have been too many incidents of auditors assessing living rent free as a gift. This constitutes use of property as defined in the IRS Publication 950. These INFORMATION officers manning the phones have scripts they go by and are not allowed to make the distinctive interpretations often required by situations such as yours. BUT, the IRS is required to stand by its agents information. So if an agent says you do not have to file a gift tax return that includes the FMV of gifts, then you need to write down that agents name and number. I know they gave it to you when you called them. Then if for some reason, though it is not likely to occur, there is ever an audit, then you will be protected. But this point of contention is really moot. Even if he were required to file a gift tax return, that is if he were a resident or considered a resident for tax purposes, there still is no tax due unless he gifts more than a million; and then it would only be on the part that exceeds one million.
The botXXXXX XXXXXne, this is a gift whether or not it is reportable based on his status, because it is either forgone rent or use of property.
The following article references the gift tax exclusion I relation to living rent free. This attorney says that her mother's rent free living was under the 24,000 annual exclusions. The figure of 24,000 comes from the fact that if you are married, you can split the gift. Each person can gift the mother 12,000 for a total of 24,000. The annual gift tax exclusion is per donor, whether married or not. http://www.nytimes.com/2008/04/21/business/retirement/21transfer.html
As I have said, in summary:
- 1. If he is a resident for income tax purposes, then he has to report the gifts to you that total more than 12,000.
- 2. If he is a non-resident for tax purposes, then I concur that he does not have to report the rents because they are non-tangible. AND further, if he is a non-resident he in fact does not have to report any gift; but that you would have to report for non-tax purposes gifts in excess of 100,000.
You can check the publication to determine his tax status in the U.S.: http://www.irs.gov/pub/irs-pdf/p54.pdf