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A fellow whose life I saved long ago and far away is sending me $300,000 via interbank wire transfer from his foreign account to my personal account here in the US. He is not a US citizen, never even been here and this is not a business deal of any kind. I have two business acounts and a personal account with a combined balance of under $1,000 and less than $1,000 in receivables. How badly is the IRS going to bite into this gift and is there anything I can do to minimize the damage?
Country/State/Province of question: California Already Tried: I have not done anything yet. The wire will be sent as early as tomorrow and the funds will be available three banking days after that. Wife and I are about to split up and I imagine she'll be entitled to half of the money left after the IRS is finished - although she was not in the picture when I saved the fellow.
There is no gift tax to the gift recipient. Note that the gift should be out of natural love and affection.
However since the gift is from a foreign person, you are required to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, if the amount received during the year is in excess of $100,000. This is just an information return and no payment is due.
Link to form 3520
http://www.irs.gov/pub/irs-pdf/f3520.pdf">http://www.irs.gov/pub/irs-pdf/f3520.pdf
I would suggest you get the gift in your personal account.
Let me know if you have any question.
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.
Certified Public Accountant (CPA)
CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..