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R. Klein, EA
R. Klein, EA, Enrolled Agent
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My wife is a naturalized American citizen from Germany residing

Resolved Question:

My wife is a naturalized American citizen from Germany residing in the U.S. Her mother (German citizen) recently passed in Germany. Will we have to pay tax in the U.S. on the inheritance?
Submitted: 2 years ago.
Category: Tax
Expert:  R. Klein, EA replied 2 years ago.

Randalltax :

thanks for asking today.

Randalltax :

The US does not tax inheritances from anywhere.

Randalltax :

The taxes, if any, will be on the Germany side.

Randalltax :

If there was income generating, such as interest on savings, after her death, then you may have income tax on that small portion, but that is all.

Customer:

Is there anything in the U.S. tax code that I can refer to regarding this situation should I ever be audited?


 

Randalltax :

There is nothing in the tax code. That's like asking for where the rules are that prohibit construction on clouds. You don't need rules or laws for things that don't exist.

Randalltax :

The IRS cannot audit income that is not income.

Randalltax :

However, money coming into the US must be declared if it is over $10K US. No taxes on it, just declared.

Randalltax :

And if you keep accounts in Germany that you or your wife have control over at any time during the year in excess of $10K, you will need to declare it to the Treasury Department as well. Depending on the amount, you may need to add a form to your 1040 next year.

Customer:

So we can wire this money into our stateside bank account from the Germany bank account and it will NOT have to be included when we file out taxes for this year?

Randalltax :

It is not income. Your tax return is an income return.

Customer:

Okay, where do we declare the amount? Will this be handled with the international wire transfer?

Randalltax :

You may wish to read up on FACTA reporting: http://www.irs.gov/businesses/corporations/article/0,,id=236667,00.html

Randalltax :

You may also wish to review whether or not you need to use IRS Form 3250 regarding a freign trust that may have been established at mother-in-law's death.

Randalltax :

Pretty much that is the two important sections you need to know about.

Randalltax :

I apologize but I must leave now. If you have any further questions or need clarification, please leave a message here and I will return in about 2 hours. Thanks.

Customer:
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 2918
Experience: Over 20 Years experience
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