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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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My foreign father-in-law in Hong Kong like to give $1 million

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My foreign father-in-law in Hong Kong like to give $1 million for our family of four due to his failing health. Do we need to pay tax on the gift? or does my father-in-law need to pay tax on the gift? We have two small children. What is the best way to avoid paying or minimize tax?
Hi and welcome to Just Answer!

 

There will not be any income or gift taxes.

You do not report the gift on your income tax return.

 

As a recipient of a gift - the person does not need to claim it as income. Regardless of the value. Please see for reference IRS publication 525 page 34 (left column)- http://www.irs.gov/pub/irs-pdf/p525.pdf

Gifts and inheritances. Generally, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you. If property is given to a trust and the income from it is paid, credited, or distributed to you, that income is also taxable to you. If the gift, bequest, or inheritance is the income from the property, that income is taxable to you.

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The donor (the person who makes a gift) who is an US citizen may be required to file a gift tax return if the value of the gift is above $13,000 per person per year.

If the value of the gift is less than $13,000 per person per year - there is no tax consequences for the donor.

That would be the donor who files form 706 - not recipients of the gift.

Refer to Form 709 , 709 Instructions.
There will not be any gift taxes unless the lifetime limit of $5,000,000 (adjusted every year for inflation) is reached.

However considering your situation - because the donor is not US citizen nor a resident of the US nor the property is located in the US - your father-in-law is not under US jurisdiction and is not required to file the US gift tax return.

 

In additional - the large gift from non-resident aliens above is reported on the form 3520 - http://www.irs.gov/pub/irs-pdf/f3520.pdf - see part IV.

There is no tax associated with this reporting.

 

Please feel free if you need any help.

Be sure to ask if any clarification needed.

Lev and other Tax Specialists are ready to help you
Customer: replied 4 years ago.

What if my father-in-law has a U.S. green card?

if your father-in-law has a U.S. green card - he is classified as a resident alien - and will need to file a gift tax return form 706.
All gifts that are above $13,000 per person per year would be considered as taxable gifts.
However - there will not be any gift taxes unless the lifetime limit of $5,000,000 (adjusted every year for inflation) is reached.
Still - there is no taxes for you regardless of the gift value.