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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22649
Experience:  Taxes, Immigration, Labor Relations
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I would like to fully understand Gifting (limits per year/total,

Resolved Question:

I would like to fully understand Gifting (limits per year/total, taxes, implications, etc) in the US under multiple scenarios:

1.
Husband: NON-US citizen or Permanent Resident (Green Card Holder), but tax resident
Wife: NON-US citizen or Permanent Resident (Green Card Holder), but tax resident
Husband's Mother: Non-US citizen or Permanent Resident (Green Card Holder), NOT tax resident

Action: Husband's Mother gives Husband (that is son) a gift originating from a foreign account.
a) General answer.
b) Deposited in a joint account with Wife. Would it be then a gift 50% to Husband, 50% to wife?
c) Deposited in an account solely owned by Husband.

Action: Husband gives Wife gift from the money he received from Mother.
a) General answer.
b) Money is deposited in a joint account (from Mom's donation) and flows to an account solely owned by wife.
c) Money is deposited in an account solely owned by husband (from Mom’s donation) and then to an account solely owned by wife.

Action: Husband (money in the US) gives Mother a gift (mother's account abroad)
a) General answer.

Action: Husband receives gift from mother from a US account, and then gives mother a gift in a foreign account.
a) General answer.

2.
Husband: NON-US citizen or Permanent Resident (Green Card Holder), NOT tax resident
Wife: NON-US citizen or Permanent Resident (Green Card Holder), but tax resident
Husband's Mother: Non-US citizen or Permanent Resident (Green Card Holder), NOT tax resident

Action: Husband's Mother gives Husband (that is son) a gift originating from a foreign account into a US Account.
a) General answer.
b) Deposited in a joint account with Wife. Would it be then a gift 50% to Husband, 50% to wife?
c) Deposited in an account solely owned by Husband.

Action: Husband gives Wife gift from the money he received from Mother.
a) General answer.
b) Money is deposited in a joint account (from Mom's donation) and flows to an account solely owned by wife.
c) Money is deposited in an account solely owned by husband (from Mom’s donation) and then to an account solely owned by wife.

Action: Husband (money in the US) gives Mother a gift (mother's account abroad)
a) General answer.

Action: Husband receives gift from mother from a US account, and then gives mother a gift in a foreign account.
a) General answer.


3.
Daughter: US citizen, residing in the US.
Mother: Non-US citizen or Permanent Resident (Green Card Holder), NOT tax resident

Action: Mom gives daughter a gift from an account abroad.
a) General answer.

Action: Daughter gives mother a gift, depositing it in an account abroad.
a) General answer.

Action: Daughter receives gift from mother from a US account, and then gives mother a gift in a foreign account.
a) General answer.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV :

Hi and welcome to Just Answer!


There are several issues related to gifts from nonresident aliens and I will clarify these for you.


1.
As a recipient of inheritance - 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.


2.
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 709 - not recipients of the gift.
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 is not under US jurisdiction and is not required to file the US gift tax return.


3.
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. Only gifts above $100,000 are reportable.

LEV :

4.
When the gift transaction occurs - there are two parties involved - the donor and the recipient. When gifted funds are transferred to a jointly owned account - it should be clear to whom the gift is intended - it is not automatically divided between account owners. So the donor need to specify to whom the gift is made and the donee should accept the gift.
5.
A gift is the voluntary transfer of property or funds to another person without receiving anything of value in return and without conditions or considerations attached. So if any of transferred funds are going to be refunded or repaid in any way - that is not a gift - but a loan.

Customer:

Hi,

Customer:

When I did some research, I think I found that gifts between a us citizen and a non-citizen spouse are taxable as of certain amount. That's why I need to have more information on each of the scenarios...

LEV :

 


When I did some research, I think I found that gifts between a us citizen and a non-citizen spouse are taxable as of certain amount.


As a recipient of inheritance - 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.

LEV :

 


There are separate gift tax regulations which are applied to donors only and only when the donor is US person or if the property is located in the US.
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.
The threshold is $14,000 starting 2013.

LEV :

As a recipient of the gift - the person does not need to claim it as income. Regardless of the value.

Customer:

Hi Lev,

Customer:

to make sure I understand this scenario fully...

Customer:

my mom, NOT a US citizen nor a US tax resident, gifts 200k to me, NOT a US citizen nor a US tax resident,

Customer:

money is deposited in a US account

Customer:

= neither my mom nor I have to file anything, nor any taxes are due

Customer:

correct?

Customer:

THEN

Customer:

the money is now in a US account

Customer:

me, not a US citizen nor a Tax resident, donate the money to my wife, not a US citizen nor a Tax resident

Customer:

the money stays in the same US account, which is jointly owned,

Customer:

= ? - what happens under this scenario

Customer:

that is one question

Customer:

THEN

Customer:

what would happen under same scenario, but now both my wife and I are NOT US citizens BUT Tax residents?

Customer:

Thanks

Customer:

Andres

LEV :

my mom, NOT a US citizen nor a US tax resident, gifts 200k to me, NOT a US citizen nor a US tax resident,money is deposited in a US account





= neither my mom nor I have to file anything, nor any taxes are due -correct?
Yes - that is correct - there is no US gift tax consequences for neither you nor your mother - because both are nonresident aliens and the gift doesn't include any real or personal property located in the US.



LEV :

me, not a US citizen nor a Tax resident, donate the money to my wife, not a US citizen nor a Tax resident the money stays in the same US account, which is jointly owned, = ? - what happens under this scenario
There is no difference - there is no US gift tax consequences for neither you nor your wife - because both are nonresident aliens and the gift doesn't include any real or personal property located in the US.


Customer:

but the money is now in a US account...

Customer:

right?

Customer:

that doesnt count as "real or personal property" - can you please define this?

LEV :

what would happen under same scenario, but now both my wife and I are NOT US citizens BUT Tax residents?
That situation will be different. Your wife as a recipient will not have any liability. But you - as a donor and as an US resident alien - are subject of US gift tax regulations.

LEV :

but the money is now in a US account... right? that doesnt count as "real or personal property" - can you please define this?



The money in the US bank account is NOT a "real or personal property and is not considered as US located property for nonresident aliens.

LEV :

what would happen under same scenario, but now both my wife and I are NOT US citizens BUT Tax residents?
That situation will be different. Your wife as a recipient will not have any liability. But you - as a donor and as an US resident alien - are subject of US gift tax regulations.
Generally, no gain or loss is recognized on a transfer of property from you to your spouse.
However - this rule does not apply if your spouse is a nonresident alien.
There is an annual limit you may transfer. This threshold is $139,000 in 2012. With transfers above that amount - there might be gift tax complications. But there will not be income tax complications.

Customer:

can you elaborate on gift tax complications? would I have to pay taxes, or just report?

LEV :

can you elaborate on gift tax complications? would I have to pay taxes, or just report?
That would be the donor who files form 709 - not recipients of the gift.
There will not be any gift taxes unless the lifetime limit of $5,000,000 (adjusted every year for inflation) is reached.
Taxable gift is the amount above the threshold - the gift above $13,000 per person per year, or above $139,000 in case teh gift is made to a non US citizen spouse.

Customer:

so, as I understand it, I wouldn't have to pay any taxes as the 139k is far away from the 5 million I can gift, correct?

LEV :

If the gift is made to a non US citizen spouse $139k or less - there is no reporting requirements.
The gift above that amount is a taxable gift and will require you to file a gift tax return.
However you are not liable of any gift taxes as long as your lifetime limit of $5,120,000 (adjusted for 2012) is reached.

Customer:

correct, so under that scenario, if I gift my wife 200k, I wouldnt have to pay any taxes in that year as I am far from the 5.122m - correct?

LEV :

That is correct - assuming you are an US tax resident.

Customer:

to clarify, the 5 million, that is the total I can gift, be it children, wife, parents, etc.? Or is that per person I gift - child, for wife, etc...

LEV :

$5k is a lifetime limit fro all taxable gifts.
Taxable gift is the amount above the threshold - the gift above $13,000 per person per year, or above $139,000 in case the gift is made to a non US citizen spouse.
For instance if you gift $200k to your non US citizen spouse - the taxable gift will be $61k.

LEV :

If you gift $50k to your child - the taxable gift will be $50k-$13k=$37k.

Customer:

correct, my question is the taxable lifetime limit of 5 million, that is distributed among all the people I gift. Its not 5 million for wife, 5 million for son, 5 million for daughter, etc...

LEV :

That is correct - $5m is YOUR lifetime limit - that is not a limit per donee.

Customer:

last question, what would be the yearly limit be if I am a US tax resident and gift to my mom abroad who is a non-tax resident? Is it also 13k/ per year that I can gift to her?

LEV :

Yes - current limit is $13k per person per year. The limit is set $14k for 2013.

LEV :

My goal is to provide EXCELLENT service.
Please be sure to ask for clarification as needed.
You may return back to this page any time.
Even I might be not immediately available - still I will address all your concerns.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22649
Experience: Taxes, Immigration, Labor Relations
Lev and 6 other Tax Specialists are ready to help you
Expert:  Lev replied 1 year ago.
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