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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7884
Experience:  15years with H & R Block. Divisional leader, Instructor
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Hello. My father is a non resident alien with a bank account

Resolved Question:

Hello.
My father is a non resident alien with a bank account in the US. He is thinking of gifitng me some money from this account in excess of the 14,000 gift exemption. I am a US Citizen. Does either of us have to pay gift taxes on this amount? Is there a way around this?
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Megan C :

Is your father a resident for tax purposes?

Megan C :

If he is not a resident for tax purposes, and does not live in the US he has no gift tax reporting responsibilities

Megan C :

You do not have to file any returns either, unless the gift is over $100,000. If the gift is over $100,000 you will have to file form 3520

Megan C :

No tax is due from you, even if you have to file form 3520. Form 3520 is just an information return informing the IRS that you are the recipient of a gift from a foreign person.

Megan C :

If your father is a resident for tax purposes, you would never have to file the form 3520 and he will have to file form 709 if the gift is over $14,000 but no gift tax will be due so long as he has not gifted over $5.2 million during his life

Megan C :

So, the chances are very good that no tax whatsoever would be due with this gift.

Customer:

HI i am fine thank you. How do I know if my father is a resienrt for tax purposes?

Customer:

An how are you, sorry.

Megan C :

Does he live in the us more than 183 days per year?

Megan C :

No need to apologize, I am well.

Customer:

No he lives in Italy permanently

Megan C :

Okay and does he have a green card?

Customer:

No, he does not have a green card

Megan C :

Okay then he is not a US tax resident.

Megan C :

So, you would file form 3520 if the gift is over $100,000

Megan C :

If the gift is under that, there's absolutely no requirement to file any forms.

Customer:

Ok. Does the fact that the money he may be giving me is currently in a US and not foreign accoutn make some difference?

Megan C :

No, it's for gifts from a foreign person, so where his bank is does not come into play

Customer:

Great. And form 3520 will not require me to pay income tax, right?

Megan C :

Correct. It is an information return only

Megan C :

No tax is paid

Customer:

And it's due with my regular tax reutrns?

Megan C :

Yes, but you send it in separately.

Customer:

OK, fantastic. Thank you for your help today!!

Customer:

Be well!

Megan C :

You're welcome. If there's nothing else I can assist you with today, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 15588
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and other Tax Specialists are ready to help you
Expert:  Megan C replied 1 year ago.
Thanks, XXXXX XXXXX your positive rating. Please come back and visit me any time you need a tax question answered. It was a pleasure working with you today!
Customer: replied 1 year ago.

Thank you! Afterthought: this was pertaining to gift tax. Would I be subject to income tax on the gifted amount? Thanks again

Expert:  Megan C replied 1 year ago.
Thanks, XXXXX XXXXX your follow up. You pay no tax whatsoever on this ... there is no income tax or gift tax on your part, either. Thanks!
Customer: replied 1 year ago.
Relist: Inaccurate answer.
Expert:  Robin D. replied 1 year ago.
Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.
You relisted your question citing the answer was Inaccurate.
I am not sure what part you found to be not correct but I will explain the requirements when a US person receives a gift from a Non US person.
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return.
The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
The person that receives the gift does not normally pay any tax unless the giver is an expatriate of the US after June 16, 2008, may be subject to tax which must be paid by the recipient. If your father was never a US person then this would not apply.
The receiver, again, does not pay tax on the gift they receive. They would only even report if the gift is $100,000 or more. Of course, if they generate income from the gift, that income would be taxable to them, but not the initial gift itself.

Customer: replied 1 year ago.

This is the answer I find inaccurate, or at least inconcistent with my reading of 26 USC 2511:


 


Customer:


Ok. Does the fact that the money he may be giving me is currently in a US and not foreign accoutn make some difference?


 


Megan C :

No, it's for gifts from a foreign person, so where his bank is does not come into play



 


This appears to be inconsistent with http://www.law.cornell.edu/uscode/text/26/2511 which reads


 


"Subject to the limitations contained in this chapter, the tax imposed by section 2501 shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible; but in the case of a nonresident not a citizen of the United States, shall apply to a transfer only if the property is situated within the United States."


As I stated in my question and reiterated in the answer, the money I may recieve from a non resident alien is in the US. So i am not clear wheteher it is then taxable.

Expert:  Robin D. replied 1 year ago.
I see,
It is not taxable to you. It may be reportable but it is not taxable. The cash would not be intangible property.
Expert:  Robin D. replied 1 year ago.
There are no reported decisions specifically deciding whether a
wire transfer of funds deposited in a US bank account transferring funds to another US bank account is a gift of either intangible or tangible property. Only IRS interpretations on whether transfers of funds by check constitute gifts of tangible or intangible property.
Customer: replied 1 year ago.

My concern was mostly regarding the fact that the gifted property was already in the US and thus the tax exemption seemed inapplicable if the property, even though gifted from a NRA, was "situated within the United States". Frankly that sentences confuses me.

Expert:  Robin D. replied 1 year ago.
I understand.
A problem arises when a non-resident alien makes gifts to his US
child by transferring funds from corporate accounts, whether foreign or US, as Section 672(f)(4) gives the IRS authority to recharacterize” transfers from foreign corporations which are treated by the US transferee as gifts (called “purported gifts”) in order “to
prevent tax avoidance.”

The implication would only be relevant if the account used by your father was a corporate or business account. Then the gift could be seen as compensation to you or a dividend payment which would not be a gift.
Even if such a transfer is made from a corporate account and your father is able to prove that his country of residence would tax neither the distribution nor the gift, then the purported gift should not be treated as a dividend to you, but as a gift.

If the account is from your father's personal US bank account then there is no area in what you cited that would relate to you.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7884
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and other Tax Specialists are ready to help you

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Robin D.
Robin D.
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15years with H & R Block. Divisional leader, Instructor