Hi I ever asked you about transferring stocks to my nonresident parents when I am nonresident alien, and the conclusion is that, there is no gift tax for such transfer. To follow up on this, assuming after several years, the stock price has gone up and my parents sell these stocks. Also, I become a residence again by then, and my parents transfer money as gift to me and part of the money is from the sales of these appreciated stocks. In this case,
- I guess there is no gift tax needed because the gifting is from nonresidient (my parents are always nonresident), right?
- do I need to report the capital gain of these stocks after this loop of gifting?
Hi and welcome to our site!Several issues...
Thanks for the reply.
Because when I transfer appreciated stocks this year (from non-resident to another non-resident), there is no reporting needed for this. Then later when the value and gain are transferred back to me (when I am already a resident, so this transfer will be from non-resident to resident), assuming IRS reviews this and judges that this is not considered gifting but regular transfer actions (I did not claim this is gifting either because there was no reporting for me to do anyways, thus I did not lie at all), what tax obligation in this process for me?
assuming IRS reviews this and judges that this is not considered gifting
what tax obligation in this process for me?
If that is not a gift - means you are considered as the owner of these shares all that time - you would be responsible for the capital gain at the time shares are sold.
Thus the gain would be included into your taxable income in the year shares are sold.
The "transfer" itself is not taxable.
Thanks a lot for your reply! Then a follow-up question, how about if I sell all the appreciated stocks and pay the capital gain tax for this, then I transfer the cash to my nonresident parents. Later they may use the cash to do whatever investment they want to and may also make more gains. Then after that maybe many years later, they transfer me cash (part of it may be indirectly from the cash I gave to them before - but it is hard to define as it is just cash). In this process, is it possible that IRS also judges that they used my cash to invest and make gains, and then give it to me, thus I also need to pay capital gain tax against the gains they made?