Hi Randall isn't online ... May I help?
My husband is a Japanese citizen and a US Permanent Resident ( living over 30 years in the states. I am his wife and a US Citizen. We have a child who is 4. If he wanted to send us fund from Japan, what would the max amount be before we get taxed? Thank you, Ilona
For US persons, the receipt of gifts or inheritances are never taxed
Regardless of the amount?
The GIVER of a gift (and the estate of a person who has died) ppays the gift transfers tax
What if he alive?
Thats correct ... once the amount is ver 14,000 per person per year the GIVER (if a US person) has to file an ninformational return
to accumulate the lifetime gifts against the lifetime exclusion of $5,250,000 (for a person dying in 2013) it goes up every year
So once its over $14,000 we have to fill out some form.
NO ... If HE were a US person, her would have to
So during his lifetime he can give us $5,250,000 before being taxed?
sorry for the typo ... HE (or his adult guardian) would have top
again it is the GIVER, if alive, or the Estate of the decedent (if someone has passed) that pays the tax
the eciever (or heor, in the case of death) does not pay the tax
again, sorry ... the receiver (or the heir)
does not pay
Now, there is one more issue
In US, but we would have to pay in Japan?
So if we inheirt a house and see it in Japan - would we have to pay tax in Japan even if we are US citizen?
An informational return (IRS form 3520) must be filed simply to DECLARE the gift received from a foreign person ... If the gift is over $100,000 but this has nothing to do with taxes,,,, this form is used to track money movement
That will have to do with whatever Japans taxes are
so anything under $100k - we do not have to fill out Form 3520?
If you inherit anything at someone else's death, you will receive a step-up in tax basis for purposes of then selling that asset
so it's better to get all the funds before he dies?
But on your questions about SELLING a n inherited asset ... THEN as US citizens you mayu be subject to capital gains tax (an INCOME tax)
I should say to avoide double tax in japan and here - its bess to receive all the money/funds before his death?
for estate/gift tax purposes ... if the amounts will total less than $5,250,000 it is irrelevant BUT for capital gains ......
Yes, that would be true
Just wanted to make the point that your BASIS in those assets (for purposes of calculating taxable gain when you eventually sell) it's better to receive at death, because of the STEP-UP to date of death values for TAX BASIS purposes
So If the house is about 3 million US dollars and he dies and I sell it. Then I would have pay Japanese tax and then pay capital gains in US? am I correct?
am I subject to Capital Gains tax if it's more than $5,250,000?
No you're confusing capital gains tax (an income tax taid by the person who sells an asset for a gain) and estate/gift tax (a whole different syatem of tax that taxes transfers by gift or by inheritance)
If you buy a house for 100,000 and sell it for 200,000 you have a 100,000 gain
that's an income yax paid by you
if you are given something or inherit something (the final gift) those axes are paid by the gtiver
I see that makes sense.
gift and estate taxes (together) are excluded up to 5,250,000
capital gains is simplyt sales price minus what you have invested
where the two come together is what someone gives or leaves an asset to you8
if it's a gift you get the giver's *called carryover) basis
if it's l;eft to you at death, your basis in that asset is stepped up to the fair market value as of the date of death
and finally, there is no income tax on items received through gift or inheritance
just the tax on any profits for selling it later
Great. Thats wonderful news.
Thank you Lane!
and the SIZE of that profit (gain) will depend on whether you get oi through gift or estate - from gift you have the giver's basis - from inheritance, the basis is stepped up to fair market value at date of death
You're very welcome!
Okay sorry one more thing.
what is more better? The house is paid off. It's about 2.5 million US. If my husband sells it next year he would have to pay tax in Japan and then transfer the money to me (without having to pay any sort of tax)
or should we just inherit the house and probably in 50 years it will be more money and pay the tax in japan and then pay the tax here in us?
my husband is a bit older then me so i can inherit
and still enjoy the money ;-)
Other than not knowing what the tax in Japan will be now (OR then) fom the US perspective either way works... if you inherit there is no estate tax (that would be paid in Japan if there is a Japanese estate tax) ... IF he sells now, since you would get the cash after he pays whatever taxes would be owed for the gains on sale there, you will have no taxes here either....so ....
it probably depends on (1) how much the value appreciates between now and the date of death (2) the difference in capital gains tax ad estate taxes there .... you won't be taxed here either way ... and from a capital gains perspective the same is true ... he either gets the gains out of the way when he sells OR you inherit and get the asset with the basis stepped up, so that if you sold immediately (before the price went up) there would be no capitl gains tax for YOU that way either
Yes in Japan tax is soooooo high for inheritance. more then capital gains tax.
soe... IF her were to do fairly quickly... better to sell, pay the gain and transfer to you ....
sorry if he were to pass away fairly quickly
thats what we are thinking. they just raised it even more last year.
FI not things really get complicated by how much the value would go upthere, vs here
yes no worries.
you are very kind and thanks for the help
have a nice evening.