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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10097
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Ed, I found you because you answer a similar question another

Customer Question

Hi Ed,
I found you because you answer a similar question another person asked you.
Here's the situation. My parents are about to get their 6 months visa to get their green card. I understand they will be US tax liable once they arrive in the US as they become officially US resident that day. They would like to sell their home that they have lived for the past 30 years. Will they have to pay taxes on capital gain once they become US resident or it is better for them to sell it before they come to the US? Then they would like to donate the money after the sale to my brother who is a French resident so he can come to the US with an investor visa E-2. My brother has a bank account with BoA (but he's not resident yet) so can my parents donate the money to him by transferring it to his BoA account in the US without being taxed on gift tax if they do it before they become resident?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.
Hi,The answer to both of questions is yes.As tax residents (which can happen through substantial presence, green card or citizenship) they will be subject BOTH to income tax (which includes capital gain) and gift tax.HOWEVER, those in the U.S. tax system (both tax residents and citizens) are able to exclude up to 500,000 of capital gain from the sale of their primary residence. (IRC section 121)ALSO, the lifetime exemption on gifts for U.S. citizens and non-citizen residents is now $5,430,000.So once they BECOME tax residents, these exclusions would also apply.But yes, they can do what they want to do BEFORE becoming residents with no implications whatsoever.
Expert:  Lane replied 1 year ago.
OK, I still don’t see you coming into the chat here … I’ll move us to “Question and Answer” mode … (We can still continue our discussion there, just not in real-time chat) … This way JustAnswer won’t charge you for for additional chat time and we can continue the dialogue.
Expert:  Lane replied 1 year ago.
If this HAS helped, I would appreciate a positive rating (using the stars or smiley faces on your screen)… That’s the ONLY WAY I'm credited for the work here
Expert:  Lane replied 1 year ago.
Hi,
I’ve moved us to the Q&A mode so JustAnswer won’t charge you for more Chat time.
Please let me know if you have any questions at all...
Lane
Customer: replied 1 year ago.
So if I understand my brother would have to pay gift tax if he receives the donation at a US bank institution even though he is not a US resident? Also my parents would get an exemption on capital gain for selling their house in their country? Thanks.
Expert:  Lane replied 1 year ago.
No,Gift taxes are paid by the giver, no gift tax here And yes, there is an exclusionof up to $500,000 for sale off a primary residence ... IRS test for that is having lived in the home for 2 out of the last 5 years before the sale
Customer: replied 1 year ago.
It will be my last question. So to avoid any US tax involvement, my parents just have to sell their house before becoming US resident and donate it to my brother? Thanks!!
Expert:  Lane replied 1 year ago.
That's exactly right.
If they are not residents or citizens the US doesn't come into play at all.
Hope this has helped
Lane
If this HAS helped, I would appreciate a positive rating (using the stars or smiley faces on your screen)… That’s the ONLY WAY I'm credited for the work here
Expert:  Lane replied 1 year ago.
Let me know if that last question and answer made sense...
As you can see, the rate depends on the level of profit.
And remember, this is NOT GROSS income, but rather profit, that's taxed.
Let me know if you have questions
Hope this has helped.
If this HAS helped, I would appreciate a positive rating (using the stars or smiley faces on your screen)… That’s the ONLY WAY I'm credited for the work here.
Expert:  Lane replied 1 year ago.
Hi,
… just checking back in to see how things are going.
Did my answer help?
Let me know…
Lane

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