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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29573
Experience:  Taxes, Immigration, Labor Relations
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What would be the best way to except money from an out ...

Resolved Question:

What would be the best way to except money from an out of country source? A person who lives in the U.S. is getting a loan from his brother in the amount of $200,000 to by a home, but not his first home. What is his tax liability on this money? His brother lives in France. Would it be better to claim it as a loan or as a gift?
Submitted: 9 years ago.
Category: Tax
Expert:  Lev replied 9 years ago.
What state does that person live?
Customer: replied 9 years ago.
Reply to LEV's Post: California
Expert:  Lev replied 9 years ago.

If the money are given without any consideration - that is a gift; If you will have to repay the money - that is a loan. In both situations - there will not be any income tax obligation neither on the federal level nor in California.

As a recipient of the gift - you do not need to claim it as income. Please see for reference IRS publication 525 page 30 - http://www.irs.gov/pub/irs-pdf/p525.pdf

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As your brother is not an US resident - he is not responsible for any gift tax and do not need to file a gift tax return.

As you will transfer the money to US - because the money you are receiving from abroad and amount is more than $100,000, you are require to file form 3120 - http://www.irs.gov/pub/irs-pdf/f3520.pdf (see instructions for details - http://www.irs.gov/pub/irs-pdf/i3520.pdf) to declare transfer from the foreign country. There is no tax associated with this form.

So far - there is no any tax obligation and you do not need to report that amount as income.

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