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Is a money transfer from non-U.S. to U.S. subject to U.S. gift tax?

My wife is a resident...

My wife is a resident alien and her mother has visited the U.S. several times and stayed less than three months each time. She does not have a SSN/ITIN and has no asset except a joint bank account with my wife in the U.S.. Last year, she wire-transferred $150,000 from her non-U.S. bank account to my wife's personal only U.S. bank account. In this case, I would like to confirm the money is still considered as foreign gift. 
1. If yes, is the wired money subject to U.S gift tax? I checked online about this question and get confused. 
In the following link 
http://www.taxalmanac.org/index.php/Discussion:Gift_by_wire_transfer_of_u.s._dollars_in_foreign_acct_to_u.s._acct 
Smktax's comment is wire-transferred money is subject to U.S gift, but based on C. Phelps & Mark D's answer, wire-transferred money between non-U.S. and U.S banks is not subject to U.S gift tax 
Could you please clarify this? 
2.  If no, can I claim that the gift money is not only to my wife, but also to other members of my family?

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Answered in 7 minutes by:
3/19/2009
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Verified

The treatment of money received from a foreign country by a U.S. citizen or a resident alien depends on whether or not the person who sent you the money is herself a U.S. citizen or resident alien for tax purposes.

If the person who sent you the money is a U.S. citizen living overseas, then the money is treated as a gift, and the person sending the gift must file a gift tax return. No gift tax would be due unless the donor had already exceeded their lifetime exclusion of $1 million on gifts, but they would be required to file the form.

If your wife's mother is not a U.S. citizen or is not a resident alien, then she is not subject to the same rules as a U.S. citizen and she has no reporting requirements. In that instance, it is your wife who must report receiving the money, if the amount exceeds $100,000 in any one year. The receipt of the money is reported by filing Form 3520 with the IRS. There is no tax due on the amount received, but again it is a reporting requirement.

Thank you.

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Customer reply replied 8 years ago

Many thanks.

My wife's mother is neither a U.S. citizen nor a resident alien, so she is a non-resident alien, am I right?

The following statements are from the internet.

1. "A NRA is subject to the U.S. gift tax only on a gift of real property or tangible
personal property situated in the U.S. at the time of the gift. The gift tax provisions
applicable to NRAs are found in sections 2501(a)(2) and (3), (b) and (c), and
2511."

2. "is there any risk of gift tax?" Yes.
"Is there any way the U.S. dollars located in foreign account could be deemed to be 'situated in the U.S.'?" Yes. It can be argued that the "gift" did not occur until

received. Receipt occurred in the U.S. Thus, it can be argued that the property was situated in the U.S. when the gift occurred. The IRS may argue that the receipt of

the funds was tangible, rather than intangible, property. See GCM 34845.

(http://www.taxalmanac.org/index.php/Discussion:Gift_by_wire_transfer_of_u.s._dollars_in_foreign_acct_to_u.s._acct)

3. "The receipt of a gift is generally not "income." To the extent, however, that U.S. gift taxes are due and unpaid by a donor, they may be assessed against the recipients of the gifts. Under legislation signed in August of 1996, we now require that a U.S. donee of gifts aggregating more than $100,000 in any one year from a foreign person file an information report by the due date of the donee's U.S. personal income tax return year of the gift. Form 3520 has been revised to serve as the required report and may be obtained from our website (www.irs.gov) or from any IRS Forms Distribution Center. "

(http://www.justanswer.com/questions/1e5d-international-money-gift-tax)

What I am concerned is if (2) is true, and then I’d have to pay the tax based on (3).

Could you please verify whether wire-transferred money from non-U.S. account to U.S. account is U.S. situs or not?

Thanks!

First, your mother-in-law is considered to be a NRA .S. tax purposes. She is not subject to U.S. tax laws. That means that no matter what she gives you, she is never obligated to report anything to the IRS. The burden of reporting then is placed on the U.S. citizen or resident alien who is receiving the money.

Money that is currently in a foreign account is in no way considered to be situated in the U.S.. If your mother-in-law transfers money to you in the U.S., and if the amount exceeds $100,000 in a year, then since she is not a citizen or resident alien, the reporting requirement becomes your responsibility. You report the amount received on Form 3520. It would not matter if she sent you $5 million; you do not owe tax on that money.

The other thing that you need to understand is that gift taxes in the U.S. apply to the donor of a gift, and no gift taxes apply at all until a person has reached their lifetime limit on gifts which is $1 million. The only time that the gift tax might become the responsibility of the recipient, is if the donor themselves did not pay the gift tax. But here again, if the gift does not exceed $1 million, then no gift tax is due from anyone.

But in your case gift tax is not even an issue here, because your mother in law is a NRA.

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Customer reply replied 8 years ago

One thing I need to make clear. The money was wire-transferred from mother-in-law's foreign account to my wife's account in last May. The money is in my wife's account now. In this case, was the wire transfer US situs or not?

Thanks.

I think you are concentrating too hard on the fact that this money was wire transferred. The article that you read where this might be an issue is totally wrong. It does not matter if you receive this money by wire transfer or by check or if your mother-in-law personally comes over here and hands you cash, it is still considered to be money that you received from a foreign country, and money you received from a NRA.

I have read articles before where people want to make an issue out of a wire transfer possibly being considered US situs, but this is totally bogus. These articles are from people who are not familiar with the tax laws, and are just trying to find ways to create possible issues.

In this day and age, wire transfers are quite common, in all aspects of life, particularly when you are talking about someone from a foreign country sending money to someone here in the U.S.. My guess would be that out of all the people in the U.S. who receive a foreign gift, probably 99% of those people receive the money by wire transfer. This does not change the fact that it is still a foreign gift. The wire transfer originated in a foreign country, and therefore it is considered a gift from a foreign country.

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Customer reply replied 8 years ago

That's wonderful.

Several more questions related to Form 3520.

Since the country of my mother-in-law only allows $50,000 wire-transferred to foreign country per person per year, the total $150,000 was in fact wire-transferred by three foreign accounts of my mother-in-law, NRA A and NRA B. But all the money is of my mother-in-law’s.

1. In Part IV of Form 3520, shall I list all of them or only my mother-in-law?

2. If all of them need to be listed, shall I check 'YES' to line 56 of part IV?

3. Shall I fill in the 'date of gift' using transfer-date or receive-date?

Thanks.

I appreciate again great help.

On Form 3520, you should list each $50,000 gift separately, and list your mother-in-law as the donor on each of the 3 gifts. Regardless of the laws of her country, the money came from her and she is the one you should list as the donor.

Line 56 should be checked "no" because the gifts all came from the same person.

Date of gift should be the date you received the funds.

Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Customer reply replied 8 years ago

Thanks millions again!

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