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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My parents, non US citizens or residents want to gift me a

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My parents, non US citizens or residents want to gift me a certain amount, close to 220K for the purchase of a home. I will not fill out the 3520 form since the yearly amount they'll transfer will be 70K. There are certain max limits for individuals in my home country. So I will purchase the home using a loan. All of the money will go towards repaying the loan. So, say for example:
Can you look at something for me and tell me if it makes sense?

Loan - 220K
Interest - 6.5%
terms - 27 months (the time I expect to pay it off, not the regular 30 year max term of the loan)
First payment 8780.51
Total interest paid at end of term - 17073.77

Now the payments will go down each month since the interest isn't acumulating as fast as with a normal 30 year loan.
the first year I will pay some 11.5K in interst, the second about 6K, and the third year whatever's left.

My question... Would the IRS get suspicious at the end of the 4th year when I'll have the whole thing paid off? I make 75K a year, I am essentially dumping the entire income in the house and on paper it would look like I'm not paying for anything else at all, such as food, clothing, bills, what have you.
I would also welcome suggestions as to how to proceed.

First of all, when you ask if the IRS would get suspicious, I guess the real question here is what could they be suspicious of? There is nothing whatsoever illegal about what you are proposing to do. And I am quite confident that there are other people in this country who find themselves in a similar situation, or even purposely put themselves in a situation, where the foreign gifts they receive do not exceed the annual threshold of $100,000 and therefore they do not need to be reported.

You will be claiming your mortage interest as a deduction when you file your taxes, but the amounts you have listed of $11.5k, $6k and even less in the third year are not all that uncommon. There are many people in the US who have house payments which greatly exceed this amount, and so the deductions for the interest will not particularly raise any flags. And as I said earlier, it would not really matter, because what you are proposing to do is perfectly legal.

I would not plan to do anything differently than what you have proposed. Even if the IRS were to ever select you for a random audit, just presenting the facts that you received $70,000 each year as a gift is a perfectly viable thing to do.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you groundround, and good luck on the purchase of your new home.

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