Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Overseas wired funds / capital contributions

I'm starting a new business...
I'm starting a new business in California. Will be setting it up as an LLC.

Part of the initial capital contributions will be coming from family members (not immediate family, but uncles, aunts, godparents, etc.) overseas (Taiwan, specifically). They are not U.S. citizens or permanent residents - all Chinese citizens (of Taiwan, Republic of China).

I am now a U.S. citizen. I originally came to America as an immigrant during my childhood.  I have lived in the U.S. now for the majority of my adult life, in excess of 40 years. I have always worked & earned my income & filed my personal income tax returns in the U.S. - have never lived or worked overseas.

My company will be set up as an LLC, for example, Cal-Pacific Trading, LLC (note: this is NOT the real name of my LLC to be), and then there will also be a DBA. So, the actual business will reflect something similar to: XXXXX XXXXX LLC, dba Super Discount Electronics (once again, the DBA is just a made up name for this example only).

Once all legal / regulatory details have been completed and the LLC & DBA's are properly established, I will open up a business checking account in the name of the DBA.  At that time, my relatives/family will wire funds into the business checking account. The anticipated funds that will be wired in will be somewhere in the range of $25,000 to $50,000 in U.S. dollars.

To be exact, the funds will be wired from an overseas bank in Taiwan to my local U.S. bank. However, at this time, I am not sure whether the overseas bank will be a **COMPLETELY** foreign bank, ie, The Bank of Taiwan, or whether it will be from the local Taiwan branch of a U.S. bank, such as Citibank Taiwan. Most likely, it will be from a Taiwan based bank.

At the current time, the optimistic forecast is tht the **INITIAL** capital contribution of $25k - $50K will be the only capital contribution from my relatives. The funds are meant to supply my working capital during the start-up phase of my business operations and the hope is that this amount will suffice.

However, in the event that additional capital is needed before the operating cash flows of this new venture is adequate to sustain this new business, it is possible that there will be additional capital contributions in the future.

My questions / concerns relate to the what must be done after these overseas wired funds are received in my domestic U.S. business checking account.
That is, what are the **CORRECT / PROPER** regulatory / legal steps I must take & complete so that I do **NOT** run afoul of the U.S. Government / IRS.

That is - given the political environment / reality that we live in post-9/11, I definitely want to know **EXACTLY** the **CORRECT** way to do this so that I and my overseas relatives do **NOT** run afoul of any rules & regulations or laws in any area that might by mistake, give us problems in the areas of money-laundering, etc.

Also, for tax purposes, I want to make sure that I do the **CORRECT & PROPER** reporting to **DOCUMENT** that these funds are meant to be the capital contribution from my relatives/family as their investment in my business, and not to be mistaken or misconstrued in any way as income.

So, the answer I'm seeking is an explanation of **ANY and ALL** relevant information and considerations about the rules, regulations & laws that pertain to what I've described above.

Most importantly, I need to know **WHAT** are the **CORRECT/PROPER** IRS tax forms that I must file and what are the filing requirements (amount of time from date the funds are wired in, etc.) so that I can properly document that the funds wired in are **MEMBER CAPITAL CONTRIBUTIONS** to the LLC, and **NOT INCOME**.

Thank you!
Show More
Show Less
Ask Your Own Tax Question
Answered in 8 hours by:
11/2/2011
Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1,408
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
Verified
If the transfer (gift) from relatives overseas is less than $100000 in any year, there is absolutely no reporting requirement or tax. If over $100000k, you must report the gift, but there is still no tax on the gift.
This is true even if you plan on paying it back to them. That is a personal contract issue between you and them.
You simply use the money to capitalize your business as you state. Based on the numbers you have provided, there is no reporting requirement at all.
Ask Your Own Tax Question
Customer reply replied 6 years ago
Can you provide an IRS code section that references or deals with what you've provided as an answer?

I've read up on the details regarding US citizens about the annual gift tax exclusion of amounts up to $13,000 and also the $1 million liftetime gift tax exclusion.

In my current scenario where the incoming funds will definitely be less than the annual $100K threshold you mentioned, great - on the face of it, no problem.

Let's change the scenario a little. Let's say that I'm going to be searching for distressed real estate to purchase, and my relatives will be the investors. Despite the opportunities in the current real estate market, even distressed real estate still requires much larger capital commitments.

So, let's say that my relatives will be sending / wiring funds to my business in EXCESS of the $100,000 amount you mentioned - say maybe $500,000 to $1 million.

Same scenario - funds to be invested in LLC (or multiple LLC's) with the intent of purchasing distressed real estate. The terms of the investment, distribution of returns/profits will be documented by the operating agreement of the LLC's, etc.

What are the reporting requirements with the larger $ amounts?

PS - I'm brand new to this forum. If my question about the larger $ amounts should be sent in a separate question, let me know, and I'll be glad to do it that way.
Yes. IRS form 3520 and instructions.The gift exclusions and tax you mention apply only to US citizens that are giving gifts. Not to those receiving gifts.
Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1,408
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
Verified
Jax Tax and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Jax Tax Your Own Question
Jax Tax
Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1,408
1,408 Satisfied Customers
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions

Jax Tax is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I used the online version to file my 2016 tax return and I
Good morning I used the online version to file my 2016 tax return and I am not sure how I missed filing my wife's return. I now need to file a return for her and would like to know if I can add her to… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,483 satisfied customers
This is a question on a UK resident's personal income tax on
This is a question on a UK resident's personal income tax on lump withdrawals of funds in a Canadian RRSP using an example with funds expressed in $CAN. Value of lump sum payment from the RRSP is $100… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,483 satisfied customers
I am completing my personal income taxes. For this filing
I am completing my personal income taxes. For this filing year, I left my corporate career to manage my real estate full time. Therefore, the real estate is moving from a passive activity to an active… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Can I report rental income in my tax return on a property
Can I report rental income in my tax return on a property thar is owned by my father? He does not live in the US is not a US citizen and can sign a document to allow me to receive the rental… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
For a ny state partnership tax return, if you file an
For a ny state partnership tax return, if you file an extension but don't pay anything and then end up owing a lot. Do they still recognize the extension or do they charge a failure to pay penalty (fo… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Information on Gift tax return. My 100 year old mother wants
my 100 year old mother wants to gift the balance of a home loan to my brother, Balance is aprrox $35,000. What are the mechanics? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,483 satisfied customers
For the purpose of IRS form 3520 line 54 can an estate
For the purpose of IRS form 3520 line 54 can an estate account be a person 'related to' my brother? For example, if I received money from an estate account from my father in Canada as part of a will a… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I filed for an extension to file my 2017 income tax return.
I filed for an extension to file my 2017 income tax return. I recently suffered a stroke - 6 weeks ago - and have been unable to finalize my return. I should be able to file it within the next 30 days… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,483 satisfied customers
Help with Form 3520. Form 3520 - Need to know what line
Form 3520 - Need to know what line items to fill for having received a cash gift from a foreign citizen … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,483 satisfied customers
Form 3520- Received a bequest from a foreign Estate. Besides
Form 3520- Received a bequest from a foreign Estate. Besides my personal info, what other info, if any, goes on page 1 … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I am receiving some income from a foreign government "social
I am receiving some income from a foreign government "social security-type" benefit program. Where should I report this income in my Tax Return? Should I report it as "Other Foreign Financial Assets"?… read more
abci168
abci168
Principal
27 satisfied customers
NYS can collect personal income tax for 20 years? But the
Hi - So NYS can collect personal income tax for 20 years? But the Fed can only collect for 10? … read more
abci168
abci168
Principal
27 satisfied customers
What tax form is filed to report dividends paid by US Corp?
What tax form is filed to report dividends paid by a US Corp which is owned by a Canadian Corp? I think it might be 1042S. I want to know the rate of WH.… read more
abci168
abci168
Principal
27 satisfied customers
I was unaware of requirement to file Form 3520. I received
Hello:I was unaware of requirement to file Form 3520. I received cash gifts from foreign persons (parents) in 2016. I have not been contacted by IRS; have no previous under or unreported tax liabiliti… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
What is the ruling to use for a LLC not want to file a late
what is the ruling to use for a LLC not want to file a late S election for 2016. the LLC does not file an extension for the S corp.… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I am aware that a foreigner can form an LLC in the states.
Hi,I am aware that a foreigner can form an LLC in the states. My question is; if he/she is living in Japan and wants to live in California by starting a business, is forming an LLC here in the US solv… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Rules on Rollovers (Return of a non-taxed IRA Distribution).
Rules on Rollovers (Return of a non-taxed IRA Distribution). Over 70-1/2 years old) … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
Is not knowing you need to file a form 3520 for foreign
Is not knowing you need to file a form 3520 for foreign gifts enough to establish reasonable cause? Plan to voluntarily disclose after finding out the requirement. I did my taxes myself on Turbo Tax, … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,230 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x