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i have a client who has money in India. How can he transfer

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i have a client who...
i have a client who has money in India. How can he transfer the money to a bank here in the states without being taxed? He will use the money to purchase a new home in California
Submitted: 5 years ago.Category: Tax
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5/1/2012
Tax Professional: Lev, Tax Advisor replied 5 years ago
Lev
Lev, Tax Advisor
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LEV :

Hi and welcome to Just Answer!

LEV :

What is the source of these money? Is that a gift? Inheritance? Other?

LEV :

The fact of transferring the money - by itself - is not taxable.
However based on the source of funds, a residency status, the amount and other circumstances - there might be some additional reporting requirements.

Customer: It is a loan from a Relatve residing in india
Customer: $60,000
LEV :

The loan - as long as it is assumed to be paid back - is not taxable income - no need to be reported.
The bank might ask to disclosure the source of the money - so the formal loan agreement might be helpful if requested. I might suggest discussing with your banker before initiating the transfer.
Nothing will be reported to the IRS and there will not be any tax liability for the loan.

Customer: Thank you
LEV :

You are very welcome.
Is there any interest charged on that loan?

Customer:

5%

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Tax Professional: ShawnA, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions. replied 5 years ago
ShawnA
ShawnA, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
Category: Tax
Satisfied Customers: 2,884
Experience: CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
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Hello. My specialty is focusing on YOUR Financial needs. Financial Planner/Business Owner for 20 years. CPA,PFS,QFP,GMMA.

 

Please note that this interest (if the loan is used for mortgage purposes is tax deductible.

 

 

If this does not answer your question please let me know. Also let me know if you have additional questions.

 

This is my full time job and I only get paid if you accept my answer. We work on the trust system at JA.

 

If you understand my answer and have no more questions, please accept and please leave positive feedback (if so inclined). Thank you.

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Tax Professional: Lev, Tax Advisor replied 5 years ago

Unfortunately it is very unlikely that your client will be able to deduct the interest on the loan.

I assume that you did not pass incorrect advice to your client.

 

I asked about the interest because if the interest is not charged - the forgone interest would be deemed a gift.

As long as the interest is charged - that is not an issue.

The loan - as long as it is assumed to be paid back - is not taxable income - no need to be reported.

Nothing will be reported to the IRS and there will not be any tax liability for the loan.

Let me know if you need any help.

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Tax Professional: ShawnA, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions. replied 5 years ago
I disagree with the other expert. Per the IRS regulations any interest paid on a mortgage is deductible (whether through family or another source).
ShawnA
ShawnA, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
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Tax Professional: Lev, Tax Advisor replied 5 years ago
While you preferred and accepted the answer provided by Mr. Adamo... that is a good example how sales people work - we are given only the good side of the product...

However there are other sides.
1.
If the loan is used to purchase the home - that doesn't mean it is a mortgage. To qualify for the mortgage interest deduction - the mortgage should be registered in the county where the property is located and the property should be used as collateral.
2.
To deduct the mortgage interest paid to a person - the taxpayer should include that person tax identification on the schedule A - in case of a foreign person - that should be ITIN.
3.
You might not aware - but the Mr. Adamo most likely does aware that mortgage interest received by a foreign person is taxable in the US for that foreign person.
4.
If the US resident pays to a foreign person and that payment is taxable - the payer is treated as a withholding agent and is required to withhold 30% of taxable payment.

So when you "buy" the idea of deducting the loan interest - you might like it, but when you know all circumstances - if doesn't have any financial benefits - and I doubt that you client will like it.
Lev
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