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Nonresident alien wants to gift $600,000 (situated in USA)

to USA citizen spouse....
Nonresident alien wants to gift $600,000 (situated in USA) to USA citizen spouse. What are gift/estate tax consequences?
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7/1/2013
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 3,856
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
Verified
Welcome. THANK YOU for choosing Just Answer. My name is XXXXX XXXXX my goal is to help make YOUR life, a little...LESS taxing.

Since the amount is coming from a Non U.S. citizen, there are no tax implications to the U.S. citizen, however, the U.S. citizen will need to complete a Form 3520 since the amount is more than $100,000. SEE BELOW:

Reporting Requirements


You must file Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, if, during the current tax year, you treat the receipt of money or other property above certain amounts as a foreign gift or bequest. Include on Form 3520:

  • child last-child">
    Gifts or bequests valued at more than $100,000 from a nonresident alien individual or foreign estate (including foreign persons related to that nonresident alien individual or foreign estate);

REFERENCE SOURCE:

 

http://www.irs.gov/Businesses/Gifts-from-Foreign-Person

 

Link to form 3520/instructions:

 

http://www.irs.gov/pub/irs-pdf/f3520.pdf

http://www.irs.gov/pub/irs-pdf/i3520.pdf

 

Please let me know if I can be of further assistance to you regarding this matter.

 

Thank you again for using JUST ANSWER.



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Customer reply replied 4 years ago

Your answer is incomplete and not helpful. What are the tax consequences to the nonresident alien spouse? This is family money - although in a separate account controlled by the nonresident alien spouse- and preservation of principal is of concern. Is the gift a good idea vis-a-vis tax consequences?


Consider tax consequences for both spouses - perhaps it would be better to not make the gift and keep the money in a separate account in name of the nonresident alien spouse?

You wrote the following;

Nonresident alien wants to gift $600,000 (situated in USA) to USA citizen spouse. What are gift/estate tax consequences?

-----------------------------

With all due respect, you were not specific as to who you were asking about relating to the gift tax consequences. There are no gift tax consequences to the nonresident alien in the U.S.. If there are gift tax consequences in Africa, that I cannot tell you. I am not familiar with Africa's taxation system.

As there are no tax consequences to either party on the U.S. end, the gift is a good idea from that stand point. The issue is whether or not the donor will be taxed in Africa, which again, I do not have the knowledge to answer.
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Customer reply replied 4 years ago

These people are husband and wife, living in Kenya. Wife is USC. Money is in the USA, result of a real estate investment by the nonresident alien spouse of the USC. USA income tax has been paid. We are not concerned about taxes in Kenya. It looks like there may be a tax on the transfer (gift) in the USA by the nonresident alien of 41 to 45 %. Is this not true? Can the gift be made, ie, transfer the cash from Texas bank account to US citizen spouse's Ohio account without tax consequences? Please give IRS code citations supporting your answer.

Again, with all due respect, you mentioned nothing about the money being the result of a real estate investment. As I need to leave the computer, I am unable to continue on with this matter, therefore I will release the question back into the queue so that someone else may assist you.

Thank you again for using JUST ANSWER.
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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,134
Experience: Taxes, Immigration, Labor Relations
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Hi and welcome to Just Answer!
Different expert here. Please allow me to assist...
Here are several issues.
1.
In the US - the gift is NOT a taxable income for the recipient - regardless of the value.

Please see for reference IRS publication 525 page 31 (left column)- http://www.irs.gov/pub/irs-pdf/p525.pdf

Gifts and inheritances. In most cases, property you receive as a gift, bequest, or inheritance is not included in your income.
2.
Gift taxes are assessed ti the donor - however if the donor is a nonresident alien - he/she is not under the US jurisdiction - and is not subject of gift tax regulations.
Nonresident aliens are only subject of US gift tax is a gifted property is a real or a personal property located in the US.
The gift tax return is filed using form 709 - see instructions page 3 - middle column - Nonresidents not Citizens of the United States - www.irs.gov/pub/irs-pdf/i709.pdf‎
Nonresidents not citizens of the United States are subject to gift and GST taxes for gifts of tangible property situated in the United States.
3.
So far - in general - if the money are transferred from one bank account to another bank account in anticipation of the gift - for nonresident alien donor - that is NOT subject of US gift tax.
We need to clarify that a gift of cash by a nonresident alien could be a gift of US tangible personal property if the cash consists of currency (actual bills and coins). In this case - it will be subject of gift taxes, but in case of bank transfer - there is no gift tax liability.
Specifically for gift taxes - if you are looking for references to the US tax law - see here - http://www.law.cornell.edu/uscode/text/26/2501
(a)(2) Transfers of intangible property
Except as provided in paragraph (3), paragraph (1) shall not apply to the transfer of intangible property by a nonresident not a citizen of the United States.
4.
Because the US citizens receives a gift from a nonresident alien - there are certain reporting requirements.
Gifts from non-resident aliens above $100,000 are also reported on the form 3520 - http://www.irs.gov/pub/irs-pdf/f3520.pdf see part IV. There is no tax associated with this reporting.
5.
See for reference this article which contains many references to the statute and court cases - http://www.ttn-taxation.net/pdfs/Speeches_Miami_2011/04-ArturoAballiII.pdf
Let me know if you need any help.
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,134
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Customer reply replied 4 years ago

Thank you, LEV. Your's is the first answer to really address the issue. Just to be clear, you are saying there is no gift tax consequence if the US cash (proceeds of a one-time real estate sale, income tax return filed and tax fully paid) presently in a Texas bank account (separate property of the nonresident alien spouse) is transferred to a brokerage account of the US Citizen spouse located in Ohio. Both spouses live together in Kenya. No tax consequence for either?


If you have any further comment, fine. Otherwise I'll spend some time researching your citations. Thank you again for your thorough answer.

That is correct - there is no gift tax consequence for the nonresident alien when cash gift is made via bank transfer (not actual bills and coins which may be considered as tangible property).
However a recipient of the gift who is a US citizen - is required to report a gift from a nonresident alien when the total value is above $100,000 on the form 3520.
There is no gift tax liability for either spouse.
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