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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55132
Experience:  29 years of experience as a tax, real estate, and business attorney.
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I will purchase a house this year, the down payment will be

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I will purchase a house this year, the down payment will be a gift from my brother. the money curretly resides in a foreing accout (he works overseas), when transfered to my account will it count as an income? will i be taxed next year for that? if yes, at what rate? is there any way to avoid the penalty since it will be used to purchase a house?
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good morning. No, the gift is a gift and is thus not considered income. Therefore, it need not be reported on your income tax return nor is it taxable as income. There will be no tax or penalty. And, there will be no tax on you as the recipient of such a gift. The only reporting requirement you may have is if the amount of the gift is in excess of $100,000. Since it is coming from a foreign bank, you would need to file Form 3520 with the IRS to report the receipt of such amount; but, there would be no tax.

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Customer: replied 3 years ago.

So, if i understood you correctly the limit to the gift is $100,000.

The form 3520 will need to be filed next year with my taxes? or when the money is received?

Does the bank need to be involved in this declaration? of gift? or is this transparent to the bank?


I appreciate your help.

Thanks for following up. With regard to gift tax, each donor can give $14,000 per year per person under the annual gift exclusion. In addition to that, for any amounts in excess of the $14,000 in a year, each person has a $5,250,000 lifetime exemption....which means a person can give a cumulative amount of up to $5,250,000 in gifts over and above the $14,000 annual gift exclusion amount without incurring gift tax....the donor must file a gift tax return to let the IRS know how much of the lifetime exemption is being used, but there will be no gift tax until cumulative additional gifts have exceeded the $5,250,000. With regard to the limit before you have to file a Form 3520, it's $100,000 in any calendar year. The Form 3520 if filed at the same time your income tax is filed. Unless your loan documents require it, there is no requirement to involve the bank at all.
Customer: replied 3 years ago.

Ok, i apooligze for repeating the same questions over and over in different context/wording but i fear the IRS mostly due to ignorance.


I will receive $40K from my brother, with this, I dont need to report it to the IRS nor do I encoure in any penaly or additonal taxation, right?

No worries...I'm here to help. Yes, that is correct. For a gift of $40,000, you need do nothing at all. There are no tax or reporting requirements of a gift of that amount for you. For your brother, since the gift is more than the $14,000 annual gift exclusion, he would need to file a gift tax return to indicate how much of his $5,250,000 he is using; but there would be no tax.
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