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Hello Randall - My husband is a Japanese citizen and a US

Hello Randall - My husband is...
Hello Randall -

My husband is a Japanese citizen and a US Permanent Resident ( living over 30 years in the states. I am his wife and a US Citizen. We have a child who is 4. If he wanted to send us fund from Japan, what would the max amount be before we get taxed?

Thank you,
Ilona
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Answered in 2 minutes by:
11/11/2013
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Lane :

Hi Randall isn't online ... May I help?

Customer:

hello

Customer:

Yes

Customer:

My husband is a Japanese citizen and a US Permanent Resident ( living over 30 years in the states. I am his wife and a US Citizen. We have a child who is 4. If he wanted to send us fund from Japan, what would the max amount be before we get taxed? Thank you, Ilona

Lane :

For US persons, the receipt of gifts or inheritances are never taxed

Customer:

Regardless of the amount?

Lane :

The GIVER of a gift (and the estate of a person who has died) ppays the gift transfers tax

Customer:

What if he alive?

Lane :

Thats correct ... once the amount is ver 14,000 per person per year the GIVER (if a US person) has to file an ninformational return

Lane :

to accumulate the lifetime gifts against the lifetime exclusion of $5,250,000 (for a person dying in 2013) it goes up every year

Customer:

So once its over $14,000 we have to fill out some form.

Lane :

NO ... If HE were a US person, her would have to

Customer:

So during his lifetime he can give us $5,250,000 before being taxed?

Lane :

sorry for the typo ... HE (or his adult guardian) would have top

Lane :

again it is the GIVER, if alive, or the Estate of the decedent (if someone has passed) that pays the tax

Lane :

the eciever (or heor, in the case of death) does not pay the tax

Lane :

again, sorry ... the receiver (or the heir)

Lane :

does not pay

Lane :

Now, there is one more issue

Customer:

In US, but we would have to pay in Japan?

Customer:

So if we inheirt a house and see it in Japan - would we have to pay tax in Japan even if we are US citizen?

Lane :

An informational return (IRS form 3520) must be filed simply to DECLARE the gift received from a foreign person ... If the gift is over $100,000 but this has nothing to do with taxes,,,, this form is used to track money movement

Lane :

That will have to do with whatever Japans taxes are

Customer:

so anything under $100k - we do not have to fill out Form 3520?

Lane :

If you inherit anything at someone else's death, you will receive a step-up in tax basis for purposes of then selling that asset

Lane :

That's correct

Customer:

so it's better to get all the funds before he dies?

Lane :

But on your questions about SELLING a n inherited asset ... THEN as US citizens you mayu be subject to capital gains tax (an INCOME tax)

Customer:

I should say to avoide double tax in japan and here - its bess to receive all the money/funds before his death?

Lane :

for estate/gift tax purposes ... if the amounts will total less than $5,250,000 it is irrelevant BUT for capital gains ......

Lane :

Yes, that would be true

Lane :

Just wanted to make the point that your BASIS in those assets (for purposes of calculating taxable gain when you eventually sell) it's better to receive at death, because of the STEP-UP to date of death values for TAX BASIS purposes

Customer:

So If the house is about 3 million US dollars and he dies and I sell it. Then I would have pay Japanese tax and then pay capital gains in US? am I correct?

Customer:

am I subject to Capital Gains tax if it's more than $5,250,000?

Lane :

No you're confusing capital gains tax (an income tax taid by the person who sells an asset for a gain) and estate/gift tax (a whole different syatem of tax that taxes transfers by gift or by inheritance)

Lane :

If you buy a house for 100,000 and sell it for 200,000 you have a 100,000 gain

Customer:

yes

Lane :

that's an income yax paid by you

Lane :

tax

Lane :

if you are given something or inherit something (the final gift) those axes are paid by the gtiver

Customer:

I see that makes sense.

Lane :

gift and estate taxes (together) are excluded up to 5,250,000

Lane :

capital gains is simplyt sales price minus what you have invested

Lane :

where the two come together is what someone gives or leaves an asset to you8

Lane :

if it's a gift you get the giver's *called carryover) basis

Lane :

if it's l;eft to you at death, your basis in that asset is stepped up to the fair market value as of the date of death

Lane :

and finally, there is no income tax on items received through gift or inheritance

Lane :

just the tax on any profits for selling it later

Customer:

Great. Thats wonderful news.

Customer:

Thank you Lane!

Lane :

and the SIZE of that profit (gain) will depend on whether you get oi through gift or estate - from gift you have the giver's basis - from inheritance, the basis is stepped up to fair market value at date of death

Lane :

You're very welcome!

Customer:

Okay sorry one more thing.

Lane :

Sure!

Customer:

what is more better? The house is paid off. It's about 2.5 million US. If my husband sells it next year he would have to pay tax in Japan and then transfer the money to me (without having to pay any sort of tax)

Customer:

or should we just inherit the house and probably in 50 years it will be more money and pay the tax in japan and then pay the tax here in us?

Customer:

my husband is a bit older then me so i can inherit

Customer:

and still enjoy the money ;-)

Lane :

Other than not knowing what the tax in Japan will be now (OR then) fom the US perspective either way works... if you inherit there is no estate tax (that would be paid in Japan if there is a Japanese estate tax) ... IF he sells now, since you would get the cash after he pays whatever taxes would be owed for the gains on sale there, you will have no taxes here either....so ....

Lane :

it probably depends on (1) how much the value appreciates between now and the date of death (2) the difference in capital gains tax ad estate taxes there .... you won't be taxed here either way ... and from a capital gains perspective the same is true ... he either gets the gains out of the way when he sells OR you inherit and get the asset with the basis stepped up, so that if you sold immediately (before the price went up) there would be no capitl gains tax for YOU that way either

Customer:

Yes in Japan tax is soooooo high for inheritance. more then capital gains tax.

Lane :

soe... IF her were to do fairly quickly... better to sell, pay the gain and transfer to you ....

Lane :

sorry if he were to pass away fairly quickly

Customer:

thats what we are thinking. they just raised it even more last year.

Lane :

FI not things really get complicated by how much the value would go upthere, vs here

Customer:

yes no worries.

Customer:

you are very kind and thanks for the help

Customer:

have a nice evening.

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
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You too!

Let me know if I can help further.

Lane
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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