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This question is about foreign gifts and loans, taxes / the

IRS. Im currently buying my...
This question is about foreign gifts and loans, taxes / the IRS. Im currently buying my wife out of the house title, and need $20,000 to do that. My dad is offering most of that money in the form of a loan. He's able to send $9,800 to start off, and another $9,300 when he gets paid for a contract which could happen any time. He's sending both amounts from Colombia in the form of wire transfers. He also gifted $7,000 this year to help with financial difficulties related to our daughter, and my cousin loaned $4,000 to assist with other transfer of assets related expenses.With all these moneys coming in i'm worried there might be laws and regulations I need to watch out for specially in relation to the IRS. What does law and the IRS require when it comes to significant foreign gifts and loans? Does this need to be reported and how? What are the penalties for not reporting? Are any of these gifts and loans considered taxable?
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10/10/2017
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Thank you for choosing this Q&A service for assistance. My name is Angela. I will be assisting you.

At this point you have no reporting requirements for any of the money that you have rec'd. Loans are not considered income and require no reporting for tax purposes. As the gift amount is less than the $100,000 threshold amount, it does not have to be reported either. See below regarding gifts from foreign persons.

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

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:

  • 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);

or

  • Gifts valued at more than $15,601 for 2015 (adjusted annually for inflation) from foreign corporations or foreign partnerships (including foreign persons related to the foreign corporations or foreign partnerships).

You must aggregate gifts received from related parties. For example, if you receive $60,000 from nonresident alien A and $50,000 from nonresident alien B, and you know or have reason to know they are related, you must report the gifts because the total is more than $100,000. Report them in Part IV of Form 3520. Treat gifts from foreign trusts as trust distributions you report in Part III of Form 3520.

File Form 3520 separately from your income tax return. The due date for filing Form 3520 is the same as the due date for filing your annual income tax return, including extensions. You file an annual Form 3520 for all reportable foreign gifts and bequests you receive during the taxable year. See the Instructions for Form 3520 for additional information.

Under a new law effective June 17, 2008, gifts from individuals who ceased to be a U.S. citizens or green card holders (lawful permanent residents) on or after June 17, 2008 may be subject to special rules. Refer to the 2008 Instructions for Form 3520 for additional information.

REFERENCE SOURCE:

https://www.irs.gov/businesses/gifts-from-foreign-person

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Customer reply replied 1 month ago
Thanks! I read online that the Bank Secrecy Act requires that transactions in excess of $10,000 be reported to the IRS; granted the site seemed amature-ish. I need to know if this is correct information or not. I need to be 100% sure that something isn't being missed; i'm concerned these transfers, being foreign and relatively large need to be reported. You'll get 5 stars...

Hello again.

As mentioned in my previous response, at this point you do not have a reporting requirement. However, if there are numerous transfers of money to, or from the same person, the authorities might consider the activity suspicious and look into it. As for the Bank Secrecy Act and the $10,000 amount, that is correct for cash transactions. However, a wire transfer is not considered a cash transaction under the Bank Secrecy Act. SEE BELOW:

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

Under the Bank Secrecy Act (BSA), financial institutions are required to assist U.S. government agencies in detecting and preventing money laundering, such as:

  • Keep records of cash purchases of negotiable instruments,
  • File reports of cash transactions exceeding $10,000 (daily aggregate amount), and
  • Report suspicious activity that might signal criminal activity (e.g., money laundering, tax evasion)

REFERENCE SOURCE:

https://www.occ.treas.gov/topics/compliance-bsa/bsa/index-bsa.html

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

A personal check is not considered cash for purposes of Bank Secrecy Act Compliance. A wire transfer is not considered cash under the Rule. So if you buy a $12,000 car and pay $4,000 cash and $8,000 by wire transfer, this would NOT be a reportable transaction because the wire transfer is not cash and the remaining 4k is less than the 10k cash threshold for reporting.

REFERENCE SOURCE:

https://blog.fraudfighter.com/bid/80625/Bank-Secrecy-Act-The-10-000-Rule

A positive rating is greatly appreciated. Thank you in advance.

Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Customer reply replied 1 month ago
Thank you so much, excellent work!

You are very welcome. Thank you for the positive rating and kind words. I do appreciate it.

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