Discussion:Inheritance or gift from foreign national
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Discussion Forum Index --> Tax Questions --> Inheritance or gift from foreign national
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| 16 June 2006 | |
| Is there a tax or limit of any kind when receiving an inheritance or a gift from a foreign national that is not a US resident? I have a client whose mother is a citizen of and lives in Lebanon. She is worth a few million dollars. My client has told me that he heard from a friend's accountant that there is a $500,000 limit on gifts and inheritance from a foreigner without tax. I find no reference to this in the IRC. | |
| 16 June 2006 | |
| You have to be careful with transfers. Cash, for example, wants to be transferred into an account in client's name in a foreign country. You do run into problems if you do it here. Basic reference is Notice 97-34 | |
| 16 June 2006 | |
| What do you mean "you run into problems if you do it here"? We're not looking to do anything against the law or to evade taxes. I'd just like to know if it is subject to some kind of a gift or estate tax. | |
| 16 June 2006 | |
| Notice 97-34 states that you must disclose gifts from foreign individuals over $100,000 but it doesn't say anything about a tax. | |
| 16 June 2006 | |
| Says a lot about penalties for failure to report, though. Not the clearest area of the law and not a specialty of mine. If the transfer is not done in US, none of this applies. I believe the annual exclusion applies and tax doesn't start until cumulative total is over $1,000,000. My understanding is that anything over annual exclusion requires 3520. | |
| 16 June 2006 | |
| Warren, we are dealing with 2 different issues here.
A gift in excess of $100,000 from a nonresident alien must be reported on an information return -- use Form 3520. Secondly, if a nonresident alien makes a gift to a resident of property that has a U.S. situs, the gift is subject to gift taxes. For example, if the NRA alien draws a check on a U.S. bank account made payable to a resident or citizen of the U.S., the gift is subject to gift tax. A similar rule would apply to a gift of U.S. real estate. | |
| 1 August 2006 | |
| A US corporation's stock has US situs for estate tax purposes, but not for gift tax purposes. | |
| 1 August 2006 | |
| That's what I get for not bothering to look it up. All intangibles are excluded from gift tax for non resident aliens. | |
| 16 August 2006 | |
| So what happens when nonresident alien's gift is subject to US gift tax and said nonresident never sets foot in US and has no assets in US? Does that mean IRS can go after the resident donee? Is this codified in the IRC? | |
| 17 August 2006 | |
| Eagle996, if the nonresident alien has no assets in the US, I don't see how he would be subject to gift tax.
However, a donee can be held liable for unpaid gift taxes. See Code Sec. 6901(a)(1)(A)(iii). | |
| 30 January 2007 | |
| Riley, above you state "if the NRA alien draws a check on a U.S. bank account made payable to a resident or citizen of the U.S., the gift is subject to gift tax." I believe that there is an exception to gift tax for intangible property. I believe that cash (actual currency) may be considered tangible property. Do you know if there is any authority regarding whether money in a U.S. bank account is tangible or intangible property? | |
| 30 January 2007 | |
| I believe that cash on deposit in the United States is considered to be intangible property under Internal Revenue Code § 2511(b)(2)(A). However, cash in a safe deposit box is considered to be tangible property. See Rev. Ruling 55-143. I believe that a check drawn on a U.S. bank and presented for payment in the United States becomes tangible property when it is presented for payment and honored by the bank. The obvious solution to the check problem is to simply make a gift of the entire bank account. | |
| 30 January 2007 | |
| I'm kind of with Riley on this one. Silly once upon a time ruling that bills and coins are tangible property. There are indications that a check drawn on a foreign account and cashed in US escapes (PLR 821005). | |
| 13 February 2007 | |
| Hi Riley
You wrote A US corporation's stock has US situs for estate tax purposes, but not for gift tax purposes. Can You give me some reference to this inreseting law does it apply to a US C corporation too or only to public corporation's | |
| 13 February 2007 | |
| Technically, the code provides that the gift tax will not be imposed on transfers of intangible property by a nonresident alien. You will need to look at Internal Revenue Code § 2511(b)(1) in connection with Internal Revenue Code § 2501(a)(2).
In contrast, the code provides that the estate tax will be imposed on transfers of stock (issued by a domestic coproration) by a nonresident alien. You will need to read Internal Revenue Code § 2103 in connection with Internal Revenue Code § 2104. | |
| 13 February 2007 | |
| Hi Riley
One more Question Is a trustee personally liable for gift taxes to a Trust? | |
| 13 February 2007 | |
| Hi Riley
One more Question Is a trustee personally liable for gift taxes to a Trust? | |
| 14 February 2007 | |
| THANK YOU RILEY
In that case , would a shareholder in a USA "c" Corp. that holds rental properties still be intangible property even the underlying assets are real estate It is not a public Corp, just 10 shaerholders Thanks again for your help | |
| 21 May 2007 | |
| Hi Everyone,
This is very interesting. I have a new client who is a US citizen but has relatives in India who are not. One of his Uncles has transferred ~$450,000 to an escrow company for the downpayment on my client's first home. I was going to prepare form 3520. There should be no gift tax consequences since the donor is not a US citizen, right? Thank you! | |
| 21 May 2007 | |
| Are the funds coming from a U.S. bank account? If so, may be a taxable gift. | |
| 21 May 2007 | |
| Hi Riley,
The funds are coming from overseas going directly to the escrow company. | |
| 22 May 2007 | |
| I think you are telling me that the check or wire transfer will not be drawn on a United States bank. If such is the case, then there will be no gift tax reporting issues. | |
| 22 May 2007 | |
| Question. If escrow fails to close, who has the right to the money? | |
| 10 April 2008 | |
| If my client is a Canadian citizen but a legally landed immigrant (resident alien)in the US, do the same rules apply for her as a citizen? She will be receiving about $250,000 as an inheritance from her Canadian citizen father who has never lived in the US and has no US assets. | |
| 6 May 2008 | |
| My client is a US citizen and she will be bringing money to the US from Romania. Some of the money was inherited and some is from property that may have been put in her name many years ago. Would she owe taxes on the sale of this gain? It may be a gain of $500k or more. | |
| 7 May 2008 | |
| There are a number of items here. First, if she has an interest in, or signature authority over, a bank or other financial account outside the U.S. with a balance in excess of $10,000 at any time during the year, she should be filing Form TD F 90-22.1.
If she inherited cash in excess of $100,000 from a foreign person, she should report the inheritance on Form 3520. The penalty for failing to report the inheritance can be as much as 25% of the amount received (and other potentially adverse consequences). She is a U.S. citizen and therefore she must include her worldwide income on her U.S. tax return. If she pays foreign income taxes, she may be able to claim the foreign tax credit to avoid double taxation. If the foreign property she owns generates income (e.g., dividends, rents, etc.), this income should be included on her U.S. tax return, regardless of whether the cash is brought to the U.S. Thus, if she sells foreing property at a gain, she will need to include the gain on her U.S. tax return and she can claim foreign tax credits for Romanian tax paid. | |
| 11 October 2008 | |
| Ladies & Gentlemen,
I have a client who is a non-resident alien owning property in the US. He wants to gift this property to his two daughters who are also non-resident aliens. Current value of the property is $500,000. What forms if any will he be required to file on this gift? DJCPA | |
| 11 October 2008 | |
| Send in Form 709 and a big check for the taxes.
Consider transferring the property into a foreign corporation, then gifting the stock in the foreign corporation to the daughters. | |
| 12 October 2008 | |
| As alluded to by Riley, there is no gift tax exclusion of #1,000,000 for nonresident aliens with property in the U.S. Thus, gift tax would be due on the gift to the extent it exceeded $24,000. Riley's suggestion may eliminate the gift taxes. For income tax purposes, the transfer to the foreign corporation will trigger gain and withholding tax under the FIRPTA rules. | |
| 12 October 2008 | |
| thanks for the input. is there anything that needs to be done for NYS & NYC? | |
| 13 February 2009 | |
| Hi everyone
In this thread, one question raised in 2007 was never answered. I have the exact situation and would like know if anyone knows the answer. I understand no gift tax to a nonresident for a transfer of intanbile properties (e.g. stocks). How about, "would a shareholder in a USA "c" Corp. that holds rental properties still be intangible property even the underlying assets are real estate It is not a public Corp.." ? | |
