Thursday, May 9, 2013

Gifts From Non-Citizens to US Citizens

Here's a happy scenario, you hear from an aunt from the old country & she wants to send you a check. You are elated to come into some chunk of change but you also wonder if that is a gift & if it is taxable. Yes, it did happen to a client of ours and here's what we told him! 

A gift is any transfer between individuals either directly or indirectly where full consideration- in money's worth- is not received in return. 

A "foreign" gift is money or other property that a U. S. person receives from a foreign person & treats it as a gift & excludes it from income. 

A "foreign" person is a non-resident individual, foreign corporation, partnership or estate. 

These gifts do not include amounts paid on behalf of U.S. individuals for qualified tuition or medical payments. 


Generally for the donor or donee, the following are not taxable gifts: 

  • Gifts less than the annual exclusion for the calender year.
  • Tuition or medical expenses paid on behalf of another person.
  • Gifts to your spouse.
  • Gifts to a political organization for it's use.
One cannot deduct the value of gifts made on a tax return (unless made to certain charities), however an annual exclusion applies to gifts made by an individual in a calender year. This annual exclusion was $13,000 from 2009-2012 & is $14,000 for gifts made after January 1st, 2013. This exclusion is per donee. If you want to give gifts of property/ money jointly with your spouse, this exclusion is $28,000 on or after January 1st, 2013.

So when should one start getting worried? One needs to worry about Reporting Requirements & file a Form 3520, if the following apply:

  1.  More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests; or
  2. More than $15,102 (for 2014) from foreign corporations or foreign partnerships (including foreign persons related to such foreign corporations or foreign partnerships) that you treated as gifts.


The due date for this tax return is the same as your tax filing date (April 15th) including extensions (October 15th). Among other items, you need to include copies of appraisals; copies of documents showing transfer; documentation of unusual items. 

If you are the donor and your gifts are more than the annual exclusions as stated above, you need to file Form 709

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Consult with a tax professional for your unique needs and make sure your questions are answered. Always remember to read my disclaimer here. If you have any more questions regarding this or other tax matters, contact me at manasa@mntaxsolutionsllc.com.