Gift Tax

Old Aug 29th 2017, 9:34 pm
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Default Gift Tax

Hi folks.

I think I have the following understood correctly but wanted to run it by the forum.

Recently my late British mothers estate in the UK was wound up and me - ex UK and now USA LPR - and my British brother and sister in the UK shared the proceeds. There are no outstanding issues from my Mum's estate. The bulk of my share sits in my bank account in the UK. This is all background as.....

I would like to give my sister a cash gift and my short investigation reveals that -
1) If I gift over the IRS annual limit then I may need to fill in a form 709 in when I do my taxes. The amount will also go towards the lifetime allowance of something over $5million and in essence I won't pay tax on the gift.
2) As the gift is "going" overseas - although the cash is sitting in the UK of course - my sister is not liable to the IRS as a UK citizen.

And now the bonus question for 10 points...
3) My sister will not be liable to any tax from HMRC as there's no gift tax per se in the UK

Now the gift is really a temporary loan - she will repay me in full, probably within a couple of months.

From what can I tell the reverse transaction will also not be liable to any tax from IRS or HMRC to either her or me. Just need to declare that you've received it and it also aggregates to your lifetime IRS entitlement.

BTW - Tax/reporting wise this seems more practical/easier than giving my sister a loan with interest etc.

Apart from declaring what you are doing and being above board the only issue would be the banks looking at the transaction as possible money laundering.

I think that's about it - all the above is just a long winded way of saying "I think there's no tax to pay if I give a large sum to someone in the UK then she gives it to me back later".

Thanks for anything from advice to shooting holes in my stunningly crude interpretation of the tax rules.

Of course - being that the money is already in the UK, if I just transferred it and kind of didn't sorta tell anybody......
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Old Aug 29th 2017, 9:42 pm
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Default Re: Gift Tax

you might have more answers if you asked this in the US forum.
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Old Aug 29th 2017, 9:45 pm
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Default Re: Gift Tax

Oh blast - I thought that's where I was. Pardonez-moi et merci bien. A bientot.

That said when I submit my post and exit to the main forums page all the items are USA based - Am I missing something as the directory structure above this post reads: British Expats / Living & Moving Abroad / USA.

Last edited by freerskier; Aug 29th 2017 at 9:48 pm.
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Old Aug 29th 2017, 9:48 pm
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Default Re: Gift Tax

Originally Posted by freerskier View Post
Oh blast - I thought thats where I was. Pardonez-moi et merci bien. A bientot.
de rien!
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Old Aug 29th 2017, 9:55 pm
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Default Re: Gift Tax

Originally Posted by freerskier View Post
Oh blast - I thought that's where I was. Pardonez-moi et merci bien. A bientot. ....
Originally Posted by petitefrancaise View Post
de rien!
Rule #17!
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Old Aug 29th 2017, 10:04 pm
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Default Re: Gift Tax

Thanks for all the bi-lingual fun - but unless I am now monumentally confused this post is in the USA forum, n'est ce pas/isn't it?
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Old Aug 29th 2017, 10:09 pm
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Default Re: Gift Tax

Originally Posted by freerskier View Post
Thanks for all the bi-lingual fun - but unless I am now monumentally confused this post is in the USA forum, n'est ce pas/isn't it?
It is in the US forum.

I have no idea if you are confused.

To your question, unless there is some nefarious reason for making a reversible gift, you would be better off making it a loan and having done with the matter.

Last edited by Pulaski; Aug 29th 2017 at 10:11 pm.
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Old Aug 29th 2017, 10:45 pm
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Default Re: Gift Tax

Thanks Pulaski for the response - Could you elaborate a little as to why a loan would be better? Just so's its all documented/above board etc?

Thanks.
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Old Aug 29th 2017, 11:34 pm
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Default Re: Gift Tax

Originally Posted by freerskier View Post
Thanks for all the bi-lingual fun - but unless I am now monumentally confused this post is in the USA forum, n'est ce pas/isn't it?
ignore me. I'm having one of those days and the only remedy is a large glass of something alcoholic!
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Old Aug 30th 2017, 1:02 am
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Default Re: Gift Tax

Originally Posted by petitefrancaise View Post
ignore me. I'm having one of those days and the only remedy is a large glass of something alcoholic!
Beeping alarms can do that to you.
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Old Aug 30th 2017, 1:45 am
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Default Re: Gift Tax

Originally Posted by freerskier View Post
Thanks Pulaski for the response - Could you elaborate a little as to why a loan would be better? Just so's its all documented/above board etc?

Thanks.
If it's a "gift" with an implicit understanding that the gift will be returned, then it really isn't a gift it's a loan, isn't it.

You can make loans to family members and friends, or indeed anyone else, as often as you like and so long as the loans are repaid, they will have zero impact on gift tax and inheritance tax - none whatsoever.

So unless there is some other reason that the the money has to be held by the recipient unconditionally, in my opinion it would be better to call the arrangement what it really is, a loan.
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Old Aug 30th 2017, 8:08 am
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Default Re: Gift Tax

As this is a loan, you will need for US tax purposes to recognise income equal to interest at the AFR on the loan. You'll also technically have a Form 1042-S withholding requirement.
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Old Aug 30th 2017, 10:38 am
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Default Re: Gift Tax

Originally Posted by Cook_County View Post
As this is a loan, you will need for US tax purposes to recognise income equal to interest at the AFR on the loan. ....
If there is any. .... Which I guess is highly unlikely.
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Old Sep 4th 2017, 8:57 pm
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Default Re: Gift Tax

Thanks folks - comprehensive as ever.
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