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Nice gift from home. Tax question....

Nice gift from home. Tax question....

Old Jan 29th 2013, 2:32 am
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Default Nice gift from home. Tax question....

I'm a UK citizen living in US for last 6 years on a green card (married to US gal).

So Mum called the other day and says she's so happy things are working out in the US she wants to help us along and is going to pay $120,000 into my old UK bank account (I plan to transfer the money from my UK account to my US account by Swift bank to bank transfer).

As the money will only be in the account for a week at most (my account has practically nothing in right now and has been dormant since i moved out) do I still need to file an FBAR this year?

Also I think Mums money would be termed a gift under US tax law with no tax to pay (as Mums not a US citizen). Do I need file anything to declare the gift?

I imagine a transfer that large will trigger some sort of report from the bank. What do I need do to avoid any headaches with this otherwise pleasant surprise?

Thanks for you time to answer...
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Old Jan 29th 2013, 2:51 am
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Default Re: Nice gift from home. Tax question....

That is nice!
There are limits on how much a gift can be for tax purposes. So expect to pay tax on some of it,
Anything over 10k is reported by the us banks for patriot act purposes, so expect to have to verify id of sender/source of funds.

You cannot/should not do anything to avoid unpleasentness, anything you do to evade detection could be considered money laundering. Best bet is to tell all the banks involved what you just told us and pay the fees and taxes.
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Old Jan 29th 2013, 2:57 am
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Default Re: Nice gift from home. Tax question....

I can't answer with regard to any potential tax implications or tax filing requirements - but someone should come along soon who can do so.
As far as FBAR filing - its entirely pro forma...a breeze....just a 2 page form. And I think it's probably required even tho the time pd. involved would be so brief.

But why can't the funds be sent by EFT from your mothers bank directly into your US account? Then no FBAR filing would be required (I think )
Your bank will give you a poor conversion rate - but that's the case even if you do the transfer as you describe.

Last edited by MMcD; Jan 29th 2013 at 3:00 am.
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Old Jan 29th 2013, 3:01 am
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Default Re: Nice gift from home. Tax question....

Originally Posted by RICH
That is nice!
There are limits on how much a gift can be for tax purposes. So expect to pay tax on some of it,
Don't confuse the US "gift tax" (which is paid by the person *giving* the gift - but only if they are liable to pay US taxes in the first place) with the US income tax consequences for the recipient of the gift which will normally be "none".

From the UK perspective there could be issues with inheritance tax if the OP's mother were unfortunate enough to die within 7 years of making the gift, but to the best of my knowledge the OP is unlikely to have to pay any US taxes on the gift.

FBAR disclosure will, of course, be necessary.
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Old Jan 29th 2013, 3:04 am
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Default Re: Nice gift from home. Tax question....

Originally Posted by RICH
That is nice!
There are limits on how much a gift can be for tax purposes. So expect to pay tax on some of it,
Anything over 10k is reported by the us banks for patriot act purposes, so expect to have to verify id of sender/source of funds.

You cannot/should not do anything to avoid unpleasentness, anything you do to evade detection could be considered money laundering. Best bet is to tell all the banks involved what you just told us and pay the fees and taxes.
It's money laundering rather than patriot act stuff, but it's automatic.

As for the tax, no idea on how much of a gift one can get before taxes kick in.

FBAR will need to be filed for next tax year. Might be easier to have the mother just wire it directly to avoid that.

Either way, with that kind of sum of money, look into using a currency exchange service like xe.com to transfer the money for a better rate, can make a fairly large difference.
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Old Jan 29th 2013, 3:21 am
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Arrow Re: Nice gift from home. Tax question....

You'll have to file form 3520 because it is more then $100k.

The UK limit for tax free gifts is £3k tax may be owed in the UK.
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Old Jan 29th 2013, 3:25 am
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Default Re: Nice gift from home. Tax question....

Originally Posted by Bob
It's money laundering rather than patriot act stuff, but it's automatic.

As for the tax, no idea on how much of a gift one can get before taxes kick in.

FBAR will need to be filed for next tax year. Might be easier to have the mother just wire it directly to avoid that.

Either way, with that kind of sum of money, look into using a currency exchange service like xe.com to transfer the money for a better rate, can make a fairly large difference.
Money laundering is under the Patriot act nowadays. Terrorist funding, and all that.
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Old Jan 29th 2013, 12:15 pm
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Default Re: Nice gift from home. Tax question....

Originally Posted by RICH
......You cannot/should not do anything to avoid unpleasentness, anything you do to evade detection could be considered money laundering. Best bet is to tell all the banks involved what you just told us and pay the fees and taxes.
Agreed 110%! Other than being open with your bank about telling them where the money from, and being able to prove that (letter from your mother, and perhaps being prepared to obtain a notarized copy of her passport, if requested), as RICH said you shouldn't do anything to "avoid any unpleasantness", because that is a fairly certain way to cause unpleasantness. This includes expressing any concern, or even asking/ mentioning to your bank anything about transaction reporting requirements, possibly been seen to be laundering, or concerns about the USA PATRIOT Act, etc.

Treat your interaction with your bank like you would speak to the airport immigration officer checking your passport - simply state the facts, nothing more. Following several massive fines against large banks in recent years (just a few weeks ago HSBC was fines $1.5billion for USA PATRIOT Act violations ) the banks are all operating on a hair trigger these days when it comes to any USA PATRIOT Act regulations.

Last edited by Pulaski; Jan 29th 2013 at 12:24 pm.
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Old Jan 29th 2013, 12:51 pm
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Default Re: Nice gift from home. Tax question....

Originally Posted by sir_eccles
You'll have to file form 3520 because it is more then $100k.

The UK limit for tax free gifts is £3k tax may be owed in the UK.
Whilst it's true that generally the exemption limit is £3k, I think this would fall under the 7 year rule of potentially exempt transfers. See http://www.hmrc.gov.uk/inheritanceta...pt-gifts.htm#4

I.e so long as the OP's Mother lives for another 7 years it would become exempt. Between years 3 - 7 there's a sliding scale on the amount of inheritance tax owed (if the total estate value is more than the inheritance tax threshold).

Oh and absolutely file an FBAR. It will only take you 15 mins to fill it out and the penalties of not doing so can be quite severe!
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Old Jan 29th 2013, 2:54 pm
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Default Re: Nice gift from home. Tax question....

FBAR is definitely required as will be form 3250

For UK tax purposes there's no immediate tax consequences of the gift. But if the mother dies within 7 years of making the gift then it will be added back into the value of the estate in order to calculate any inheritance tax.

In the US you won't be subject to tax on the gift.
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Old Jan 29th 2013, 3:01 pm
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Default Re: Nice gift from home. Tax question....

Originally Posted by medic1010
I'm a UK citizen living in US for last 6 years on a green card (married to US gal).

So Mum called the other day and says she's so happy things are working out in the US she wants to help us along and is going to pay $120,000 into my old UK bank account (I plan to transfer the money from my UK account to my US account by Swift bank to bank transfer).

As the money will only be in the account for a week at most (my account has practically nothing in right now and has been dormant since i moved out) do I still need to file an FBAR this year?

Also I think Mums money would be termed a gift under US tax law with no tax to pay (as Mums not a US citizen). Do I need file anything to declare the gift?

I imagine a transfer that large will trigger some sort of report from the bank. What do I need do to avoid any headaches with this otherwise pleasant surprise?

Thanks for you time to answer...
When you say your UK account has been "dormant" you may want to check with your UK bank as a large sum like that going into an inactive UK bank account will trigger money-laundering stuff on the UK side too. Nothing more infuriating than the money being bounced back to your mum before it even gets to you
Lx
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Old Jan 30th 2013, 12:19 am
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Default Re: Nice gift from home. Tax question....

All good info thanks.

I've done some more research too and think it comes down to this:

On UK side it would fall under estate tax rules, 7 year clause and all but will not incur an estate tax as her total estate is worth less than 325K GBP.
On the US side it's considered a gift from a non citizen and is not taxable. As someone side I do need to file 3250 as the gift is over $100K.

And FBAR filing if I go through my own account, but reading up on that it might just be easier to have her send direct from her account.

Thanks all.
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Old Jan 30th 2013, 12:30 am
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Default Re: Nice gift from home. Tax question....

Originally Posted by medic1010
All good info thanks.

I've done some more research too and think it comes down to this:

On UK side it would fall under estate tax rules, 7 year clause and all but will not incur an estate tax as her total estate is worth less than 325K GBP.
On the US side it's considered a gift from a non citizen and is not taxable. As someone side I do need to file 3250 as the gift is over $100K.
It's form 3520, as far as I know.

It's not taxable at federal level (Also assumes your mother's not a U.S. citizen etc.) - but make sure that your state doesn't have a tax on receipt of gifts. Most states don't - but a few do.



And FBAR filing if I go through my own account, but reading up on that it might just be easier to have her send direct from her account.
Make sure your U.S. account details are correct - you wouldn't want such a large sum wired into someone else's account by mistake. You may want to transfer a smaller amount first and then have her transfer the rest (using same details) once the first transfer is confirmed received in your account.
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Old Jan 30th 2013, 8:40 pm
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Default Re: Nice gift from home. Tax question....

So to avoid FBAR its best to have Mum transfer directly to my US account. Got it.

One other thought.

Should I ask Mum to send in one transfer and file form 3520 (get it on the record with IRS) or have her wire half this year and half next (no filing necessary but might trigger an audit)?

Gift/estate taxes for my state are not taken for less than 1Mil.

The other thing that was weird was 3520 does not ask for any info on the gift giver. I would have thought they would ask for details to verify for fraud/laundering etc....?
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Old Jan 30th 2013, 8:44 pm
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Default Re: Nice gift from home. Tax question....

Originally Posted by JAJ




Make sure your U.S. account details are correct - you wouldn't want such a large sum wired into someone else's account by mistake. You may want to transfer a smaller amount first and then have her transfer the rest (using same details) once the first transfer is confirmed received in your account.
Excellent point.
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