UK parents gifiting us a flat in England
 

My wife's (UK citizen in US as permanent resident) UK parents are trying to offload some of their assets to their daughters. They have a flat in England that they rent out. Right now, they send us the rental income in money transfers, that we do not report as income.

They would like to come to a more permanent solution, but it seems that bequeathing it to a trust or giving it to us outright or selling it, subjects us to a number of tax issues on the US side that does not make it worth the hassle.

Does anybody have any suggestions?

Re: UK parents gifiting us a flat in England
 

For starters, that you start including the rent as income before the IRS finds out about the omission, and file amended returns for the unreported income from prior years.

The issues aren't surmountable, butyou need the advice of a tax accountant familiar with UK-US tax issues. Giving away an asset is unlikely to be the most tax efficient solution for your in-laws, so they should be getting some professional advice too.

Re: UK parents gifiting us a flat in England
 

:popcorn:

You don't report the income as income? No tax implications there?

Re: UK parents gifiting us a flat in England
 

Have you put on your IRS hat and considered how the arrangement you describe might be seen from their point of view?

An overseas property. Not in your name but the rental income is transferred to you. Said rental income is not reported as income. I think it would look a tad dodgy from the IRS viewpoint.

Re: UK parents gifiting us a flat in England
 

Hang on, the parents own the flat and collect rent. Isn't it their responsibility to pay tax in the UK on it?

Re: UK parents gifiting us a flat in England
 

They do pay tax in the UK on it. I will report the income this year. Thanks for the advice. It was a small amount of income. I was under the impression that because it about $500/month, it would be like receiving it as a gift from our parents and not taxable.

Re: UK parents gifiting us a flat in England
 

I'm no tax expert, just a taxpayer, but I don't think you need to be paying tax on this money twice ...

Re: UK parents gifiting us a flat in England
 

Any suggestions on where to find one? It seems most of these tax accountants are only familiar with corporate tax law and not very helpful when it comes to smaller matters.

Re: UK parents gifiting us a flat in England
 

Yes. And they may well do.

I merely think that in the age of FATCA if the rental income from an asset is being transferred to a US person it will, at least, look dodgy.

If the parents were sending them a couple of hundred quid every month to help out, that would be one thing. That the amount is the rental income from an overseas (as far the US is concerned) property, with neither the property or income being declared, just creates too much potential for grief.

If it looks like rental income...

Re: UK parents gifiting us a flat in England
 

If it helps, each transfer always comes with a message line like "For xxxx's birthday." Or "For swimming lessons for xxxx"

Re: UK parents gifiting us a flat in England
 

The limit for tax free gifts for UK tax payers is a lot lower than that. It's of the order of £3000.

One assumes because it is being rented out it is not classified as a primary residence. There will be some sort of tax to pay when it is sold/transferred.

The more I think about this situation the more messy it looks. Professional advice is needed.

Re: UK parents gifiting us a flat in England
 

My grandfather received a salary from a business he owned. The business paid tax on its income, and then wrote him a check, and he and my grandmother jointly paid tax on that income. When my grandfather died, he left money to my mother. My mother, who was ill at that point with cancer but working from home, paid tax on that inheritance as well as on her normal job income. When she died a few years later, a portion of the remaining inheritance money came to me, and I paid tax on that income. I took a large amount of it and invested in silver metal. By the time I sold the silver, I had realized a gain and needed to pay tax on that income. Dizzy yet?

From the point of view of the IRS, it doesn't matter where the money came from, just that it is income and you owe tax on your income.

Re: UK parents gifiting us a flat in England
 

But it's not income, it's a gift! As I understand it, gifts are not taxable by the recipient ....

Yes your tale made me dizzy I had to sit down and have a soothing cup of tea :cool:

Re: UK parents gifiting us a flat in England
 

Up to a limit, I thought.

Re: UK parents gifiting us a flat in England
 

That's the way I would look at it to. Our eldest lives just around the corner, we give them cash from time to time to help them out. It certainly isn't income that they report to the IRS. It is my income which I have reported and paid tax on.