Question: Does an individual receiving a gift from a person outside the U.S. have to pay gift tax on that gift in the U.S? Answer: In the U.S., a gift is not subject to ordinary income tax so it is not reportable for income tax purposes. If the person who gave the gift is a U.S. citizen, gifts over $14,000 will generally use up a portion of the person’s lifetime credit from gift and estate tax (currently $5.43 million). Certain gifts will not use up the credit. If the gift received is from someone who is not a U.S. citizen, then you will likely need to report to the IRS, even if no gift tax is owed. Per the IRS instructions (paraphrased): A Form 3520 needs to be filed if, during the current tax year, you treat the receipt of money or other property above certain amounts as a foreign gift or bequest. Include on Form 3520:
- Gifts or bequests valued at more than $100,000 from a nonresident foreign individual (including foreign persons related to that nonresident foreign individual);
- Gifts valued at more than $13,258 (adjusted annually for inflation) from foreign corporations or foreign partnerships.”
The IRS may re-characterize certain distributions from foreign partnerships, corporations, or trusts as net gifts, and then subject these to income tax or additional reporting requirements.”
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates. You can also connect with Offit Kurman via Facebook, Twitter, Google+, YouTube, and LinkedIn.
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