Taxes on foreign gifts and inheritance?

Question

Hello,

I am a naturalized U.S. citizen and I recently visited the country of birth for vacation. My brother gave me $10,000 as a gift while I was there. I spend some money and brought back $8,500 in cash. Do I need to declare this on my 2014 tax returns and will I owe any taxes? I understand donees are exempt from paying taxes on gifts received from a U.S. donor up to a certain amount every year. But what if the donor is a foreign national and the gift came from abroad?

I also have the same question on inheritance. My brothers are in the middle of settling my late fathers properties and I will inherit about $125,000. Once I get this cleared through the Inland Revenue of the country of my birth, I intend to bring the money into the U.S. Will I be taxed on it?

Thank you in advance.

Best Regards,

Mike

Answer 1

As you already know, the donnee is never liable for gift taxes; that falls to the donor. Since the donor is not a US citizen or resident he cannot be compelled to file a US gift tax return or pay a US gift tax. As an aside, since this gift was less than the current annual exclusion of $14,000 there would be no filing requirement nor gift tax due even if he were subject to US gift taxes.



There are no federal inheritance taxes either and since the bequestor was not a resident of any US state there would not be any state inheritance taxes due even in one of the few states that still have them. If you received possession of an appreciable asset you could owe capital gains taxes when you sold the asset but that would only be on the difference in value between the date of the bequestor's death and when you sold it.



Depending upon the size of the inheritance you may be required to file a Form 3520 information return. No tax is due with this return but the penalties for failure to file or for late filing are severe. Here's a link to the instructions so that you can become familiar with the requirements: http://www.irs.gov/pub/irs-pdf/i3520.pdf . If there is any doubt as to whether this return should be filed or not, I'd recommend that you defer to caution and file it as there are no penalties for filing one when it is not required.

Answer 2

Your brothers 10000 gift to you should NOT be any problem as long as it was a qualified gift according to the IRS rules for this purpose during the 2014 tax year.

Just make sure that this is all done correctly and completely by following all of the rules and filling out any of the required forms for this purpose and time in your life.

Hope that you find the above enclosed information useful. 02/27/2014

Answer 3

Not federally taxable, gift or inheritance. Inheritance possibly by your state.



Recipients never pay gift tax, givers do.

Answer 4

recipients of gifts are not taxed on them