Is 125,00 Gift Taxable?

What is the name of your state? ny

My In-Laws are pretty well off and as a wedding gift, they want to help us buy a home. They are from a foreign country and wish to wire over $125,000 to my bank account.

I have no idea the tax implications for such a gift. Does anyone know if I will be taxed on this gift?

This is a bit beyond my tax knowledge...

BUT...I did find that you are required to REPORT such a gift using IRS form 3520...though I am NOT sure if you would be taxed on it...

From the IRS website:
"Who Must File

File Form 3520 if:
4. You are a U.S. person who, during the current tax year, received either:
a. More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests or
b. More than $11,642 from foreign corporations or foreign partnerships (including foreign persons related to such foreign corporations or foreign partnerships) that you treated as gifts.

Complete the identifying information on page 1 of the
form and Part IV. See the instructions for Part IV."

From the looks of the form, for Part IV, line 54, you would check yes (that you received a gift in excess of $100,000 from a foreign person), and then list the date of the bequest, describe the property (cash) and list the amount.

You should REALLY consult with a tax accountant who is familiar with foreign gifts to determine what, if any, your tax liability would be - or if you merely have to report the receipt of the gift.

Abezon - any ideas on this one?

-Christina

Edit: This only applies if your in-laws are NOT US citizens. If they are US citizens, then they can EACH give you and EACH give your wife $11,000 ($44,000 total) before they would have to pay a gift tax on any amount over $44,000. I am not sure, but I think that you would also have to report any amount over the $44,000... Abezon?

You'll have to report the gift by filing Form 3520. Here is a link to the form & the instructions:

http://www.irs.gov/pub/irs-fill/f3520.pdf (form)
http://www.irs.gov/pub/irs-pdf/i3520.pdf (instructions)

The form is daunting, but take heart! You can fill in the identification info on page 1 & skip to page 6, since you're receiving the $$ from individuals & not a foreign trust. You usually don't pay any taxes; just file the form. The form is due by the due date of your income tax return for that year.

You can avoid the form altogether by having your in-laws wire 1/2 the money to your account & half to your wife's account. Then you're both under the $100,000 filing requirement. As Christina said, if they are US citizens or had green cards within the last 10 years, the rules may be different. Consult an accountant/attorney in that case.

"You can avoid the form altogether by having your in-laws wire 1/2 the money to your account & half to your wife's account. Then you're both under the $100,000 filing requirement."

Abezon - is this correct? I swear I saw somewhere in the instructions for the form that if you KNOW the sources are related that you have to aggregate them (ie John Doe $62,500 plus Jane Doe $62,500 = Total $125,000).

Ahh...found it (form 3520 instructions):

"Line 54. To calculate the threshold amount ($100,000), you must aggregate gifts from different foreign nonresident aliens and foreign estates if you know (or have reason to know) that those persons are related to each other (see definition of related person on page 4) or one is acting as a nominee or intermediary for the other.
For example, if you receive a gift of $75,000 from nonresident alien individual A and a gift of $40,000 from nonresident alien individual B, and you know that A and B are related, you must answer “Yes” and complete columns (a) through (c) for each gift."

As our poster is married, they would likely be filing jointly, thus only filing ONE form 3520. And if filing separately, I'm SURE there are certain restrictions - as is usually the case with most things when filing MFS.

I think the general concensus here is consult a tax accountant with experience in this type of situation.

-Christina

Thank you so much for the advice!!!

You people sure are AWESOME!!!

When determining if you need to file a form 3520, you must aggregate gifts from related donors. However, since the form is filed by individuals (no MFJ check box), married donees do not have to aggregate their gifts just because they are related. A married couple has the option of filing a joint 3520 if they file a joint return that year, but they do not have to do so.

Thus, if T receives $75,000 each from 2 related donors, T must file a 3520 showing $150,000 of gifts. If T & Spouse each receive $75,000 from the same donors, neither needs to file a 3520 unless they choose to file a joint 3520.

So, to get around the 3520 problem, T & S each set up a separate account. After the money is wired into the accounts, T & S are free to transfer the money to a joint account or just write checks for the house on the 2 separate accounts. None of these transactions is a reportable tax event.