My Tax Question

Hello! I am a Senior at a University and just recently became U.S. Perm. Resident. My Grandfather, who works at the WHO in Geneva, Switzerland and is thus a tax-exempt international employee, is giving me money to pay for my tuition, living expenses, etc. We have set up an account at a Credit Union in the U.S. on which he is the primary owner and I am the attorney-in-fact. Every 3 or so months I transfer the amount that I need for the quarter from his tax-exempt account to my normal account, also in the U.S., by writing myself a check against his account (since I am attorney-in-fact on his account, I am allowed to do that.) My question is: do I have to pay any income taxes on the funds that I transfer to my account? Also, would it be better in the tax sense for him to directly pay for my tuition and living expenses out of his account, without the money going through my account?

Thanks!

Tax on gift

First of all, there is no income tax on the funds you transfer to your account. The money is a gift from your Grandfather, and there is no income tax on gifts.

I have to know the following to give an opinion on gift tax:

1. Is the amount you transfer each year more or less than 10,000?
2. Is your grandfather a U.S. citizen?

Lastly, I see no reason to keep the money out of your account.

Dear Loku,

Thanks very much for replying to my question. Here is the information you requested in order to clarify the situation:

1. Is the amount you transfer each year more or less than 10,000?

--> Yes, the amount averages about $15,000/year, as I transfer approx. $5,000 every 3 months or so during the academic year (excluding Summer). Most of the money, though, goes to pay tuition and living expenses.

2. Is your grandfather a U.S. citizen?

--> No, he is not; moreover, he is not a U.S. perm. resident and he does not reside in the U.S. at all (see my original question). However, I personally just recently became a US Perm. Resident.

Any further comments will be greatly appreciated. Thank you very much once again for taking the time to answer my question.

Gift tax

You have no gift tax on this. The tax does not apply to a gift of intangibles (such as cash) from a nonresident, non US citizen.

So there is no tax problem at all.