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Monetary Gift

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Ffish

Junior Member
What is the name of your state? CA

I worked for a Russian company, in Russia for three years. After completing the work for which I was hired, I resigned and returned to the USA (CA) accepting a position in a US based company. Eight months after having left Russia, without any prior communication, I received a note in the mail telling me that the owners of the Russian company were celebrating the 10th anniversary of the company and giving money gifts to their family and friends. I am on the friend list and they will be sending me $xx,xxx.

Since I am receiving the gift, do I have to report it? Is it a taxable event?
 


Zigner

Senior Member, Non-Attorney
What is the name of your state? CA

I worked for a Russian company, in Russia for three years. After completing the work for which I was hired, I resigned and returned to the USA (CA) accepting a position in a US based company. Eight months after having left Russia, without any prior communication, I received a note in the mail telling me that the owners of the Russian company were celebrating the 10th anniversary of the company and giving money gifts to their family and friends. I am on the friend list and they will be sending me $xx,xxx.

Since I am receiving the gift, do I have to report it? Is it a taxable event?
If I were you, I'd ignore and avoid this like the plague...
 

abezon

Senior Member
Unfortunately, the IRS is pretty clear that gifts received from employers are really earned income & subject to tax. The reasoning is that, if you hadn't worked there, you wouldn't have been included on the gift list. Unless you have good evidence that most employees were not on the gift list, you'll have to pay taxes on the money.

The bonus is foreign earned income & is eligible for the foreign earned income exclusion. You *might* be able to exclude the money from CA tax by arguing that it was earned prior to becoming a CA resident, but I'd get an opinion letter from the FTB first.
 

HomeGuru

Senior Member
What is the name of your state? CA

I worked for a Russian company, in Russia for three years. After completing the work for which I was hired, I resigned and returned to the USA (CA) accepting a position in a US based company. Eight months after having left Russia, without any prior communication, I received a note in the mail telling me that the owners of the Russian company were celebrating the 10th anniversary of the company and giving money gifts to their family and friends. I am on the friend list and they will be sending me $xx,xxx.

Since I am receiving the gift, do I have to report it? Is it a taxable event?
**A: the answer is yes depending upon the amount of the gift and your tax liability.
 

LdiJ

Senior Member
Unfortunately, the IRS is pretty clear that gifts received from employers are really earned income & subject to tax. The reasoning is that, if you hadn't worked there, you wouldn't have been included on the gift list. Unless you have good evidence that most employees were not on the gift list, you'll have to pay taxes on the money.

The bonus is foreign earned income & is eligible for the foreign earned income exclusion. You *might* be able to exclude the money from CA tax by arguing that it was earned prior to becoming a CA resident, but I'd get an opinion letter from the FTB first.
I have to disagree with the bolded part. He won't meet the residency test for 2007.
 

abezon

Senior Member
It's income earned in one year, paid in another. It is eligible for exclusion to the extent it could have been excluded if received in prior years. See Pub 54, page 18-19 for details.

Also, if he moved back in 2007, he'll meet the physical presence test for some of 2007, just not all of it.
 

xylene

Senior Member
The WORST thing to do would be to make assumptions when dealing with a 5 figure gift :eek:from a foreign entity with which you were previously employed.

Don't blow it until you have satisfactorily established the legality, legitimacy, and tax status of this 'gift'.

Only a veteran tax professional who is familar with your complete situation can give you a solid answer

Don't forget to explore the issues with Russia too... ;) Massive 'bonuses' to 'friends' would sound MAJOR ALARM BELLS to me, even if not from a country with severe and endemic corruption, illegal financial dealings, and criminal syndicalist tendencies.
 

LdiJ

Senior Member
Thanks for all the comments.
I hope that all the comments make you realize that you need to use a tax professional, with experience with foreign income exclusions, for your 2007 return. (or 2008 if the gift happens to get pushed into 2008)

This one isn't a DIY project.
 

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