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taxes on gifts

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LdiJ

Senior Member
In that case I would agree that the gift was a gift of a present interest. But if the donor arranges with the parent to keep it out of the kid's hands until the kid is older then it is not a gift of a present interest; that's a trust like arrangement and the gift of a future interest.
Ok, then we are in accord. My parents made us put 50% of every cash gift we received into our savings accounts which our parents controlled. My siblings and I ended up with tidy sums when we became legal adults. Its was peanuts in today's dollars, but mine paid for my 1st year college tuition and my sister's paid for her first car.
 


jenisha3

Member
Great, many thanks again.

Please clarify: If someone other than parents/legal guardian gifted cash to a minor then the parents/legal guardian can manage that gift (by putting in bank account on the minor's name, or by keeping it as cash), for the minor, until he/she becomes a major, and then give that to the minor who is now major

First, gift taxes and gift tax returns only apply to the giver. What someone does with the money after it has been gifted to them is irrelevant as far as the person giving the gift is concerned.
What I understood is: if a major receives a gift money, that major can do anything, at any time, with that gift money. Please let me know if what I understood above is incorrect.

Finally, if a major accumulated some money in cash by putting in his/her safe box from the gifts he/she received (or in his/her bank account, from the gifted money received several years ago as checks), is he/she obligated to keep or produce any proof (such as giving the donor's names, etc) for that money if asked by IRS or some government/law enforcement agency?
 

Taxing Matters

Overtaxed Member
Great, many thanks again.

Please clarify: If someone other than parents/legal guardian gifted cash to a minor then the parents/legal guardian can manage that gift (by putting in bank account on the minor's name, or by keeping it as cash), for the minor, until he/she becomes a major, and then give that to the minor who is now major
If Aunt Polly makes a gift to Sam, who is 13, of $10,000 with no restrictions — just gives him a check for it in his name — then that is a gift of a present interest. If Sam's parents then decide to take the money and invest it for him and not let him spend it as he wishes that won't change that it was a gift of present interest. The parents are simply exercising their right under state law to manage their kid's property. Note that in some states, especially California and Florida that have lots of child actors, models, and athletes, the parent's power to manage their kid's property may be regulated or restricted.

What I understood is: if a major receives a gift money, that major can do anything, at any time, with that gift money.
Correct.

Finally, if a major accumulated some money in cash by putting in his/her safe box from the gifts he/she received (or in his/her bank account, from the gifted money received several years ago as checks), is he/she obligated to keep or produce any proof (such as giving the donor's names, etc) for that money if asked by IRS or some government/law enforcement agency?
That depends on the circumstances. If because of the circumstances the IRS thinks that the cash may be income, the taxpayer has to provide information to the IRS to show that the money was not income, e.g. was a gift. Similarly, if the circumstances are such that the cash might appear to a law enforcement agency to have been from illegal activity, the person may need to show that he got it from something else. If he can't do that, he might end up losing the money to forfeiture.
 

jenisha3

Member
Great , and many thanks again.!

Can a major receive gift (below $15K) as check or cash (such as western union) from someone in another country then can the major use that gift in the same way as it is given from someone within the USA?

Yes, for the donee the rules are the same regardless of whether the donor is in the U.S. or in another country. There are no tax consequences for the donee. But for the donor, if he or she is not a citizen or resident of the U.S., where and how the gift is made matters a great deal as to whether the nonresident is even subject to U.S. gift tax. If the nonresident is subject to the tax, he or she gets a much, much smaller unified credit than the $11.58 million credit that citizens and residents get.

If the donor in a foreign country has never even visited the U.S., then is it still legal for that donor to give $10K or below gift to a donee who is U.S. citizen? And whether the donee can use that gift, in all aspects, as if it is given by a donor within the U.S.? Whether the donee can bring that gift with him in cash (U.S. dollars) while he is coming back to the U.S. after finishing a trip in that foreign county where the donor is located?

Note: I used $10K instead of $15K because, I just read that if you bring more than $10K, you should declare while that while entering the U.S. My question is not on the rules about border entry, etc. Therefore to focus on the topic of gifts alone, I used $10K instead of $15K
 
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Taxing Matters

Overtaxed Member
If the donor in a foreign country has never even visited the U.S., then is it still legal for that donor to give $15K or below gift to a donee who is U.S. citizen?
It is legal under U.S. law. No law prevents a foreign person from making a gift to a citizen (other than laws that prohibit foreign influence of U.S. public officials). The foreign person would have no worries about gift tax for gifts totaling $15,000 or less to any one person. For larger gifts made, the details of the gift matter. A non resident alien can, if he does it right, may make most gifts to a U.S. person tax free regardless of amount. The details of how and when a non resident alien is subject to U.S. gift tax can get complex and is something that beyond the scope of what can be easily discussed on a message board forum.

Whether the law of the foreign donor's country of residence would restrict the gift is another matter. Some countries have currency control laws or other laws that may restrict the ability of the foreign person to send money or other property out of the country. We dont' address the specifics of the law of any other country on these boards.


And whether the donee can use that gift, in all aspects, as if it is given by a donor within the U.S.?
Again, a gift is not taxable to the donee and the donee can do what he or she wants with the property he received. However, U.S. citizens and residents must report large gifts received from foreign persons on IRS Form 3520. If the gift is received from a foreign corporation or partnership and exceeds $16,388 it must be reported, and for gifts received from foreign individuals or foreign estates it must be reported if the gift exceeds $100,000. These amounts can change each year, so you have to check the Form 3520 each year to see what's required. Form 3520 is just an information return — there is no tax imposed on the gift. But failing to file can result in penalties.

Whether the donee can bring that gift with him in cash (U.S. dollars) while he is coming back to the U.S. after finishing a trip in that foreign county where the donor is located?
The U.S. does not restrict how much money a person may take in or out of the country nor does that result in any tax. However, any person (or group of persons traveling together) entering or leaving the U.S. with more than $10,000 in cash, traveler's checks, or other bearer instruments of any currency (whether dollars, pounds, Euros, Yen or whatever) must report that to the U.S. Treasury Financial Crimes Enforcement Network (FinCEN) on Form 105. Again, while there is no tax for taking cash in or out of the country, the failure to file the form may result in penalties.

Any U.S. person who has financial dealings outside the U.S. should anticipate that there may be filing requirements for that activity and investigate what filing requirement he/she may have. For example, if you hold bank accounts outside the U.S. that needs to be reported when the balances in the balances are high enough. Failure to report foreign financial activity or ownership of foreign assets when you are required to do so can result in very large penalties.
 
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doucar

Junior Member
There is no law against an alien making a gift to a resident or citizen in the US, The alien's home country, we cannot speak to.
 

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