Nonresident Gift Tax

[Stuart O. Bronstein]

I'm confused about something. I know that non-citizens don't get a
lifetime exemption (of a bit over $12 million for 2022) with respect to
estate tax.

But as far as I can tell that exclusion doesn't apply to gift tax. I
have a client who is going to receive a gift of real property located
in the US, from a parent who is neither a US citizen nor resident.

The only reference to non-citizens I could find is in section 2501,
where it says that, under some circumstances, the tax doesn't apply to
non-citizens. But I couldn't find anything talking about the lifetime
exemption.

What's the story?

Thanks for any insight you can give.

--
Stu
http://DownToEarthLawyer.com

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[Tempuser]

On 4/2/22 10:23 AM, Stuart O. Bronstein wrote:
> I'm confused about something. I know that non-citizens don't get a
> lifetime exemption (of a bit over $12 million for 2022) with respect to
> estate tax.
>
> But as far as I can tell that exclusion doesn't apply to gift tax. I
> have a client who is going to receive a gift of real property located
> in the US, from a parent who is neither a US citizen nor resident.
>
> The only reference to non-citizens I could find is in section 2501,
> where it says that, under some circumstances, the tax doesn't apply to
> non-citizens. But I couldn't find anything talking about the lifetime
> exemption.
>
> What's the story?
>
> Thanks for any insight you can give.
>

Re your fact set: The only gift tax exclusion available to an NRA is the
annual $16000 limit per donee. Other than that, gifts of real and
tangible personal property are subject to US Gift Tax. See the
following IRS FAQs on this subject. Any gift tax paid does add to the
cost basis of the property.

t.ly/1y1g


--
Alan

[Stuart O. Bronstein]

Tempuser <temp...@vacationmail.com> wrote:

> Re your fact set: The only gift tax exclusion available to an NRA
> is the annual $16000 limit per donee. Other than that, gifts of
> real and tangible personal property are subject to US Gift Tax.
> See the following IRS FAQs on this subject. Any gift tax paid does
> add to the cost basis of the property.
>
> t.ly/1y1g

Thanks. That's what I thought. But I couldn't find it in the code, so
I was confused.

--
Stu
http://DownToEarthLawyer.com

[Stuart O. Bronstein]

"Stuart O. Bronstein" <spam...@lexregia.com> wrote:
> Tempuser <temp...@vacationmail.com> wrote:
>
>> Re your fact set: The only gift tax exclusion available to an NRA
>> is the annual $16000 limit per donee. Other than that, gifts of
>> real and tangible personal property are subject to US Gift Tax.
>> See the following IRS FAQs on this subject. Any gift tax paid
>> does add to the cost basis of the property.
>>
>> t.ly/1y1g
>
> Thanks. That's what I thought. But I couldn't find it in the
> code, so I was confused.

OK, finally found it. It's in sectioen 2505 - the credit under section
2010 only applies to US citizens and residents.

[bc]

On Sun, 3 Apr 2022 20:26:54 EDT, Tempuser
<temp...@vacationmail.com> wrote:

>Re your fact set: The only gift tax exclusion available to an NRA is the
>annual $16000 limit per donee. Other than that, gifts of real and
>tangible personal property are subject to US Gift Tax. See the
>following IRS FAQs on this subject. Any gift tax paid does add to the
>cost basis of the property.

Alan (or Tempuser, if you prefer),

My client is inheriting money from a UK estate. Estate is unlikely
to pay U.S. tax on funds. What happens here?
--
Bruce Davidson Cantor, CPA, JD
Admitted in Colorado

[Tempuser]

On 4/9/22 3:39 PM, bc wrote:
> On Sun, 3 Apr 2022 20:26:54 EDT, Tempuser
> <temp...@vacationmail.com> wrote:
>
>> Re your fact set: The only gift tax exclusion available to an NRA is the
>> annual $16000 limit per donee. Other than that, gifts of real and
>> tangible personal property are subject to US Gift Tax. See the
>> following IRS FAQs on this subject. Any gift tax paid does add to the
>> cost basis of the property.
>
> Alan (or Tempuser, if you prefer),
>
> My client is inheriting money from a UK estate. Estate is unlikely
> to pay U.S. tax on funds. What happens here?

Nothing happens. For US income taxes the money is treated just like
inherited money is treated from a US estate. If the client resides in a
US state that taxes inheritances, then you must look to that state's law.

There may be a reporting requirement. IRS Form 3520 has to be filed with
the IRS when one receives gifts or bequests valued at more than $100,000
from a nonresident alien individual or foreign estate.

--
Alan

[Stuart O. Bronstein]

Tempuser <temp...@vacationmail.com> wrote:

> bc wrote:
>> Tempuser <temp...@vacationmail.com> wrote:
>>
>>> Re your fact set: The only gift tax exclusion available to an
>>> NRA is the annual $16000 limit per donee. Other than that,
>>> gifts of real and tangible personal property are subject to US
>>> Gift Tax. See the following IRS FAQs on this subject. Any gift
>>> tax paid does add to the cost basis of the property.
>>

>> My client is inheriting money from a UK estate. Estate is
>> unlikely to pay U.S. tax on funds. What happens here?

> Nothing happens. For US income taxes the money is treated just
> like inherited money is treated from a US estate. If the client
> resides in a US state that taxes inheritances, then you must look
> to that state's law.
>
> There may be a reporting requirement. IRS Form 3520 has to be
> filed with the IRS when one receives gifts or bequests valued at
> more than $100,000 from a nonresident alien individual or foreign
> estate.

There is one possible thing. He said there is an inheritance from a
UK estate. But he doesn't specify that the property being inherited
is located in the UK. If any of that is located in the US, then gift
or estate tax will apply to that portion of the inheritance.

--
Stu
http://DownToEarthLawyer.com

[Alan]

On Saturday, April 9, 2022 at 7:44:02 PM UTC-7, Stuart O. Bronstein wrote:

> >>
> >> My client is inheriting money from a UK estate. Estate is
> >> unlikely to pay U.S. tax on funds. What happens here?
>
> > Nothing happens. For US income taxes the money is treated just
> > like inherited money is treated from a US estate. If the client
> > resides in a US state that taxes inheritances, then you must look
> > to that state's law.
> >
> > There may be a reporting requirement. IRS Form 3520 has to be
> > filed with the IRS when one receives gifts or bequests valued at
> > more than $100,000 from a nonresident alien individual or foreign
> > estate.
> There is one possible thing. He said there is an inheritance from a
> UK estate. But he doesn't specify that the property being inherited
> is located in the UK. If any of that is located in the US, then gift
> or estate tax will apply to that portion of the inheritance.
>
> --
> Stu
> http://DownToEarthLawyer.com
> --

He actually said he inherited money.

[Stuart O. Bronstein]

Alan <temp...@vacationmail.com> wrote:
> Stuart O. Bronstein wrote:
>
>> >> My client is inheriting money from a UK estate. Estate is
>> >> unlikely to pay U.S. tax on funds. What happens here?
>>
>> > Nothing happens. For US income taxes the money is treated just
>> > like inherited money is treated from a US estate. If the client
>> > resides in a US state that taxes inheritances, then you must
>> > look to that state's law.
>> >
>> > There may be a reporting requirement. IRS Form 3520 has to be
>> > filed with the IRS when one receives gifts or bequests valued
>> > at more than $100,000 from a nonresident alien individual or
>> > foreign estate.
>> There is one possible thing. He said there is an inheritance from
>> a UK estate. But he doesn't specify that the property being
>> inherited is located in the UK. If any of that is located in the
>> US, then gift or estate tax will apply to that portion of the
>> inheritance.
>> --

> He actually said he inherited money.

Is money considered intangible property for this purpose?

--
Stu
http://DownToEarthLawyer.com

--

[Tempuser]

On 4/12/22 7:51 AM, Stuart O. Bronstein wrote:
> Alan <temp...@vacationmail.com> wrote:
>> Stuart O. Bronstein wrote:
>>
>>>>> My client is inheriting money from a UK estate. Estate is
>>>>> unlikely to pay U.S. tax on funds. What happens here?
>>>
>>>> Nothing happens. For US income taxes the money is treated just
>>>> like inherited money is treated from a US estate. If the client
>>>> resides in a US state that taxes inheritances, then you must
>>>> look to that state's law.
>>>>
>>>> There may be a reporting requirement. IRS Form 3520 has to be
>>>> filed with the IRS when one receives gifts or bequests valued
>>>> at more than $100,000 from a nonresident alien individual or
>>>> foreign estate.
>>> There is one possible thing. He said there is an inheritance from
>>> a UK estate. But he doesn't specify that the property being
>>> inherited is located in the UK. If any of that is located in the
>>> US, then gift or estate tax will apply to that portion of the
>>> inheritance.
>>> --
>> He actually said he inherited money.
>
> Is money considered intangible property for this purpose?
>

Not sure why you are asking this unless you are wondering what if the
foreign estate owned financial accounts in the U.S. The beneficiary
still gets the funds without any tax implications, but the foreign
estate may be subject to US estate tax.

--
Alan

[John Levine]

According to Tempuser <temp...@vacationmail.com>:

>Not sure why you are asking this unless you are wondering what if the
>foreign estate owned financial accounts in the U.S. The beneficiary
>still gets the funds without any tax implications, but the foreign
>estate may be subject to US estate tax.

If it's a foreign estate with no US contacts other than the
beneficiary, how would they collect the estate tax? The IRS sends the
foreign estate a bill, the estate throws it away. Then what?

--
Regards,
John Levine, jo...@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly

[Stuart O. Bronstein]

Tempuser <temp...@vacationmail.com> wrote:

>> Is money considered intangible property for this purpose?
>>
> Not sure why you are asking this unless you are wondering what if
> the foreign estate owned financial accounts in the U.S. The
> beneficiary still gets the funds without any tax implications, but
> the foreign estate may be subject to US estate tax.

That was my point. If cash is located in the US, it could be subject
to gift/estate tax even if the donor was a non-citizen/non-resident who
was not in the US at the time of the gift. If gift tax is due but the
donor doesn't pay it, they can go after the donee.

I asked about intangible property because stock in a foreign
corporation is considered intangible property. Even if it owns
property in the US, if that stock is gifted by someone who is not a
citizen or resident of the US, there will be no US gift or estate tax
on it.

--
Stu
http://DownToEarthLawyer.com

[Stuart O. Bronstein]

"John Levine" <jo...@taugh.com> wrote:
> According to Tempuser <temp...@vacationmail.com>:

>>Not sure why you are asking this unless you are wondering what if
>>the foreign estate owned financial accounts in the U.S. The
>>beneficiary still gets the funds without any tax implications, but
>>the foreign estate may be subject to US estate tax.
>
> If it's a foreign estate with no US contacts other than the
> beneficiary, how would they collect the estate tax? The IRS sends
> the foreign estate a bill, the estate throws it away. Then what?

Then they can go after the beneficiary. Technically they go after the
assets given to the beneficiary.

--
Stu
http://DownToEarthLawyer.com

[Tempuser]

On 4/12/22 8:14 PM, Stuart O. Bronstein wrote:
> Tempuser <temp...@vacationmail.com> wrote:
>
>>> Is money considered intangible property for this purpose?
>>>
>> Not sure why you are asking this unless you are wondering what if
>> the foreign estate owned financial accounts in the U.S. The
>> beneficiary still gets the funds without any tax implications, but
>> the foreign estate may be subject to US estate tax.
>
> That was my point. If cash is located in the US, it could be subject
> to gift/estate tax even if the donor was a non-citizen/non-resident who
> was not in the US at the time of the gift. If gift tax is due but the
> donor doesn't pay it, they can go after the donee.
>
> I asked about intangible property because stock in a foreign
> corporation is considered intangible property. Even if it owns
> property in the US, if that stock is gifted by someone who is not a
> citizen or resident of the US, there will be no US gift or estate tax
> on it.
>

Let's try and be clear here so that the original query and answer is not
lost. A US citizen or US resident alien who receives a bequest of money
from a foreign estate is not subject to any tax. If the amount of the
bequest is more than $100,000 there is a reporting requirement.

The foreign estate might be subject to US Estate Tax if there was US
situs property in the estate and it exceeded the allowable threshold.

None of this has anything to do with gift taxes because there is no gift
involved.

If you want to broaden this subject to include foreign entities subject
to US gift and estate taxes then it gets real complicated because
property can be tangible or intangible depending upon whether it is a
gift or a decedent's bequest. Oh, it can also get real complicated
figuring out what is US situs property.

--
Alan

[bc]

On Sat, 9 Apr 2022 19:10:41 EDT, Tempuser
<temp...@vacationmail.com> wrote:

>On 4/9/22 3:39 PM, bc wrote:
>> My client is inheriting money from a UK estate. Estate is unlikely
>> to pay U.S. tax on funds. What happens here?

>Nothing happens.

Thank you.

--
Bruce Davidson Cantor, CPA, JD
Admitted in Colorado

[Stuart O. Bronstein]

bc <can...@ix.netcom.com> wrote:

> Tempuser <temp...@vacationmail.com> wrote:
>> bc wrote:

>>> My client is inheriting money from a UK estate. Estate is
unlikely
>>> to pay U.S. tax on funds. What happens here?
>
>>Nothing happens.
>
> Thank you.

Basically that's correct. However if the client has one or more
accounts outside the US that at any time during the year hold, in the
aggregate, more than $10,000 in value, it has to be reported (though
there is no tax). You report the account(s) by filing a Report of
Foreign Bank and Financial Accounts (FBAR) on Financial Crimes
Enforcement Network (FinCEN) Form 114.

In addition, if the inheritance is worth more than $100,000, there is
another reporting requirement - the person has to file IRS Form 3520.
Again, this is reporting only - there is no tax.

--
Stu
http://DownToEarthLawyer.com