International Gifts from Non-Resident Aliens to U.S. Citizens or residents

The Internal Revenue Code (IRC) imposes a tax on the transfer of property by gift[1]. The gift tax applies to both direct and indirect transfers of real, tangible and intangible property.  However, the tax does not apply to a nonresident taxpayer that is not a citizen of the U.S. unless the property being transferred is situated within the U.S. at the time of the transfer.[2] The tax does not apply to the transfer of intangible property by a person who is neither a citizen nor a resident of the United States unless such person is an expatriate who lost his or her citizenship within 10 years of the date of the transfer.[3]

Real and tangible personal property are generally situated within the U.S. only if they are physically within the U.S. in a geographic sense.[4] Intangible personal property is located within the U.S. if it consists of a property right legally enforceable against a resident of the U.S. or a domestic corporation.[5]

Cash, or bank deposits, are considered tangible personal property.[6] Deposits owned by nonresident aliens in United States banks are treated as property situated outside of the United States if interest from the accounts is not effectively connected with the conduct of a trade or business within the United States.[7]

Transfers, or gifts, that a U.S. resident receives from a non-resident alien that exceed $14,139 (for corporations) or $100,000 (for individuals) annually must be reported on Form 3520.[8]

If you have received a gift of money or property from abroad and need to understand the potential implications please contact us and we would be glad to assist you.

[1] IRC §2501(a)(1)

[2] IRC §2511(a)

[3] Treas. Reg. §25.2511-1(b)(1)

[4] Treas Reg §25.2511-3(b)(1)

[5] Treas Reg §25.2511-3(b)(2)

[6] BLODGETT V. SILBERMAN, 227 U.S. 1 (1928); THOMAS V. VIRGINIA, 364 U.S. 443 (1960); Rev. Rul. 55-143, 1955-1 C.B. 465

[7] IRC §2105(b)(1)

[8] IRS Form 3520 Instructions, Part IV

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