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No taxes on gifts
Dear Tax Talk:
My wife is Colombian and her family is selling its large home there
to move into a smaller one. My wife expects to receive approximately
$100,000 from the sale. How is this money taxed in the United States?
What is the best way to transfer it to this country?
James
Dear James:
I've had this situation come up a couple of times with my South
American clients. In these situations, the parents are generally
the owner of the home but it is considered a family asset so that
the children are given some of the proceeds as an early inheritance.
Since your wife is not really the owner of the property,
she is not selling anything and therefore has no tax consequence
in the United States. The early inheritance is considered a gift,
and if the amount exceeds $100,000 it needs to be disclosed on Internal
Revenue Service Form 3520.
Form 3520 is then attached to your individual tax
return for the year that you receive the gift. The form is only
for disclosure purposes, as it does not flow to the income lines
of your tax return.
For the sum that your wife is expecting, I find it
is better to get the money through wire transfer. To support that
it is a gift, she should obtain appropriate documentation about
the source of the funds, such as the settlement statement from the
property sale and a letter from her parents.
-- Posted: Jan. 17, 2003
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