Expats - Eight Tips to Determine if Your Gift is Taxable and requires you to file a Gift Tax Return

If you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, but the IRS offers the following eight tips about gifts and the gift tax.
Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2011 and 2012, the annual exclusion is $13,000.
Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
• Gifts that are do not exceed the annual exclusion for the calendar year,
• Tuition or medical expenses you pay directly to a medical or educational institution for someone,
• Gifts to your spouse,
• Gifts to a political organization for its use, and
• Gifts to charities.
You and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion
You must file a gift tax return on Form 709, if any of the following apply:
• You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
• You and your spouse are splitting a gift.
• You gave someone (other than your spouse) a gift of a future interest that he
or she cannot actually possess, enjoy, or receive income from until some time in the future.
• You gave your spouse an interest in property that will terminate due to a  future event.
You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.

Remember, if you received gifts equal to $100,000 US or more in one year from a nonresident of property located outside of the US, you as recipient must report the gift on form 3520.

7 Things You Need to Know About US Gift Tax While Living Abroad or as a Nonresident Owning US Assets

One great technique to get assets out of your estate to save income taxes and to save estate taxes is to give gifts to another.  Here are seven things you need to know about US gift taxes and reporting of foreign gifts you might receive.

1. If you give any individual (resident or nonresident) less than $14,000 US during a calendar year you do not have to file a Gift Tax Return form 709.
2. If you give any individual more than $14,000 US (this includes cash and value of property, assets, intangibles, etc) you need to file a gift tax return with the IRS which is due 4/15 following end of Calendar year.  This includes gifts of assets located outside of the USA.
   
3. If your gift exceeds the $14,000, you may need to file the return but probably do not owe taxes since you have a combined lifetime gift/estate tax exclusion of $5.43  million.  The excess value of the gift above the $14,000 will be offset by this lifetime exclusion.  If you use up this exclusion on gifts while you are alive it will not be available for use by your estate after your death.
4. Contributions to IRS recognized charities are not the type of gift subject to gift tax
5. If you as a citizen or permanent resident receive $100,000  in fair market value of assets  as a gift or inheritance in one calendar year (total for year from one individual or related individuals) you must file form 3520. If the gift is from a foreign corporation or LLC .you must file that form  if the total gifts received  during the year exceeds  $15,601. If you receive any amount from a foreign trust you must file the form 3520.  The form must be filed on 4/15  following the end of the calendar year. Failure to do so can subject you to a substantial monetary penalty.
6. Nonresidents are subject to gift taxes for transfer of assets located in the USA.  Therefore best to make gifts if you are a nonresident from assets located outside of the USA. A nonresident must pay gift tax on any gift of US located property of more than $14,000 to a single person per year. This figure is an aggregate of all gifts during the year.
7. If you receive anything in return (including services, etc) it is not a gift.  Also reciprocal gifts are also disallowed for US gift tax exemption purposes ( i.e. you give $14,000 to my kid and then I will give  $14,000 in return to your kid).

There are more gift rules applicable to special situations not mentioned here such as  those covering gifts to US persons after you have surrendered your citizenship or long term green card.  You should consult an gift tax expert before you make any gift that might be subject to tax to be certain there are not special rules that may surprise you when it becomes time to report the gift to the IRS.  If you need help email us at ddnelson@gmail.com or phone (US) 949-480-1235.

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US EXPAT ARE STILL SUBJECT TO ESTATE & GIFT TAXES

Read below. As an expat you must include your assets everywhere in the world. Gifts include those made abroad.  Green card holders living abroad are not covered by these rules and will owe US estate taxes on US based assets exceeding $60,000 in total value.

http://www.timesdispatch.com/business/investment/time-to-check-the-list-for-financial-and-estate-planning/article_d9aa1b36-595b-5072-8360-5fe54d0dacab.html?mode=jqm

IRS Requires Reporting of Foreign Gifts Received from Abroad

If you as a US Citizen, Green Card Holder, or even a resident of the US living here on a visa received  gifts of more than $100,000 (cumulative amounts per calendar year) in gifts or inheritances from a nonresident  foreign individual or gifts of $14,375 from a foreign corporation or partnership (cumulative amounts per calendar year), you must report these amounts to the IRS by filing Form 3520.  Failure to file this form can result in penalties up to  35% of the amount of the gift or inheritance.

The IRS does track large sums transferred from abroad to US residents and will often audit these individuals fail to report these transfers on their tax returns to try to determine if they are not paying US taxes on taxable income from abroad. It is best you have complete documentation for all amounts arriving from abroad which are not taxable  in the event you are audited If the transfer is a  gift or inheritance and fail to file Form 3520, the IRS may impose the penalty.

We have helped hundreds of taxpayers file Form 3520 and we can help you avoid these possible huge penalties and the cost of defending your position in the event you are audited on transfers of funds from abroad.

IRS NOW LOOKING AT COUNTY RECORDER RECORDS TO LOCATE REAL ESTATE GIFT TRANSFERS WHICH ARE NOT REPORTED ON FORM 709

The Wall Street Journal reports the IRS is now investigating real estate transfers to determine if proper Gift Tax Returns (form 709) are reported.  The IRS is getting real estate transfer records in many states. This new procedure could naturally be extended at any time to discover real estate sales which have not been reported on personal tax returns.

Gift tax returns must be filed when the value of the gift exceeds $13,000. Real estate sales must be reported if there is any gain or loss.

This new procedure will result in many additional audits.  If you need help filing a Form 709 for any gift exceeding $13,000 let us know. This rule applies to gifts made by US Citizens and Permanent Residences whether living in the US or abroad. It also applies regardless of the location of the property gifted or to whom it is gifted.