Is There a Foreign Gift Tax?
Foreign Gift Tax
Foreign Gift Tax & the IRS: When a
Is there a Foreign Gift Tax?
Generally, the answer is No.
For example, if Michelle receives a $700,000 gift from her parents in Spain, she does not need to pay a “tax” on the gift. The reason is because the gift is not income.
Therefore, there is no “income tax” on the foreign gift.
Income Tax on Foreign Gift Income
Instead of a cash gift, let’s say Michelle’s parents gifted her a $500,000 foreign investment account.
That account generates $20,000 a year in income.
The $20,000 in income that the gift generates is taxable.
Why?
Because while the gift is not taxable, the income generated from the gift is taxable, since it is income.
*Foreign Tax Credits can apply (if applicable) to reduce the U.S. tax liability.
Reporting the Foreign Gift
Reporting the Foreign Gift is a key component to IRS law.
When a U.S. person receives a gift from foreign person, and the value of gift exceeds either the individual foreign person or entity foreign person threshold – the gift must be reported. If it is not reported, the U.S. person may be subject to
CP15 Notice
If you received a
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