Foreign Family

[Bart]

I have United States clients who's parents and family live in China. The clients got married in China recently and were given cash gifts in excess of $100,000. Are there any reporting requirements?

[cientax]

I have United States clients who's parents and family live in China. The clients got married in China recently and were given cash gifts in excess of $100,000. Are there any reporting requirements?

If it's cash they are carrying in then they would declare it with customs when they arrive, otherwise if it's transfered through a financial instituition, it is the responsibility of the financial institution to report the transaction. If the financial institution fails to report the transaction there could be penalties imposed on the financial institution. And as far as I am aware of, gifts are not taxable to the recipient unless it's illegal drug related or otherwise illegally acquired.

[Maura]

Might need to file Form 3520.

Section VI. U.S. Recipients of Foreign Gifts.

If a gift is not reported on Form 3520, the tax consequences of the receipt of the gift shall be determined by the Secretary. Section 6039F(C )(1)(A). In addition, the recipient is subject to a penalty equal to 5 percent of the value of the gift for each month in which the gift is not reported (not to exceed 25 percent). Section 6039F(C )(1)(B ). Reporting is only required under section 6039F for gifts actually or constructively received by a U.S. person. Furthermore, reporting is required under section 6039F only if the U.S. person knows or has reason to know that the donor is a foreign person.

[Gail in Virginia]

Also, if the money is left on deposit in the foreign country, they would need to complete the treasury form (I forget the number, but ATX has it) for persons who have a greater than $10,000 interest in a foreign bank account. In fact, I think they need to do that even if it is only in the foreign bank account for one day. There is always some paperwork somewhere - TANSTAAFL.

[Bart]

Also, if the money is left on deposit in the foreign country, they would need to complete the treasury form (I forget the number, but ATX has it) for persons who have a greater than $10,000 interest in a foreign bank account. In fact, I think they need to do that even if it is only in the foreign bank account for one day. There is always some paperwork somewhere - TANSTAAFL.

The money was never in a foreign account. The form is a TD F 90-22.1. I knew about that one but did not think I had to file it.

What is TANSTAAFL?

[Maura]

I learned it as:

There Ain't No Such Thing As A Free Lunch

[Gail in Virginia]

If the money was never in a foreign account that they had control over, then no, you don't need to file the TD F 90-22.1. And Maura is right about TANSTAAFL.

[Catherine]

I learned it as:

There Ain't No Such Thing As A Free Lunch

It shows up frequently in the novels of Robert A Heinlein. I once got a gift from a client's vendor (a USS Constitution Silver Dollar) because I caught the reference one of them made and commented on it. Years ago, but I still have the coin.

Catherine