Tax consequences for receiving some money as gift ($75000) and sending that over to an educational institution for tuition.

[infiniteint]

I have been asked to be an NRI sponsor for my cousin back in India. I cant personally fund this amount. So my aunt and uncle will be sending the money (around $75000) from a bank account in Dubai and I will have to send this to an educational institution in India. 

Are there any tax consequences for me if I do this process? As I understand from the IRS website, I can claim upto $100000 as gift. Is there a limitation on who can gift? 

I also read that there are no taxes that I have to pay for tuition (and no limits either). 

Is my understanding correct or is there something I'm missing out? 

Thank you.

[xmasbaby0]

Why is this $ being channeled through you?  Why not send from Aunt and Uncle to the recipient directly?

[DoninGA]

As the receiver of a gift you do not report the gift on a federal tax return, regardless of the amount received.
If you are a US citizen or US resident and you give a gift in 2018 to an individual of $15,000 or more then you must file a Form 709 with the IRS to report the gift given.  However, you will not owe any taxes on the gift if your total gifts given have not exceeded $11.18 million.
TurboTax does not support IRS Form 709

[SweetieJean]

Didn;t we have a similar Q some months ago?

[DoninGA]

Edit comment to change the IRS Form to 709 from 706

[SweetieJean]

Sound like this:
<a rel="nofollow" target="_blank" href="http://www.r2iclubforums.com/forums/showthread.php/28225-NRI-Sponsoring-Funding-College-Admission-an...>

[SweetieJean]

and this:
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/3351158-i-got-20000-from-a-cousin-in-india-to-sponsor-my-cousin-s-...>

[Opus 17]

It sounds like the transaction would be considered improper by Indian authorities, since the sponsorship is supposed to be coming from the US, and here it is really coming from somewhere else.  It is probably not illegal under US law.  Still, that's a moral and legal question to ponder before you get in too deep.

[SweetieJean]

Although the US might still consider it money laundering.

[infiniteint]

Thanks all.

[infiniteint]

Apparently they need an Non resident indian to perform this payment to the Indian institution. That's why it is being sent through me.

[SweetieJean]

As the link above says, "Legally, only parents or legal guardians can sponsor in the NRI quota." Your Uncle is trying to circumvent the law.

[Opus 17 · Accepted solution]

You must report gifts you receive from foreign persons of more than $100,000 per year.  Gifts are never taxable to the recipient.

If you are a US taxpayer (citizen, green card holder, or resident alien) you must report gifts you give, in excess of $15,000 per person per year.  Gift tax is not owed unless your lifetime gifts and estate are more than $11 million, but you must file the report.

However, banks are required to report all transactions over $10,000, so the IRS will get a report of money coming in and going out.  They may investigate.  If it turns out that these transactions have an improper purpose (such as, the money is coming from a country that is under sanction, and the Dubai account is a workaround; or the money is coming from some other improper purpose) then you could be prosecuted.  If the transactions are proper and you are not disguising an improper purpose then there may not be legal consequences but the investigation itself could be intrusive and difficult.

No one on this board can give legal advice.  You may want advice from a qualified attorney before taking on this arrangement.

[infiniteint]

Thank you. Does the report have to be filed even when it is being sent to an educational institution directly?

[Opus 17]

Yes, you are making a gift to the person, or at least on their behalf.  Omitting the gift return and trying to say this was something like a "donation to the university" would definitely be a problem if the IRS caught it.  You are already (possibly) on shaky ground with one government, don't try for two.  🙂