Crediting mother's money into her bank account

[rishabh1]

My 80 yr old Mother immigrated to the US in '23 to live with me. Since she doesn't have any source of income in US we did not open any bank accounts for her. She had a property transaction in her home country in 23 proceeds from which about $70,000 USD we decided to keep it in my account in the US for costs and expenses current and future.

Now in 2024 we have become aware that she has some tax lilability in 2023 and have decided to proceed to open bank accounts for her.

We would ideally like to put the $70K back into her account and use some of it towards her tax liability and invest the rest.

We are not sure if this can be explained as her money kept in my account and avoid Gift filing implications. It was never a gift just that she didn't have a financial account and now that she does and also to pay her tax liability we want to keep it in her account.

We can instead treat it as a gift and file forms needed when gift exceeds annual exclusion OR we can treat is as a interest free loan have her pay tax on the interest (approx 5% $3600) and gift me the interest. But these were not the intent, she had just parked money in my account given she had none and now that we have needed to open accounts for her we would like to keep it in her account, can we? without gift/loan implications? How can we explain in case IRS has questions?

[Bsch4477]

Her gift to you doesn’t exceed the $100,000 foreign gift exclusion but when you transfer the money back to her you should report it on form 709. Due to the large lifetime estate/gift exclusion you won’t have to pay any tax. 

[rishabh1]

Thank you champ.

She is filing as a US Resident for 2023. Seems you are suggesting she will need to file form 709 for '23 and I'll need to file 709 again for any money I need to give back.

Since this is money being returned thus nullifying gift any other options that can stand up to IRS queries?

I see something called "Qualified Disclaimer". It needs to satisfy the below. The funds are in joint account of me and spouse, I had given a disclaimant immediately on receipt to my mother would I satisfy the requirements?

1. The refusal must be in writing.

2. The refusal must be received by the donor, the legal representative of the donor, the holder of the legal title to the property disclaimed, or the person in possession of the property within 9 months after the later of:

   1. The day the transfer creating the interest is made, or

   2. The day the disclaimant reaches age 21.

3. The disclaimant must not have accepted the interest or any of its benefits.

4. As a result of the refusal, the interest must pass without any direction from the disclaimant to either:

   1. The spouse of the decedent, or

   2. A person other than the disclaimant.

5. The refusal must be irrevocable and unqualified.