Buy Car for Family Overseas - Pay Directly to Overseas Car Dealer

[ZeroNullVoid]

Hello,

I am a US resident (lived here for a long time on a H1B visa) but I don't have a green card yet. I want to pay for a new car for my family who are overseas and they are not US citizen / resident.

Car cost is $25,000.

1. Can I send the entire amount at once to the car dealer?

 - What are be the tax implications?

 - Do I need to file extra forms (gift tax etc.)

 - Do I need to pay any tax on it?

 - Is there any law that prevents me (individual) from sending money to a legal foreign entity (car dealership)?

 - Is there anything else, relevant to US laws, I should consider before transferring money?

2. Can I send this amount to my foreign bank account and my family pay for the car from my bank account?

 - What are the tax implications?

 - Do I need to file extra forms (gift tax etc.)

 - Do I need to pay any tax on it?

 - Is there any law that prevents me (individual) from sending money to a legal foreign entity (car dealership)?

- Is there anything else, relevant to US laws, I should consider before transferring money?

I have an additional question:

I have read that if I maintain $10,000 in an foreign bank account then I need to report the bank account to the IRS.

- Does it mean average daily balance of $10k?

- If I don't maintain this amount then I don't have to report that I have a foreign bank account?

- Is there a limit on how much money I can transfer to my bank account per year? I transfer money for family maintenance.

Thank you

[pk]

@ZeroNullVoid , 

1. There is no  direct limit on transferring money from your US account to your foreign account.  However, any amount more that US$10,000  will generally being flagged by the bank with a SAR --- it does not mean anything and finally may go nowhere.

2.  Any foreign bank account (s)  (owned  singly or jointly or having signature authority but no financial interest) comes under FBAR regulations.  You would have to file  treasury  form 114   ( online a  BSA e-file or FinCen.gov ) if the  account balance is 10,000 on the last day of the year or crossed 15,000 at anytime   during the year.  If you have multiple accounts then it is the sum of all the accounts.  This is not a tax event but  files for not reporting is pretty high per account.  The safest route is to file the form even when in doubt  ( your  foreign bank would report the ownership anyways  )

3. A car is a personal asset and  transferring money to buy  is not a tax event.  The only time  you have report the transaction is if  you plan to use the asset as an income  property   ( and not personal property).  If you make a gift of the asset to another then  there is a requirement to report  that if the  value is more than the free amount --- this changes every year  but currently frozen at 15,000.  This amount is per donor and per donee -- thus  if you file a joint return  with your spouse then  you each can donate  $15000  to your father ( a total of  $30,000  ) and same for your mother --- thus  donating $60,000 to your parents before  a reporting is required.

See this Q & A  from the IRS : ---  https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-tax...

Does this answer your query ?

[ZeroNullVoid]

@pk Thank you for your quick response.

I understand that I need to file treasury form 114 ( online a BSA e-file or FinCen.gov ) if I have more than $10,000 on any given day of the calendar year. I have only one foreign account and the balance has never been more than $10,000. So, I think I don't have to report it.

If you could, please let me know on my specific case:

I prefer to transfer $25,000 to the car dealer directly in a single transaction and not through my foreign account. Car will be in the name of my brother or other family member.

- Is this a cause of concern in any way?

- Does this fall under gift tax? Does it matter if it goes to my family or a business (car dealer)?

- Which forms do I need to file?

- I looked up what SAR is. If SAR is raised by my bank, does that mean the transfer will be delayed? If it will delay the transfer, how long can it be delayed for? I want to finish the transaction this week.

- Additional info: I can pay with my savings, but I plan to take a loan here and use those funds to transfer.

Thanks again!

[ZeroNullVoid]

Hi,

Could someone please respond to my above post?

Thanks

[pk · Accepted solution]

@ZeroNullVoid , 

1. sorry for the delay in responding;

2. we are all unpaid volunteers  and do this to  (a) help  fellow users; (b) we are not at our desks  and helping 24 X 7; and (c) because enjoy doing this, sharing our knowledge of the tax laws

3.  I stand corrected  in that there is indeed a limit on how much one can send abroad , but it is something like  US$1 million or something like that when one needs treasury permission;

4. Whether money is wired directly to a dealership or via your bank generally may not matter if you are buyer of record and then the car is registered  in your name.

5. If the money is wired to the dealership directly from your account and a relative is the buyer and registered owner, then it is a gift  and if beyond the free/exclusion  limit  ( as outlined above  ) then may need to be recognized with a  gift return ( form 709 )  but not a tax even at this time.

6. Whether money is from  your savings or from a loan secured  by something else  does not have any implication in this matter but may have implications  in a broader tax  matter.  For example, if the amount is  secured by your home  ( second mortgage or Home Equity etc. ) ,  by using the amount for purposes other than on your home improvement/purchase etc. the interest  may not be deductible.  Also your lender may have restrictions on how you are using the  loan proceeds.  Outside of that there are no worries that I know of.

Stay safe

Namaste ji

pk

[ZeroNullVoid]

Thank you @pk 

I apologize for making it sound like it is your job to help on this forum. That was not my intention.

I think it clarifies all my questions. Regarding using money off the loan - the loan is actually against my credit card limit so it would be personal loan. I don't suppose there will be any restrictions on how I can use that.

Thanks again!

[pk]

@ZeroNullVoid  you are welcome.   I apologize if  I sounded put out ---  it is just that  at this time of the year, we don't spend as much time  in the  community.   I come when I can except for PMs. which I take care of as soon as I can .

pk

[nalicak]

@pk I have a similar question.  I plan to buy a condo in Thailand.  I have a dual citizenship - US and Thai. The condo is about $100 and I plan to pay cash.  The condo will be for personal use (not for investment).  I am considering two options:

1) Buy the condo under my name.  The fund will be transferred directly to the developer.  I am less inclined to go this route because there are many things that I have to sort out (e.g.: my Thai id card is required but it is expired, my names in the US and in Thailand are different since I changed my last name after married, my husband who is not a Thai person has to go to the Thai consulate in LA to sign a form to give up his claim in the property, etc.)

2) Buy the condo under my brother's name.  He is not a US citizen or resident.  The fund will be transferred either to the developer or to my brother's bank account.  

I am wondering what are the tax implication and paper work required by the US government.   You did mention that this will be considered a gift but might not be a tax event.  What does this mean?  

[pk]

@nalicak , having gone through your post, the situation as I understand is as follows:

(a)  you a US citizen ( for US tax purposes, your dual citizenship is ignored) is purchasing a capital asset -- a condo --  in Thailand , with   post tax dollars

(b) you are a resident of California  

(c) you are married to a US citizen  and you file as Married Filing Joint ( yes? )

 Now the  question is  whether the property is to be  held  in your own name  or in the name of a relative ( brother ).

1. If you send the monies directly to the dealer/promoter, then  this  is not a gift -- a personal expense and the asset so acquired would be  community property ( part of your estate ) and therefore, absent a clear/legal  agreement to the contrary, would be 50% owned by your spouse.  You should consult a lawyer on this  as to  the best way to proceed  -- depending  on your longer term  plans.   In such a case   , if and when , you dispose of the property,  there would be capital gain to consider -- for tax purposes

2. if you choose to  instead  have the property   registered  , in your brother's name, the monies  transferred , whether  directly transferred to builder's/ promoter's  bank account or that of your brother, would still be a gift  to him.  This would mean   -- (a) you  have to file a  gift tax form and  the gift would count towards your lifetime estate  tax  free amount ;  (b) no tax impact  today  or in the future if and when you dispose of the property; (c) not community property and hence not part of your estate -- not part of your will/last testament.  Again suggest consulting a lawyer.

Actual transfer of the amount  will  result  in a SAR ( by the bank routinely) but  no impact and/or action for you except in the case  when the monies rests in a foreign bank account that you own/control/have signature  authority over  for FBAR /FATCA reporting-- again no tax impact.

Does this make sense, answer your query  ?

pk

[nalicak]

@pk Thanks for your answer.  Yes, I and my husband file jointly so together we can gift my brother $30k for the year.  Let's say I transfer $100k to the developer and the condo will be under his name.  Then we just have to file a gift tax return for $70k.  Is that correct?  

[pk]

@nalicak  that is correct.

Is there more I can do for you ?

Stay safe

pk