Foreign gift of real estate and stock account from parents question!

[ehjin]

Hello, can anyone help me answer how I should report my situation?

1. Real Estate: So I became a green card holder in 2020. I have parents in foreign country (they are non-resident aliens), and they bought real estate property some years ago under me and my sister's name as an intend to gift me later. Last year before I became a card holder, they sold the property and had half the money which is $350k from the sale deposited into my foreign account. They paid all the taxes associated with gifting the real estate under my name, as well as the sales taxes that incurred in the foreign country. 

When reporting this to the IRS, do I report that I was gifted the property, and then need to report the sales as income?? Even though I did not put any money into the property in the first place? Or can I just report the $350k in my bank as gift on form 3520?

2. Brokerage Account: They also opened a brokerage account under my name and bought stock on the account some years ago. I believe the value of the account right now is about $150k. Do I need to also report this as gift? Or simply as FBAR?

I really appreciate all your help!! I've been trying to sort this out but getting more confused... Thanks in advance!

[pk · Accepted solution]

@ehjin , 

(1) for the first question i.e. how to report the real-estate transaction --- the whole thing rests on whether you were  a 50% ( ?) owner of the asset prior to sale.  Ownership ,  generally requires an unfettered right  i.e. when all other claims are extinguished the remaining  is yours and yours alone. My suspicion is that in your country ( as in many non-western countries,  parents will buy a property in the name of a child  either as asset ownership diversion or with intent to gift at the proper time ( like the child gets married ) and therefore  the child/beneficiary is only in name owner ( signature authority) but the real owner till the gifting is consummated.   I believe this is your case  and am further supported in this because you say they paid all the  transfer and gifting  taxes etc.  If this is  your understanding and the law of the country allows this  then the simplest way to handle this is to recognize the gift of the monies  ( and not the asset).  This would require you to    (a) report this gift on form 3520  -- gift from a foreign person-- value more than US$100,000  and (b)  file FBAR ( form 114  , done on line at BSA-e-filing  or  www.FinCen.gov  ) for the bank account since the aggregate value of the account is equal/more than US$10,000.

(2)  for the Brokerage account -- again the question is  are you just a nominee or a real owner.  If a real owner then you will have to recognize  any dividends / interest earned etc on the  your US return  (  Fed and State). And  may have to file form 3520 for gift for the year when  actually opened  ( if  US resident at the time ) and  also FBAR and FATCA  ( form 8938 along with your  return).   If you are not  the real owner  -- just nominee, signature authority then  everything is on hold till the gifting actually occurs.

Which country are we talking about ? 

[ehjin]

@pk  thanks so much for your answer. This is something no one else told me about! 
My parents are in South Korea. Your assumption is all correct that I only had my name on the property and the stock account and did not control the sale of real estate nor the stocks within the account under my name. I don’t even know how to access the brokerage account right now. 

But how should I prove all this? That it’s under my name but real owners are/were my parents? 

[pk]

@ehjin , just have  the transaction details  ( how the whole thing was handled by your parents ), statements from your parents -- or  their lawyer etc.  ---  just in case you get challenged. I don't think you would.    Note that any monies deposited into an account that you operate / own  ( not just signature authority )  is  yours and  will need to shown  in FBAR and  possibly FATCA filings-- any earnings is your income and will be taxed by the USA.

Is there more I can do for you ?

[ehjin]

No question at this moment! I am working on filing the streamlined process for past years now and your answer might save me alot! Thanks so much.