He got a business to purchase items from the US and ship them to the US address that he hired. I think that address is the shipping service that later ship items to Vietnam. He lately (just recently, not happened before) has some problem with Paypal that prevents him to purchase some products to the mentioned address. I don't know what's the matter with Paypal, but he asked me to receive the money to buy things and ship them to the mentioned address.
Is $2000 counted as gift if I receive this to purchase products for him? Then if I receive the amount of $2000, do I have to include it in Form 3520 or my tax return?
Gifts are not taxable to the receiver. And you do not need to report any gifts that you give unless the amount is more than $14,000 per year. So if you want to consider this as he gives you $2000, and you give him some merchandise, there are no tax consequences.
However, what you are describing is not really a gift transaction. You are describing being in business where you are facilitating international money transfers so that your friend in Vietnam can buy US goods with a US bank account.
If this only happens once, then you probably don't need to report it at all. You just need to be careful that this is not a scam.
If this is going to happen a lot, the safest way to do this is to open a separate bank account for this business, do not use your personal bank account. If the amount of money you receive is more than the amount of money used to buy goods, then the difference that you get to keep his taxable income for performing a service and you would report it on schedule C.
if the bank account is purely a pass-through account and the outgo is exactly equal to the income, then you won't have taxable income, but you may still want to report it as a business on schedule C. With the income equaling the expenses, you will show zero net taxable income and owe no tax, but you would be reporting the activity as a business activity which may avoid any misunderstandings with the IRS.
Is this a bonafide friend? There are lots of scammers out there.
I understand your concern. Even if the one is close, I should be aware of being fooled. But say, suppose it's true, I just want to understand a bit of taxing system and the imposed law. What can you say about questions?
Actually, my brother-in-law gift me $1k when I'm on vacation in Vietnam. I take it along with me when coming back to the US. I did not report it, and just wonder if those 2 cases are the same if they're counted as gifts.
Gifts are not taxable to the receiver. And you do not need to report any gifts that you give unless the amount is more than $14,000 per year. So if you want to consider this as he gives you $2000, and you give him some merchandise, there are no tax consequences.
However, what you are describing is not really a gift transaction. You are describing being in business where you are facilitating international money transfers so that your friend in Vietnam can buy US goods with a US bank account.
If this only happens once, then you probably don't need to report it at all. You just need to be careful that this is not a scam.
If this is going to happen a lot, the safest way to do this is to open a separate bank account for this business, do not use your personal bank account. If the amount of money you receive is more than the amount of money used to buy goods, then the difference that you get to keep his taxable income for performing a service and you would report it on schedule C.
if the bank account is purely a pass-through account and the outgo is exactly equal to the income, then you won't have taxable income, but you may still want to report it as a business on schedule C. With the income equaling the expenses, you will show zero net taxable income and owe no tax, but you would be reporting the activity as a business activity which may avoid any misunderstandings with the IRS.