Nonresident Alien Parent, Joint U.S. Account, and Gift Tax Questions

[useful]

Hello!

I have a joint U.S. bank account with my father. I am a Green Card holder, while my father is a nonresident alien residing abroad. My father owns, deposits, and manages the funds in this account.

Last year my father told me to transfer $350,000 from the joint account to a high-yield savings account under my name at the same bank, intending to earn interest before returning the funds to the joint account. At the time, we were unaware of potential gift tax implications.

I understand that I must report and pay taxes on the interest earned, but I need clarification on the following points:

1. Would this transfer be considered a gift from my father to me?
2. If I return the funds to the joint account, does it still qualify as a gift?
3. If deemed a gift, am I required to file Form 3520?
4. Does my father have any U.S. tax reporting obligations for this transfer?

Regarding point #4, I’ve encountered conflicting interpretations about whether a U.S. bank account qualifies as a tangible asset for nonresident aliens concerning U.S. gift tax. The IRS states, “An NRNC of the United States is subject to gift and GST taxes for gifts of tangible property situated in the United States.” However, some sources suggest that funds in a U.S. bank account are considered intangible, while others claim they are tangible.

Any help in answering these questions would be greatly appreciated!

References:

1. https://sommers-taxapedia.com/archives/summary-of-the-law-on-gifts-from-a-non-u-s-taxpayer/ 
2. https://www.greenbacktaxservices.com/knowledge-center/form-709/#:~:text=the%20exemption%20decreases.... 
3. https://ttlc.intuit.com/community/taxes/discussion/us-bank-account-held-by-foreigner-considered-prop... 
4. https://www.law.cornell.edu/cfr/text/26/25.2511-3

[DavidD66]

Since the account that held the funds was joint account, you were already an owner of the funds.  Since you already had a joint interest, transferring the funds to an account in your name would not constitute a gift.  You might want to return the funds to the joint account to make sure it does not appear to be a gift.  

[useful]

Thank you for the response David!

The money in the account is fully managed and owned by my father, my understanding is that as long as I do not move that money out of the account he will remain as the owner. Is this not correct?

[DaveF1006]

 Your father may be the primary account holder but you are both owners who has the full right to withdraw, deposit, and manage the account's funds.

[Edited 02/19/25|3:35 pm PST]

[useful]

Got it. But wouldnt then transferring that money to my personal account trigger a gift tax obligation?

[DaveF1006]

 It depends. In a joint checking account, all account holders have equal ownership and access to the funds. This means that each person named on the account has the full right to withdraw, deposit, and manage the account's funds. While some banks may label one person as the primary account holder, this does not change the fact that everyone owns the account equally.

Since you are an equal account holder transferring the money will not constitute a gift as DavidD66 mentions in his post.

[useful]

I see, thank you for the explanation. Is there a section of the IRS website where this is mentioned?

[DaveF1006]

No, not specifically in the IRS statues. Here is an excellent reference offered by the Federal Deposit Insurance Corporation (FDIC) that explains the concept of joint checking accounts.  

FDIC- Joint checking Accounts