Can a money gift sent by wire transfer of from a foreign person's foreign account into my US account be qualified as US situs asset and incur a transfer tax?

[ircus]

Hello,

My relative (foreign person) wants to give me (US person) a money gift (>$100,000) in one calendar year.

I understand I will need to report this gift in Form 3520.

My question is what is the proper way of delivering that gift into my US account from the foreign person's foreign account?

This article  https://klasing-associates.com/u-s-tax-implications-receiving-gifts-foreign-citizens/  and other resources claim that simply doing a wire transfer from the foreign person's foreign account directly into my US account may make this money a US situs asset for the millisecond it's being wired and therefore subject to transfer tax.

Is this claim valid?

If it is what is the proper way of transferring such money gift?

Thank you

[Opus 17]

Never heard of it.  Just do a regular wire transfer.  Gifts are never taxable to the recipient in the US.  If the gift giver owes a tax in their country, that is up to them. 

[ircus]

Thank you for your reply!

Gifts are never taxable to the recipient in the US - understood.
If the gift giver owes a tax in their country, that is up to them - understood.

Remaining question is: can the foreign gift giver owe taxes in the US as a result of such transaction?

Title 26 CFR § 25.2501-1 3(i) says:

The tax does not apply to any transfer by gift of intangible property on or after January 1, 1967, by a nonresident not a citizen of the United States (whether or not he was engaged in business in the United States), unless the donor is an expatriate...

My relative is not an expatriate, so my understanding is that the gift tax does not apply to them.

[Opus 17]

People subject to US income tax laws are either

a. US citizens living anywhere in the world, or

b. resident aliens (illegal or legal) who meet the substantial presence test or have a green card.

If your relative does not meet the substantial presence test and does not have a green card, they are not subject to US tax laws.

[ircus]

Thank you again.

However it seems to me that here's a situation when a non US citizen nonresident of US may still owe taxes in the US (gift tax).

Title 26 § 25.2511–3 Transfers by nonresidents not citizens.

(a) ...

(1) The gift tax applies only to the transfer of real property and tangible personal property situated in the United States at the time of the transfer if either—

(i) The gift was made on or after January 1, 1967, by a nonresident not a citizen of the United States who was not an expatriate ...

So my understanding is that if my relative (nonresident, non US citizen, not an expatriate) purchases a house in the US and gifts it to me then they will owe gift tax in the US, is this correct?

[Opus 17]

I'm not a lawyer and I can't answer any further.  I know you are talking about "US situs" property, I've seen other web sites that say the "situs" argument doesn't exist.  At worst, even if the gift giver has to file a gift tax return, there is a lifetime exclusion of at least $11.4 million, so even if a gift tax return is required due to the "situs" rule, no gift tax could possibly be owed unless the amount was more than $11.4 million.  And if your family are gifting that much, you should be getting paid professional tax advice.   Presumably, if they needed to file a gift tax return, they would also need to file a form W-7 application for an ITIN. 

[ircus]

Got it, thank you for your time!

I didn’t not know about the lifetime maximum.

[wolf109]

Hello,

As far as I know, a lifetime exclusion of at least $11.4 million you are referring to is not applicable for non-US person (foreign person). So the questions of "situs" is a valid one here.