Do I have to do paperwork for a cryptocurrency gift from abroad if it's less than $16000

[zzz2]

Hello,

My mother, who lives outside of the US (and not a US citizen), wants to gift me cryptocurrency (10000 USDT, ~$10000 market value)

Questions.

1) I'm gonna exchange USDT to USD and send USD it to my bank account. Will I need to do paperwork for this amount?

   1a) If yes, will I need to provide confirmation that this is a gift from my mother?

      1b) If yes, how can this confirmation look, provided my mother lives outside the US?

2) What would change if the gift was greater than $16000? Would I need to pay my normal taxes (~30%) on the part that exceeds $16000? Does this $16000 limit apply at all if cryptocurrency is received from a person living outside of the US?

3) That $16000 limit is applied to all gifts between Jan 1st & Dec 31st? So theoretically I could receive a $10000 gift on Dec 31 & $10000 gift on Jan 1 and pay no taxes?

[tagteam · Accepted solution]

Your mother (assuming she is a U.S. citizen) must file Form 709 if she gave you gifts totaling more than $16,000 in 2022.

See https://www.irs.gov/instructions/i709#en_US_2021_publink16784xd0e314

The donee, which is you being the recipient of the gift, does not typically have reporting requirements. However, this will be dependent upon the particular circumstances (such as receiving funds from a foreign bank).

As far as your final question, yes, you could receive up to $16,000 on December 31st and another $16,000 on January 1 without having to file a gift tax return.

[tagteam]

@pk - re the foreign component?

[zzz2]

Thank you. I should have mentioned, she's not a US citizen though.

[pk · Accepted solution]

@zzz2 , having read through your post and agreeing with @tagteam 's response, the only questions are :

1. What if the donor is a foreign person ?    In such a case there is no requirement for foreign person to report  the "gifting" transaction to the USA authorities at all.

2. What if the source of the gifting by the donor  is US i.e. the assets ( stocks bonds, crypto or other non-immovable asset  is from US sources/ connected )?  Even then there is no requirement for NRA to report the gifting because gifting amount above the yearly free limit affects  the donor's lifetime free estate limit.  However, it would be prudent to keep track of the disposition of all the US sourced / connected assets -- because any gains are taxable to the USA.

3. Does the donee  ( the beneficiary of the gift ) if a US person  have any reporting requirements ?   There is reporting requirement  at a threshold of US$100,000 or above using form 3520 along with your  yearly return.  There is no taxation. However, the basis of the gift to the donor is the same as that of the donee and any gain/ loss  at disposal must be recognized.  The holding period  also transfers i.e. all the characteristics of the asset  transfer from the donor to the donee.

4. Note also  that while the donor ( a foreign person ) had no requirements under FBAR and FATCA regs, the donee ( a US person ) is fully under the FBAR and FATCA requirements/rules.

5. A cautionary note  -- a US donee cannot legally receive  gifts  or have transactions with foreign persons/ entities/ countries/ regimes  sanctioned  by USA directly or indirectly.

Does this answer your query?  Have I missed something ?

pk

@tagteam 

[zzz2]

@pk

Thank you very much!

1) Will I have to prove that the cryptocurrency came from a foreign person living abroad? This may be difficult with cryptocurrency?

2) "A cautionary note" may really be a problem. My mother is Russian and lives in Russia.

[pk]

@zzz2  thank you for your response / questions

 (a) on how to prove that the asset came to you as gift --- I don't know exactly how ownership is determined / transferred  for crypto ---  if it is just account sign-in type  then perhaps you need a document signed  and "notarized" ( i.e. some form of authentication  of the signature of the donor ) transferring the ownership.  I have no personal experience in this crypto world.

(b) on accepting  gifts from a citizen of Russia --- I have to read up on treasury rules  but I suspect / expect  that unless the donor is a sanctioned person, it may be no issue.  But I need to research this topic but it is indeed an interesting issue.

pk

[zzz2]

@pk thank you very much sir.

Do you know if the gift donor has to be such a very close person? Can my mother also make a gift to my wife?

[pk]

@zzz2 , there is no relationship requirement for a gift to be considered a gift -- only (a) the donee has to agree to  accept the gift ( inwriting or by action ) and (b) there is no quid-pro-quo i.e. no requirements  that will materially benefit the donor. 

Yes your mother can indeed give a gift  to your wife  and the same rules discussed above applies to her also  ( reporting, FBAR, FATCA and basis ).

pk

[zzz2]

@pk thank you!