Transferring large sum of money from US to Canadian spouse

[jyee315]

I am a US citizen/resident, do taxes in USA only. My wife is Canadian/resident, does taxes in Canada and USA. I treat her as a resident alien and file married filing jointly. 

   We are looking into buying a property in Canada, but because of tax laws (Speculation tax) will have to buy the property under a Canadian family member. If I move a large amount of legal money from USA to Canada to my wife's checking account, does this trigger any taxes or anything I have to report to the IRS. I am asking strictly from USD cash to CAD checking account, all investments (i.e stocks) will have been sold and taxes already will be paid on gains. It looks like Canada has no issues with it, no gift tax, though I am technically not gifting it to my wife. 

[pk]

@jyee315 , generally there is no tax impact of moving monies between  US  bank accounts and international bank accounts of same person. There is also no tax impact of transferring monies between accounts owned by you and one owned by your spouse , even if in a different country  ( unless  US " Sanctions" are in effect).

Your outgoing bank will indeed raise a SAR ( Suspicious Activity Report )  on all incoming or outgoing transfers/wires on US$10,000 or more, but these are generally  just flags and dealt with internally.  For  transfers of 1M or more , there may be treasury permissions required ( and depends on the country).  But again no tax impact.

There is generally no "gift" recognition between spouses, especially when you are transferring monies to buy / acquire  joint/ marital properties.

Is there more I can do for you ?

[jyee315]

Because of the aggressive speculation tax in British Columbia, if we do purchase a home, it would have to be under my brother in law (and me and my wife cannot be on the title), thus technically we would be buying the property for a family member. Does that change anything legally in terms of the money? I know Canada does not have a gift tax, and the money would go through my wife's account first before she "gifts it" to purchase property under my brother in law's name. 

   Also in googling, this is what I found. Does this come into play? I do not suspect this would be our issue because though my spouse ia a non-resident alien, for income taxes in the US, I am treating her as a resident alien and including all her assets in my US taxes and filing married filing jointly.

"If your spouse is not a U.S. citizen, tax-free gifts are limited to present interest gifts whose total value is below the annual exclusion amount, which is $164,000 (for 2022), $175,000 (for 2023), and $185,000 (for 2024); and $190,000 for 2025. There is no lifetime gift tax credit available to offset tax where such gifts result in a tax liability" 

[pk]

@jyee315 , thank you for your answers and explanation behind what you are planning.

(a) My simple and considered position always is  keep it simple. Instead of getting our knickers in a twist and try to cover all possible questions, it would be better to first  decide is this a gift or not. 

    If the whole purpose is to  buy a property for your own usage,  then the monies transferred is only a means towards  ownership & usage.  This is not a gift.

     There are quite a few cases ( some even in case law  ) where a  person, for credit history etc. reasons, decides to buy a property, using a friend/relative as the legal owner  and  therefore mortgagor, lives on the property, pays the mortgage and property taxes --- equitable ownership.  IRS challenged the claim for mortgage interest & prop-tax and lost -- because the "facts and circumstances " proved that the despite the title and loan docs. , it was always understood to be a "by and for the equitable owner" property. 

So what I understand  from your case is that  you are funding the purchase, using your "relative" as token/ stand-in owner ( in name only ) -- just as if a trust was holding the title  to satisfy the local laws/conditions/ restrictions  ( as in Mexico  through "fideicomiso" , with 100 year lease terms -- an instrument to achieve ownership / usage/ transfer rights  while complying with local ownership restrictions).

(b)  Your quote on tax liability for "gifts" to a NRA spouse is true  and the reasoning is in the last sentence.  I do not believe this is a gift because all you and your spouse are doing is using  spouse's  ( Note that for tax purposes , your spouse is NOT NRA -- immigration status  notwithstanding --- he/she is paying taxes as a "Resident for Tax purposes"-- MFJ) foreign bank account as a money transfer conduit.  At the end of the say you both own the asset that you are purchasing, for joint ownership / usage/ transfer rights etc.

For the transfer to be a gift, the acquired asset would have to be solely owned by the spouse  and  hopefully  so documented legally through some kind of post nuptial agreement.

IMHO -- treat this transfer for what it is, a money transfer to an agent in Canada for the purchase of an asset in Canada.  Therefore there is no US tax impact.

Is there more i can do for you ?