Complicated tax question, Help please!?

Question

My husband's mother sold her home in Honduras and gave my husband $100,000 towards the purchase of a home for us
(which she will be living with us). She gave us the $ in the form of two certified checks made out to my husband. He deposited it into his account to use for a down payment. We are looking for home and plan on settlement in June. Will we have to claim this as income even if we put in a home? Since the money came from a foreign capital gain is the $ taxable from the US? It is a gift from a foreign bank, does this count as taxable? I dont want to use all the $ for the house and then have to pay back taxes on it. We also live in Pa. Can any one help?

My mom-in law is a legal resident Alien and is 78 yrs. the property sold was owned outright for 30 years in Honduras.

Answer 1

I don't think the foreign source is an issue, if it's a gift it's not taxable to the recipient.

You'll probably still need a letter from your husband's mother stating it is indeed a gift since the mortgage company will ask for that since they don't want it to be a loan.

Answer 2

How the money was given to him is not relevant to anyone's taxes. What he did with the money is not relevant either. Where the money came from is only relevant to his mother's taxes. As the recipient of a gift, you and your husband have no tax liability related to the gift. Because his mother will be living with you, I will assume she is either a US citizen or legal resident. She is subject to US tax law. If she was a citizen of legal resident at the time of the sale, the gain is subject to US income tax law. I don't have enough information to say is any tax is actually owed. Your mother-in-law will have to complete a Gift tax return to report a gift in excess of $12,000 to each of you in a single year. A unified lifetime credit could shield her from actually owing gift tax. If the 'gift' occurred in 2007, you may be able to treat part of the 'gift' as payment to purchase partial ownership in the house. She can then give each of you $12,000 of her share each year until you own the whole house. That avoids the gift tax return entirely.

Answer 3

The giver of the gift is liable for the Gift Tax on it. Some countries have treaties with the US on gift taxes; you'll have to research that. If she does not pay the gift tax and there is no treaty that addresses it, your husband may have to pay it.

Whether or not any capital gains tax is due from his mother depends upon her US tax status. If she's a non-resident alien, she would not owe any US taxes.

"alamo" is so far out in left field it's not funny. The exclusion amount is $12k, not $10k. The tax on the excess is levied (normally) on the giver at the Gift Tax rate, not the capital gains rate. The CG rate isn't "extremely high" though the Gift Tax rate can be. But it doesn't even come into play here.

Answer 4

The money was a gift to you, so was not taxable - so no, you don't claim it as income. It has nothing to do with whether you use it to buy a home or not.

Due to the amount, if your mother-in-law was a US citizen or resident when she gave the gift, she'd have to file a gift tax return for it, but would probably not owe any tax for making the gift.

Answer 5

It is not a gift from a foreign bank. Foreign banks don't make gifts. It is a gift from your mother-in-law (or not, if it is in a foreign bank that you have no access to). Is it still in a foreign bank or a US bank? Is your mother-in-law a US citizen, or living in the US legally?

I strongly suggest you find a qualified tax lawyer or CPA who does international tax work even a former IRS agent who worked in international tax matters, because this may be simple, but you may have to be careful to document every step of the transaction.

Answer 6

The annual limit for a gift from parent to child is $10,000 -- over that amount, it's subject to taxation. You should consult a tax specialist.