What are the reporting requirements on non-resident alien gifts?

Question

My aunt (who meets the IRS definition of being a non-resident alien) intends to give $50k towards my son's college education. My aunt lives in Switzerland. To ensure that the gift is given and received outside of the US (so as to make it non-taxable) I plan to open an account at a foreign bank into which I will receive the gift, and then wire to funds to the university. Gifts from non-resident aliens over $10k normally requires that the recipient file of IRS form 3250.

My Question: since this gift is being used for tuition, is it exempt from filing form 3250? IRC 6039F(b) (Notice of Large Gifts Received from Foreign Persons) has exepmtion language for tuition and medical expenses, but I find the language a bit vague.

Does someone know if, in the circumstances described above I am exempt from filing Form 3250? And thus, I can receive the gift tax free, spend it on tuition and file nothing with the IRS?

Thanks

Answer 1

I'm suspicious of the qualifications of the above "tax consultant" poster. I found the answer in the Form 3250 instructions on the IRS website, linked below, and it does NOT agree with what he states. I certainly won't be paying HIM for any advice any time soon!

You don't need to file the 3250 for a couple of reasons. One being the nature of the gift for tuition. The other is that the gift is coming from a foreign person where the reporting limit -- at least as I'm reading it -- is $100,000, not $12,760 (2006 rate, it's adjusted for the cost of living.)

Even if the gift had to be reported, it still would not be taxed. The 3250 filing simply advises the IRS of the transfer so that they can evaluate the taxable status of the transfer. A bona-fide gift is never taxable to the recipient.

Technically the donor would need to file a US Gift Tax return and pay any tax due, however as the donor is not subject to US taxation they cannot be compelled to so do. There might be a tax treaty that addresses that issue but that's a problem for the donor to contend with.

The US recipient of the gift is not taxed. Gift recipients are never taxed. It doesn't matter what the money is used for.

There is no need to set up a foreign account for this gift to pass through. In fact, doing so will significantly complicate matters as you will now have to file additional informational returns since you have authority over a foreign depository account.

Answer 2

This Site Might Help You.

RE:
What are the reporting requirements on non-resident alien gifts?
My aunt (who meets the IRS definition of being a non-resident alien) intends to give $50k towards my son's college education. My aunt lives in Switzerland. To ensure that the gift is given and received outside of the US (so as to make it non-taxable) I plan to open an account at a foreign...

Answer 3

as soon as you transfer any money into the US you will be taxed on it.if you try to circumvent the law you could get in big trouble.You have to file 3250 even if your exempt,which in this case I do not think you are. It would be best to check with IRS directly(IRS.GOV) and even then get a letter from them not a e-mail or phone call.

this the type of consulting That I would normally charge for so I will not give a definitive answer. sorry

Answer 4

Form 3250