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Reporting of gift taxes involving noncitizens

We should never take it for granted that particular transactions will not have tax consequences. Even the providing of gifts can be subject to IRS tax laws. This is particularly true of gifts between U.S. citizens and citizens of another country.

Gifts provided to foreign citizens receive the same treatment as gifts between U.S. citizens. Any gift exceeding the $14,000 annual exclusion amount must generally be included on a gift tax return. If the gift is to a noncitizen spouse, there is an annual limit of $148,000. Any gift above that figure could possibly result in the need to file a gift tax return.

Careful recordkeeping is essential when reporting gifts to the IRS – especially gifts to noncitizens. For example, when foreign currency gifts occur, the one providing the gift needs to utilize the exchange rate at the time the currency exchange took place in determining the value of the gift. This is the case even if fluctuations occur between the time one obtains the currency, and the time one provides the gift to the noncitizen recipient.

The rules for recipients also are different regarding reporting. While foreign citizens usually will not have any tax gift liability for receiving a gift, recipients are required to report a foreign cash gift under certain circumstances. The thresholds for reporting are different depending on whether you are receiving gifts from nonresident aliens or from foreign corporations. The failure to report in any case can result in IRS penalties.

It’s advisable for individuals to consult with knowledgeable tax attorneys whenever questions about gift taxes arise. The provisions and exceptions are generally quite complex for both reporting and paying of gift taxes. Certain individuals will experience tax consequences for gifting while others may not have to pay gift taxes whatsoever.

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