My parents who are not a US citizen, do not and never reside in the US more than 3 months (the visited as a tourist couple of times) wants t...

Question

My parents who are not a US citizen, do not and never reside in the US more than 3 months (the visited as a tourist couple of times) wants to give me $200,000 in cash. I am a legal alien resident in the US residing in the US and pay income tax etc. Will I be subjected to gift tax in this case? Also, I am planning to use these gift money to pay off my mortgage, so would that affect the outcome? I read that I need to file a form 3520, but I cannot find answers to if I will be subjected to tax since the IRS cannot receive it from my parents.

Answer

If the money was never yours in the first place, you are not taxed on the transfer from a foreign trust or foreigner on gifts to you. The reporting requirements are designed to disclose to the IRS details of possible taxable transfers out and then back to the US by US tax persons.

Yes, you do have to file Form 3520, and for many reasons, it is prudent to do so.

I get this question (for free) repeatedly from Chinese children in the US about transfers from their parents. Good luck with your transaction.