When does a U.S. resident alien foreign gift become subject to U.S. gift tax?
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A U.S. resident alien is subject to U.S. gift tax on transfers of property by gift, but the scope and application of the gift tax depend on the type and location of the property transferred, as well as the residency and citizenship status of the donor.
1. General Rule for U.S. Resident Aliens
Under the Internal Revenue Code, the U.S. gift tax applies to all transfers by gift of property, wherever situated, by an individual who is a citizen or resident of the United States, to the extent the value of the transfers exceeds the amount of the exclusions and deductions authorized by law;. The term "resident" for gift tax purposes is defined as an individual who has his or her domicile in the United States at the time of the gift.
2. Application to Foreign Gifts Received by a U.S. Resident Alien
A "foreign gift" in this context typically refers to a gift received from a foreign person (i.e., a non-U.S. person). The U.S. gift tax, however, is imposed on the donor, not the recipient. Therefore, when a U.S. resident alien receives a gift from a foreign person, the U.S. gift tax does not apply to the recipient. Instead, the U.S. gift tax applies to the donor if the donor is a U.S. citizen or resident, and only to certain transfers by nonresident aliens.
3. When Does a Foreign Gift Become Subject to U.S. Gift Tax?
- If the U.S. resident alien is the donor: The U.S. gift tax applies to all gifts of property, wherever located, made by the U.S. resident alien, subject to certain exclusions and deductions (such as the annual exclusion under §2503(b), the marital deduction under §2523, and the charitable deduction under §2522);.
- If the U.S. resident alien is the recipient: The U.S. gift tax does not apply to the recipient of a gift, regardless of whether the gift is from a foreign person. However, the U.S. resident alien recipient may have a reporting obligation if the value of aggregate gifts received from a foreign person exceeds certain thresholds (e.g., $100,000 from a foreign individual or estate in a calendar year), which must be reported on IRS Form 3520;.
4. Special Rule for Nonresident Alien Donors
For nonresident aliens (i.e., individuals who are not U.S. citizens or residents for gift tax purposes), the U.S. gift tax applies only to gifts of tangible property situated in the United States. Gifts of intangible property (such as stock in U.S. corporations) by nonresident aliens are generally not subject to U.S. gift tax, except in certain cases involving expatriates under §877(b);.
5. Summary Table
6. Key Points
- A U.S. resident alien is subject to U.S. gift tax on all gifts made, regardless of the location of the property or the citizenship/residency of the recipient;.
- A U.S. resident alien who receives a foreign gift is not subject to U.S. gift tax, but must report the gift on Form 3520 if the value exceeds the applicable threshold;.
- A nonresident alien donor is subject to U.S. gift tax only on gifts of U.S.-situated tangible property.
In summary: A U.S. resident alien foreign gift (i.e., a gift received by a U.S. resident alien from a foreign person) does not become subject to U.S. gift tax. The U.S. gift tax applies to the donor, not the recipient. However, the U.S. resident alien recipient must report the gift on Form 3520 if the value exceeds the reporting threshold, but no U.S. gift tax is imposed on the recipient;. If the U.S. resident alien is the donor, then U.S. gift tax applies to all gifts made, regardless of the recipient's status or the location of the property, subject to exclusions and deductions;.
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