More advice for Americans from the Jacobs Report
QUESTION: I was wondering if you could help me with a recent question I received. Can a
non-US resident and non-citizen (NRA) invest in an offshore registered mutual fund
(PFIC) and then eventually transfer those assets to a US citizen (while still living) without
US tax consequences?
REPLY: The general rule for the tax treatment of a gift by the donee (recipient) is that the donee assumes the tax attributes of the donor. The tax attributes include the adjusted basis (cost) and the holding period. In the absence of any exception for gifts from a non resident alien, the U.S. recipient of a gift of shares of a foreign mutual fund would be subject to the same tax rules as if the shares had been received from a U.S. person. I checked a few tax research sources and did not find any exceptions.
If the fair market value of a gift from a NRA to a U.S. person is more than $100,000, the
gift should be reported to the IRS on form 3520 (Page 6, Part IV).
As required by U.S. Treasury Regulations governing tax practitioners, any written tax
advice contained herein cannot be used by any taxpayer for the purpose of avoiding
certain tax penalties that may be imposed under the Internal Revenue Code.
For further details see http://www.offshorepress.com/vkjcpa/disclosurerules.htm
Vern
www.vernonjacobs.com
