As a dual citizen of France and the United States, what is the best way to minimize taxes on a gift of EUR 100,000 from my French parents?
Under French law, my parents are allowed to give me EUR 100,000 while alive and the amount will not be taxed in France. I have dual citizenship in France and the U.S. and I live in the U.S.. What are the tax implications if I receive the money in the United States? Should I keep it in France? What is the best way to minimize taxes on this amount?
I assume your parents do not have U.S. citizenships as you do.
According to the IRS, “you must file Form 3520, if, during the current tax year, you treat the receipt of money or other property above certain amounts as a foreign gift or bequest.
Include on Form 3520:
Gifts or bequests valued at more than $100,000 from a nonresident alien individual or foreign estate (including foreign persons related to that nonresident alien individual or foreign estate);
Gifts valued at more than $15,671 for 2016 (adjusted annually for inflation) from foreign corporations or foreign partnerships (including foreign persons related to the foreign corporations or foreign partnerships).”
You must aggregate gifts received from related parties. For example, if you receive $60,000 from nonresident alien A and $50,000 from nonresident alien B, and you know or have reason to know they are related, you must report the gifts because the total is more than $100,000.”
The filing requirement is for information purpose only. You generally don’t owe any taxes on the gifts or bequests you received from a foreign person unless he/she is considered a “covered expatriate”. Also, the money is generally not counted as gifts if it is paid for qualified tuition or medical expenses on behalf of you.
As you may know, as a U.S. citizen, you are taxed on worldwide income and subject to certain foreign assets reporting requirements including but not limited to FBAR (FinCEN Form 114), FATCA ( Form 8938), and PFIC (Form 8621). To avoid the burden of the tax filing requirements or any potential punitive tax treatment from the PFIC rule, it is usually beneficial to keep the money in the U.S.
As always, I cannot give you any specific recommendations without knowing you detailed situations. I recommend you consult a qualified professional based on your particular situation.