Does my wife have to pay tax if sending money from the Philippines

[Will & Malou 0]

My wife has a large sum of money in the philippines (over $100,000). She has sold her inheritance properties and wants to bring the money into the US by wire transfer from bank to bank. I've have heard many stories but have not confirmed this..The US government will tax her? We want to buy a house and put the rest in a bank account here in California but hope we can get an answer from someone with experience. Thank you

[Dave&Roza 748]

My wife has a large sum of money in the philippines (over $100,000). She has sold her inheritance properties and wants to bring the money into the US by wire transfer from bank to bank. I've have heard many stories but have not confirmed this..The US government will tax her? We want to buy a house and put the rest in a bank account here in California but hope we can get an answer from someone with experience. Thank you

Was she a LPR when she acquired the inheritance? If not, there is no problem. If she was it does add a bit more to the process. She can receive, I believe but check the IRS website for the correct amount as I am going off of two year old information, $140,000 without having to pay any taxes nor report it to the IRS. Above that amount you must complete a form for the IRS. Gifts are not taxable, but the sale of property is taxable as a capital gain and that is why I ask if she was a LPR.

My wife sold her apartment after becoming a LPR. So it is taxable to her as a capital gain. However she bought the property many years ago. So how do you calculate the capital gains? We had her Mother sell the property as owner and gift the proceeds to my wife. I did not know how to go about getting an appraisal for the year my wife become a LPR and use that as the cost basis. It would not have been that much as property did not appreciate much in the 2 years since she had become a LPR.

The only issue I see is the IRS' requirement of reporting money in excess of a certain amount, but that is just paper work.

Dave

[Will & Malou 0]

Dave, she is a LPR. I noticed you've mentioned gift. How much can one give as a gift from out of the country? I am not sure what the capital gains would be on an inheritance, she had sold the property and have the money in her bank account. Now the question, does she send it to the US and will she be tax. or just better to leave it there in the bank in the philippines?

[aaron2020 11,651]

Dave, she is a LPR. I noticed you've mentioned gift. How much can one give as a gift from out of the country? I am not sure what the capital gains would be on an inheritance, she had sold the property and have the money in her bank account. Now the question, does she send it to the US and will she be tax. or just better to leave it there in the bank in the philippines?

Generally, the US will not tax inheritances brought to the US.

However, if your wife is an LPR and there are capital gains (sale price - value when she inherited the properties), then she must report the profits as income on her US tax return. If there are no gains between when she inherited the properties and when she sold them, then there are no taxes. If there are losses, then she can offset them with gains.

Go see a tax attorney or a US accountant. With $100,000, she can spend a few hundred to get the correct answers based on her specific circumstances.

Signed,

Guy with an advanced tax degree.

Edited July 20, 2016 by aaron2020

[Dave&Roza 748]

Dave, she is a LPR. I noticed you've mentioned gift. How much can one give as a gift from out of the country? I am not sure what the capital gains would be on an inheritance, she had sold the property and have the money in her bank account. Now the question, does she send it to the US and will she be tax. or just better to leave it there in the bank in the philippines?

For property that you as a LPR or USC receive, you move the cost basis to the date you inherited it, then when you sell it you claim the capital gain or loss based on the difference between the cost basis and the selling price. My wife's situation was more complicated as she owned the property since 2000. She became a LPR in 2011 and sold the property in 2014. So she has a cost basis of when she acquired the property in 2000, but she was not subject to US tax laws until 2011. So you move the value of the property to 2011 and use the value on that date for determining capital gains when the property is sold. Does not matter if the money is in the US or not. The rest of the inheritance does not matter as long as it is not subject to US inheritance taxes which I think has been raised to $5 million. It is only assets that have a value that is dependent on when the asset is sold--i.e. property, stocks, bonds, rare coins, art--that is taxable because it is a capital gain.

For your situation it depends on when she inherited the property and when she became a LPR. The capital gain rules are some of the most complicated every put to paper. As a LPR she is subject to US tax laws on all world wide income. Capital gains are considered unearned income and are payable upon the selling of the asset that generates an increase in value or can be used to reduce your income if the sale is for a decrease in value. I agree with Aaron that you should talk to a good tax advisor.

Dave

Edited July 22, 2016 by Dave&Roza

[aaron2020 11,651]

For property that you as a LPR or USC receive, you move the cost basis to the date you inherited it, then when you sell it you claim the capital gain or loss based on the difference between the cost basis and the selling price. My wife's situation was more complicated as she owned the property since 2000. She became a LPR in 2011 and sold the property in 2014. So she has a cost basis of when she acquired the property in 2000, but she was not subject to US tax laws until 2011. So you move the value of the property to 2011 and use the value on that date for determining capital gains when the property is sold. This is partially incorrect. Her basis in the property does not change because of legal status. Her basis would stay the same as when she inherited it. There is nothing in the law that says your basis change upon getting LPR status.

For your situation it depends on when she inherited the property and when she became a LPR. The capital gain rules are some of the most complicated every put to paper. As a LPR she is subject to US tax laws on all world wide income. Capital gains are considered unearned income and are payable upon the selling of the asset that generates an increase in value or can be used to reduce your income if the sale is for a decrease in value. I agree with Aaron that you should talk to a good tax advisor.

Dave

[EmilyW 1,434]

On the capital gains tax (we just went through this completing our US tax returns), there is a threshold of $USD250,000 as a single ($USD500,000 as a couple) where you do not pay tax on the capital gains. Any gain above $USD250,000 ($USD500,000 as a couple) is taxable. From memory (I can't be sure as this didn't apply to our situation as we had been living in our house for years), you only get this exemption if the home is your primary place of residence and you've owned it for a specified period of time. If it's a pure investment property, you will get taxed on the entire gain.

Capital gains is calculated on the basis of sale price minus the purchase price minus selling costs minus capital investments (renovation, purchase of assets that remain with the home (pool, fencing, garage)).

[aaron2020 11,651]

On the capital gains tax (we just went through this completing our US tax returns), there is a threshold of $USD250,000 as a single ($USD500,000 as a couple) where you do not pay tax on the capital gains. Any gain above $USD250,000 ($USD500,000 as a couple) is taxable. From memory (I can't be sure as this didn't apply to our situation as we had been living in our house for years), you only get this exemption if the home is your primary place of residence and you've owned it for a specified period of time. If it's a pure investment property, you will get taxed on the entire gain.

Capital gains is calculated on the basis of sale price minus the purchase price minus selling costs minus capital investments (renovation, purchase of assets that remain with the home (pool, fencing, garage)).

The Home Sale Exclusion applies when the taxpayer owns the property for the requisite period and has used the property as a primary home. The exclusion applies to a primary home anywhere in the world.

[Lee&Ana 88]

Interesting topic

[Will & Malou 0]

Thank you everyone for their inputs...It's a difficult subject and we are going to need some professional advice. The reason I put this question out there was because we wanted to know if anyone had a same situation. In conclusion, no one has the exact situation and we have decided to get a professional involve. I appreciate all the comments and advice, god bless to all of you.