The great Renminbi caper
October 19, 2010 10:56 AM Subscribe
Transferring a large sum of money from China to the US: Why would it make sense for my account to be a proxy?
Parents in China want to give $100,000 USD to their son (my friend) in the US, the proceeds from a recent property sale in China. The twist is that he's asked me if they can first transfer the money to my US account, and then I would transfer it to him. Apparently, this way they can avoid paying some taxes on the Chinese end of things. I have a few questions:
1. In China, are gifts to family taxed differently than tax to non-family or foreigners? Considering son will have to pay income tax on this money in the US (after the $13k gift allowance), and that middlemen will take their pounds of flesh in the international bank transfer and currency conversion, could this possibly still make sense? The other option would be to put the gift in a Chinese account in the son's name. (This is to be a savings account; from that perspective, a Chinese account would make more sense, as the son plans to return to China after finishing school)
2. Conventional AskMe wisdom about questions concerning large sums of money is "Hire an expert, dummy!", but what kind of expert? Where would I find one?
The whole situation makes me anxious, but I'd at least like to point my friend towards a better alternative before I say no.
(I am not being duped into a scam. The son is a very good friend of mine)
Parents in China want to give $100,000 USD to their son (my friend) in the US, the proceeds from a recent property sale in China. The twist is that he's asked me if they can first transfer the money to my US account, and then I would transfer it to him. Apparently, this way they can avoid paying some taxes on the Chinese end of things. I have a few questions:
1. In China, are gifts to family taxed differently than tax to non-family or foreigners? Considering son will have to pay income tax on this money in the US (after the $13k gift allowance), and that middlemen will take their pounds of flesh in the international bank transfer and currency conversion, could this possibly still make sense? The other option would be to put the gift in a Chinese account in the son's name. (This is to be a savings account; from that perspective, a Chinese account would make more sense, as the son plans to return to China after finishing school)
2. Conventional AskMe wisdom about questions concerning large sums of money is "Hire an expert, dummy!", but what kind of expert? Where would I find one?
The whole situation makes me anxious, but I'd at least like to point my friend towards a better alternative before I say no.
(I am not being duped into a scam. The son is a very good friend of mine)
Just FYI, gift tax in the US is typically paid by the giver, not by the recipient of the gift. But get your own lawyer to confirm.
posted by shivohum at 11:01 AM on October 19, 2010
posted by shivohum at 11:01 AM on October 19, 2010
Considering son will have to pay income tax on this money in the US (after the $13k gift allowance)
Nope, if anything you would have to pay gift tax on it. Realistically, it would mean that you are reducing your lifetime exclusion from gift and estate taxes by $87000 and will have to file some paperwork.
I wouldn't touch this with someone else's ten foot pole. Why on earth get the Feds interested in exactly why or for who you're laundering money?
posted by ROU_Xenophobe at 11:21 AM on October 19, 2010 [1 favorite]
Nope, if anything you would have to pay gift tax on it. Realistically, it would mean that you are reducing your lifetime exclusion from gift and estate taxes by $87000 and will have to file some paperwork.
I wouldn't touch this with someone else's ten foot pole. Why on earth get the Feds interested in exactly why or for who you're laundering money?
posted by ROU_Xenophobe at 11:21 AM on October 19, 2010 [1 favorite]
Scam or no, do NOT get involved with shady financial transactions. Period. I have no horse in the tax race but I assume that you personally don't want to get involved with IRS scrutiny, etc.
posted by Inspector.Gadget at 11:25 AM on October 19, 2010
posted by Inspector.Gadget at 11:25 AM on October 19, 2010
Legitimate transactions between two parties virtually never require Random Guy #3 to get involved; this has "money laundering" written all over with it. Avoid.
posted by mhoye at 11:26 AM on October 19, 2010 [1 favorite]
posted by mhoye at 11:26 AM on October 19, 2010 [1 favorite]
Can you find out which specific taxes they're trying to avoid? Also which part of China they're in?
Mainland China does not have a gift tax. So no, gifts to foreigners are not taxed differently than gifts to family members - because they are not taxed at all.
There may be other taxes involved but again, it would help to know what they're talking about specifically.
More importantly, however, I'd say that even if you're positive this isn't a scam, to stay far away from it.
posted by FAMOUS MONSTER at 11:58 AM on October 19, 2010
Mainland China does not have a gift tax. So no, gifts to foreigners are not taxed differently than gifts to family members - because they are not taxed at all.
There may be other taxes involved but again, it would help to know what they're talking about specifically.
More importantly, however, I'd say that even if you're positive this isn't a scam, to stay far away from it.
posted by FAMOUS MONSTER at 11:58 AM on October 19, 2010
A lawyer friend gave me a piece of advice which has served me well.
"You are not a bank. Do not attempt to act as one."
posted by zephyr_words at 11:58 AM on October 19, 2010 [5 favorites]
"You are not a bank. Do not attempt to act as one."
posted by zephyr_words at 11:58 AM on October 19, 2010 [5 favorites]
never get involved in other people's money issues. you'll sleep better at night. friendship has it's limits.
posted by canned polar bear at 12:34 PM on October 19, 2010
posted by canned polar bear at 12:34 PM on October 19, 2010
Read this and then think about it.
posted by The 10th Regiment of Foot at 1:12 PM on October 19, 2010
posted by The 10th Regiment of Foot at 1:12 PM on October 19, 2010
Considering son will have to pay income tax on this money in the US (after the $13k gift allowance)
No, YOU are on the hook for the gift tax, because YOU are the one "giving" the $100K to him, as far as your bank is concerned. Even if you are 100% sure this is not a scam, I would not do it for this reason.
posted by fantoche at 5:39 PM on October 19, 2010
No, YOU are on the hook for the gift tax, because YOU are the one "giving" the $100K to him, as far as your bank is concerned. Even if you are 100% sure this is not a scam, I would not do it for this reason.
posted by fantoche at 5:39 PM on October 19, 2010
This thread is closed to new comments.
In any event I would steer clear of this.
While you may not think it's a scam, and it may not appear to be a scam to the parents, you are essentially acting as an intermediary to exchange money between parties. Don't do this.
posted by dfriedman at 10:59 AM on October 19, 2010 [2 favorites]