Gifting foreign property to a foreign person: which IRS form/document?

July 8, 2023 11:17 AM

The IRS almost certainly has a document or FAQ or rulemaking discussing this, but I cannot seem to locate it; any thoughts? I want to gift a foreign real property (non-revenue producing) to a foreign person. Everything I can find refers to foreign property being gifted to a US person; I need the reverse.

You are not my tax person. I do have a tax person which I will be contacting, but in the meantime I am trying to do background research.

I have a piece of real estate (an empty apartment) in a foreign location, which was acquired by me while I was also a foreign person in that location, with no foreign tax implications at that time (inheritance of a type specifically excluded from being taxed).

Now that I am considered a US Person, I wish to gift this property to a someone who is resident in that same foreign location. From the perspective of the foreign government, this is not a taxable event for either of us (it is in fact specifically excluded from being taxed).

I am trying to find out if this event is taxable from the perspective of the IRS. I already file FBAR with FinCEN, so I'm not worried about that kind of thing, I just want to find the right IRS references so I can read up beforehand so I have an opinion on things when asked.

The countries involved do have a DTAA in place, if that makes any difference.

posted by aramaic to Law & Government (4 answers total)

Within the US, you need to file a gift tax informational form (form 709) for gifts in excess of $17,000. Note that you do not generally owe tax unless your lifetime (and post death) gifts exceed about $13 million, but you still need to file this form.

The information here suggests that applies to gifts from U.S. citizens overseas. Since you're quite unlikely to actually own any taxes, I'd guess that your tax person will suggest filing the form, either because it's definitely required or because it might be required and it doesn't cost you anything to do so.
posted by Mr.Know-it-some at 11:41 AM on July 8, 2023

It is my understanding that a US person -> non US person gift is just the regular form 709, gift tax return (a gift in the opposite direction requires form 3520). If the property is going to a non-US spouse, you only have to report it if the value is more than $175,000, otherwise the regular limit of $17,000 applies. I do not think there will be any tax owing but it will count against your lifetime gift maximum.

Having said all that, I'm just a layperson, not a tax expert of any kind. I'd highly recommend paying for at least a 30-min consult with a CPA specialized in US expat tax (I hate that word but it's the best search term for Google), because the IRS does not have a reputation for being fair or reasonable when anything "foreign" is involved.
posted by nanny's striped stocking at 11:45 AM on July 8, 2023

Apologies, rereading your question, I see that you're already planning on consulting a tax professional, please disregard the second part of my reply!
posted by nanny's striped stocking at 11:55 AM on July 8, 2023

I am a tax examiner. You have to look o line for the list of foreign countries which are exempt from US federal tax. Belgium. Australia Great Britain. Etc. Those countries transactions are not subject to gift tax
posted by The_imp_inimpossible at 2:13 AM on July 9, 2023