I am filing 2013 return as a resident alien and just discovered a bank transfer I made might cause me a great deal of trouble.
My father visited me in Canada in 2012 and I opened a checking account under his name for him just for the convenience of him taking money out for grocery shopping etc. I have full power of attorney for this account. He left Canada in 2012 and I didn't bother to close the account for him. He is non Canadian citizen/American citizen. I'm Canadian citizen.
In early 2013 I transferred about CAD40,000 to his account because his bank had better interest than my bank. The money was put in GIC and went back to the account when it matured in 2013. I transferred CAD10,000 back to my account after the GIC matured by end of 2013.
I included the interest generated from this account on my 1040 return because I consider this my own interest income. My father has never touched this account after he left Canada and returned to his home country.
Will the CAD40,000 be treated as a gift if I actually really own the money, already transferred some money back to my own account and plan to transfer the rest back soon for use in US?
Or is it a foreign trust so I have to file form 3520/3520a for it?
Or I include the interest in my income, and report it on form 8938 as my own account (I have signing authority and both my father and me agree that I am the REAL owner).
Could somebody help me with this? Thanks!!
Foreign trust, gift, or something else
Moderator: Mark T Serbinski CA CPA
Nelsona, thanks so much for your reply, you are a life saver!
Just want to clarify a bit more with you
My fathers account only has his name on it. You think IRS won't use this to treat the transfer as a gift, especially there is still CAD30000 I haven't transferred back to my own account yet?
I just discovered the gift exclusion is $14,000/year and the gift tax rate is 40% or something, which is way too more than that little bit of extra interest I earned from the transfer.
Yes I will report the account on both 8938 and FBAR as my own accounts.
Just want to clarify a bit more with you
My fathers account only has his name on it. You think IRS won't use this to treat the transfer as a gift, especially there is still CAD30000 I haven't transferred back to my own account yet?
I just discovered the gift exclusion is $14,000/year and the gift tax rate is 40% or something, which is way too more than that little bit of extra interest I earned from the transfer.
Yes I will report the account on both 8938 and FBAR as my own accounts.