Gift Tax From US To Canada

[s]

Hi,

I'm Canadian, my spouse is American. I've been living in the United States and married to my spouse for more than 10 years.

My spouse's American father is going to give us a gift of more than $100,000 upon our planned return to Canada later this year. Our plan for the gift has been to find and purchase a home in Canada, and then to begin the process of moving our household and family to Canada.

Since this is mostly savings and earned income that my father-in-law was taxed at the time it was earned, my question is whether or not there is a way to do this without the father having to pay a gift tax, or any other taxes or fees aside from normal bank fees for transferring funds.

Thanks for any guidance you might provide.

[nelsona]

Gift tax is ALWAYS from money that was already earned and taxed, so that argument is meaningless.

However, if he gives gifts below a certain limit, which is currently $13,000 annually, per person, he does not have any gift tax form to file at all, so planning is the key. Add to this that there is a $1 million lifetime exclusion, whereby he would report the gift in excess of $13K, and use the exclusion to avoid gift tax, although it would be reported. (this lifteime exclusion would have an effect on his estate tax when he dies).

But, typically, a mother/father wanting to give large gifts will each give eackh person $13K per year, so that your as a couple end up with $52K, with no reporting requiremnts at all. They do this in december of 2012, and Jan of 2013, and there is $100K for you, plain and simple.

[s]

Thanks so much for the quick reply, Nelson.

Due to personal and other logistics my time frame doesn't grant me the luxury of waiting until the new year. So if there is no mother - just the father - and we wanted/needed to complete our purchase before August 2012, it seems as though he will only be able to protect $26k?

Do you think there may be other options related to a trust or some other portfolio that could be established if I worked through a consulting firm that specializes in setting up this kind of thing between the US and Canada? The sum is actually more than $100k so I would much rather spend a small percentage in fees than a large percentage in tax.

[nelsona]

Re-read what I wrote. Gifts in excess of $13K become part of the lifetime exclusion of the individual. if he were to give you $13K and your wife $100K, he would report the gift on a gift tax form (next year) and apply $87K towrds his $1 million exclusion, ie. no gift tax.

[s]

Thanks for pointing out the obvious :)

Your help is sincerely appreciated!

-S