My son is getting ready to go to college this year. My parents overseas want to pay for his four years in college, which may total about $200,000.
My questions:
If they send him (my son) the money through wire transfer from overseas, less than 0,000 this year and another 0k next year, or 50k each year for the next four years, is there any problem? Form 3520 says to report if amount is over 0k.
Or would it be better to send the entire amount, or less than a 0k each tax year as MY (father) inheritance?
Please help at your earliest because we have to let the college know soon if he would attend. It all depends on the grandparents grace now. Thanks.
to pay for his four years in college, which may total about $200,000.
less than $100,000 this year and another $100k next year, or 50k each year for the next four years, is there any problem? Form 3520 says to report if amount is over $100k.
tax year as MY (father) inheritance?
Form 3520 says to report the amount if it is over 100k, but there is no tax due. I think the point of this law is to try to catch drug dealers and such.
If your parents are citizens or permanent residents, then they have to follow the gift tax exclusion rules (you can only give 13k to one person, a couple can give 26k per year). Any amount above that is subject to gift tax. In addition, if your parents gave up their US citizenship on or after June 16, 2008 the gift tax rules still apply to them and I suppose the recipient would pay tax.
year might be better because they might blow the money. But that's another issue, not tax related.
Your son can claim the American Opportunity credit or Lifetime Learning credit (if this is grad school) or tuition and fees. I think the Hope credit was eliminated, and I don't know if the AOC is available in 2011. All of these credits and deductions are subject to income limits. An amount received as a gift does not add to income.
to pay for his four years in college, which may total about $200,000.
less than $100,000 this year and another $100k next year, or 50k each year for the next four years, is there any problem? Form 3520 says to report if amount is over $100k.
tax year as MY (father) inheritance?
he would attend. It all depends on the grandparents grace now. Thanks.
Are your parents US citizens? If not then it's not an issue whether your son is required to fill out Form 3520 or not. There is no tax due.
On a non tax related note, it's probably better not to send 6 figures to an 18 yr old college freshman. Maybe they can send the money to you and let you pay the tuition and expenses. Or they can pay the tuition directly to the university.
Thanks for your help & suggestions. No, my parents are not U.S. citizens. The problem is I cannot afford to pay so much but they can and want to for their oldest grandson.
less than $100,000 this year and another $100k next year, or 50k each year for the next four years, is there any problem? Form 3520 says to report if amount is over $100k.
each tax year as MY (father) inheritance?
he would attend. It all depends on the grandparents grace now. Thanks.
He is required to fill out form 3520 if gift from foreign person over
100k. If he does not, there is a penalty, which I think is between
25% and 35% of the amount, which you can think of as a tax.
If he pays the tuiti Who Can Claim the Credit
Generally, you can claim the American opportunity credit if all three of the following requirements are met.
You pay qualified education expenses of higher education. * You pay the education expenses for an eligible student. * The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.
Note.
Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you.
They don't say that qualified education expenses paid by someone else are considered paid by the student. So then it is most efficient to let the grandchild pay, then either the grandchild or parent can claim the education credits.
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