I would like to participate in the EB-5 investor program and my uncle may provide me with a gift of $580,000. However, I was wondering what the tax consequences might be for me and my uncle? How might this impact my investment?
The personal investment amount has to equal $500,000 and no less (assuming the EB-5 project is in a TEA). The first step is for you to retain a U.S. international tax attorney who will be able to advise you on the tax and gift liabilities.
It depends on where you and your uncle reside and are taxed. Different counties have different tax laws. You may want to consult a local tax expert regarding this issue.
Consulting with an experienced tax attorney would be advisable prior to taking any action. To verify lawful source of funds, it will be important to also document the payment of applicable gift taxes, if any.
The gift tax issue is something you should ask an accountant or tax expert in the country where your uncle resides. From an immigration perspective, we would need to see the source of funds for your uncle and his income to be able to give you such a large gift. Ideally, the gift amount that he gives you should be documented with his income tax returns, gift tax paid and a gift letter that states that he does not want the money back from you.
A gift is acceptable for an EB-5 investment. The tax consequences on you and your uncle really depend on where you and he live. Your uncle would be responsible, and an immigration attorney would draft documentation that the funds came from a lawful source. The IRS in the U.S. is not concerned about taxing you until you become a permanent resident.
Taxes are levied on the person gifting the property or money, so that your Uncle would have to consult with an experienced tax attorney to determine whether there would be any tax consequences to him. In general, a person has a certain limit of life time tax exemption.
As an immigration attorney, I work with corporate attorneys and tax attorneys, and even CPAs, for the business and financial considerations of an EB-5 investment. That said, gifts from family members can be acceptable sources of funds.
If your uncle is subject to U.S. taxes, he would need to file a Federal Gift Tax return (Form 709). But he would not need to pay any money as the tax calculated would be paid by reducing the lifetime credit against the estate and gift tax. You would not be liable for any tax. As long as you receive more than $500,000, so that the net amount after any administration fees is at least $500,000, you will be in good shape. Of course, you would have to show how your uncle acquired the funds that he gave to you, to prove they were lawfully obtained.
If your Uncle is outside of the U.S., it will not have a tax impact. If he is in the U.S. and is a tax resident, he should talk to his tax advisor.
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