Jewish World Review March 20, 2000 / 13 Adar II, 5760
Tax on foreign gifts?
DEAR BRUCE: My father-in-law would like to give my wife and me a sizable gift -- between $50,000 and $100,000. We know about the $10,000 gift rule, but my father-in-law is a foreign national who lives in his home country. Will this gift be subject to a tax? -- P.L. (e-mail)
DEAR P.L.: Money that comes to a United States citizen from out of the country, regardless of the amount, would be considered taxable income by the IRS unless the recipient of that money can establish that it is intended to be a gift.
You would have to provide the IRS with proof, such as a letter from your father-in-law stating that this money was a gift. While the amount is not taxable itself, the interest that this gift earns will be.
DEAR BRUCE: I am 64 and will retire in April 2000, but I have not yet set up IRAs for myself and my wife. With retirement this close, is a non-deductible IRA a good idea? -- P.L., Manhattan, Kan.
DEAR P.L.: It all depends upon your needs. If you are able to remove $2,000 each from your savings into an IRA, you can still pick up another seven years of tax deferment, which has to work to your advantage.
If, on the other hand, you require the income from these funds on a regular basis then the IRA is not a viable option for you.
DEAR BRUCE: My husband and I, who are both in our early 40s, just received a $10,000 inheritance. We gross $55,000 a year and have accumulated credit-card debts of $14,000 and school loans of $30,000. Our take-home pay barely covers our monthly expenses.
I am looking for a part-time job to supplement our income, while teaching school full time. What would be the best thing to do with the $10,000? -- S.G., Illinois
DEAR S.G.: In my opinion you have a lot of choices, none of them desirable.
I would reduce the credit-card debt. Even if you are currently getting a decent rate, that can't go on forever. Furthermore, paying interest on the type of things we buy on credit cards over a period of years makes no sense.
Why you can't get along on your current income is another story. There are many families of four that are living comfortably on $55,000 a year. Be that as it may, you might find it helpful to sit down with your spouse and your children and write down every expenditure that is paid out of your pockets every month and then go over a budget. I am sure that you will find some leaks that could be plugged
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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