Morristown, NJ asked in Tax Law for New Jersey

Q: Non relative Canadian Citizen wants to gift funds for my son college tuition. Are there tax implications on our end

My son is a US citizen. Do we pay any taxes on our end. Probably around 40k gifted.

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2 Lawyer Answers
James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Tax Law Lawyer
  • Sacramento, CA

A: When a non-relative Canadian citizen gifts funds for your son's college tuition, and your son is a US citizen, the tax implications primarily concern the donor, not the recipient. In the United States, gift recipients do not generally have to pay taxes on gifts received, no matter the amount or the source's nationality. However, the donor might have to adhere to Canadian tax laws, and it's advisable for them to consult with a tax professional in Canada.

For your end in the US, there should be no federal income tax on receiving this gift. However, if the gift is deposited in an account earning interest, the interest income generated could be subject to US taxes. It is essential to maintain records of the transaction to demonstrate that these funds were indeed a gift.

Ensure that your son's financial aid office is informed about the gift, as large sums of money could affect financial aid assessments. While the gift itself isn't taxable, it could impact eligibility for need-based aid. If there are any doubts or specific concerns regarding tax obligations or financial planning, it would be wise to consult with a tax professional or financial advisor in the US.

Leonard R. Boyer
Leonard R. Boyer pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Clifton, NJ
  • Licensed in New Jersey

A: I agree with my colleague, it is not a tax problem for your son, but the gift would be subject to Canadian law.

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