There joint tenants are on the deed in California (husband, wife and mother of husband). The husband and wife are US citizens. The mother is a foreigner. She does not have a green card, is not a permanent resident and does not live in the US. The house was refinanced 10 years ago with only the husband and wife as borrowers. This month, the mother (foreigner) paid off $303,000 mortgage. (Funds were wired from overseas directly into the mortgage bank). Mother wired in the funds through a relative (also non US citizen) to mortgage bank. Do husband and wife need to pay tax or file any tax form and report to the IRS

ANSWER

The BIDaWIZ Team's Answer:

The husband and wife do not need to pay any tax given that this is a foreign gift. However, the transaction needs to be reported on informational IRS Form 3520 because more than $100,000 was gifted from a nonresident alien individual. Please note that this form is due when the personal tax return is due. If you do not file your Form 3520 on time or if it is incomplete or inaccurate, the penalty is 5% of the amount of the foreign gift for each month for which the failure to report continues (not to exceed a total of 25%).

References: IRC Section 6039F(a); IRS Publication 519
State: California