Schenkung unter Nießbrauchsvorbehalt-Gift with Retained Usufruct – Form 3520
Kontaktieren Sie uns für eine vertrauliche Beratung.
Dr. Günther Grewe, WP RA StB CPA
+49 89 2351 3218 after 3pm CET from Germany
+1 914 816 1115
Grewe@WP-RA-usa.com
Grewe@WP-RA-usa.com
Antje Klaunig, WP StB CPA
+49 89 6151 5973 after 3pm CET from Germany
+1 914 205 6002
Klaunig@WP-RA-usa.com
Maximizing Compliance and Minimizing Tax Liabilities: A Guide for US Citizens Inheriting Assets from Germany
Introduction
US citizens inheriting assets from a German citizen and resident face a complex web of tax implications and reporting requirements in Germany and the United States. Consulting with a Wirtschaftsprüfer und Steuerberater in den USA® (Certified Public Accountant and Tax Consultant in the USA) is crucial to navigating these complexities, ensuring full compliance and minimizing potential tax liabilities.
Navigating US Tax Implications and Reporting Requirements
Understanding the Tax Landscape
Inheriting or receiving gifts from a German citizen can introduce various tax challenges for US citizens, including liabilities in Germany and the US. A comprehensive understanding of tax implications and reporting requirements for assets such as real estate, GmbH shares, partnership interests, and PFICs (Passive Foreign Investment Companies), like ETFs, is imperative.
Reporting Gifts and Inheritances: Form 3520
US citizens must report gifts or inheritances from a German citizen on Form 3520 if they exceed specified thresholds. This step is vital to remain compliant with US tax regulations.
Tax Basis for Inherited Assets and Gifts
The US tax basis for inherited assets is typically the fair market value at the decedent’s death, affecting capital gains tax on future sales. The basis for gifts is usually the donor’s, impacting the calculation of capital gains tax on subsequent sales.
Special Considerations
Gift with Retained Usufruct: “Schenkung unter Nießbrauchsvorbehalt”
This German legal concept involves gifting an asset while retaining the right to use and benefit from it. This gift is still subject to tax rules and reporting requirements for US tax purposes, with valuation possibly considering the retained usufruct rights.
Tax Implications for Specific Asset Types
Real Estate, GmbH Shares, Partnerships, and PFICs
Inheriting these assets may trigger German inheritance or gift tax, with obligatory reporting on US tax returns. Additionally, income or gains from these assets are typically taxable in the US, with strict reporting requirements and significant penalties for non-compliance.
PFICs, such as foreign ETFs, present additional complexity. Gains are usually taxed at ordinary income rates in the US, with potential interest charges on deferred tax amounts. Filing Form 8621 is mandatory for reporting PFIC holdings and transactions.
Conclusion
For US citizens inheriting assets from a German citizen, staying informed and seeking expert guidance is paramount. A deep understanding and professional assistance ensure compliance with tax regulations and minimize potential liabilities.
Contact Us for Expert Assistance
Reach out to our experienced tax advisors for tailored guidance. We are available to address your concerns at +49 89 2351 3218 or +1 914 816 1115 after 15h (9 am ET).