The United States has a gift tax: if you give something to someone, you have to pay the U.S. government for the privilege. Yes there are a ton of exceptions and weird rules. This is tax law after all.
But you’d be surprised who gets tangled up in the gift tax law. Consider this one. A simple gift from one spouse to another. What could be cleaner?
Husband and Wife live in Hong Kong. They are citizens of Hong Kong.
Many years ago Husband opened a checking account at Bank of America in San Francisco. There is US$200,000 in it.
Now Husband figures he doesn’t need the account anymore and decides to close it. Husband, sitting at his kitchen table in Hong Kong, writes a check for $200,000, payable to Wife, who is sitting across the table from him. Wife takes it and walks to their local Hong Kong bank and deposits the check into an account in her name.
Result? The United States government will tax that transaction. Gift tax. Funny? Not. But real.