American dollars cheque

ukelag

Hello all, I have been sent a cheque for $ 110,000 dollars from the sale of some property by my inlaws. This is a gift to my wife and I and we are not sure where to put it or if we are supposed to pay any form of tax on it. I have read that citi bank give good interest on dollars but what if we want to exchange into pounds to invest in savings accounts e.t.c? Any suggestions would be greatly appreciated.

Cook_County

This sounds as if the figure was possibly designed with US estate taxes in mind.

Are you or your partner US citizens? Where are you each domiciled for UK tax purposes?

ukelag

I am english my wife is a US citizen. We live and pay taxes in the UK

Cook_County

As your wife is a US citizen she is subject to US tax on worldwide income and gains.

If she is not domiciled within the UK for income tax purposes then she should keep the funds outside of the UK because US tax rates generally speaking are lower than UK tax rates.

I assume that she is filing annual US tax returns in any case. The question of her domicile will revolve around whether or not she has settled in the UK for the remainder of her life. Would she leave the UK say on retirement, or if she became ill and needed care from her family in the States?

ukelag

She is domicile in the UK for tax purposes. Does not earn enough to have to pay US tax and we will move to the US but not for a number of years maybe 5/10

Cook_County

It is extremely unusual for a US citizen wife in the circumstances you describe to be UK domiciled.

You may be confusing this with UK resident which doubtless she is.

If she earns more than about $6,000 she MUST file annual US tax returns even if there is no tax due. If her UK bank accounts ever (even for a day) have more than the equivalent of $10,000 deposited in them she MUST file a form TDF90-22.1 with the US Treasury. Penalties for failure to file this form are now an automatic $10,000.

If you are certain she is UK domiciled then remit the money to the UK if you need, but avoid of course UK unit trusts, investment trusts or OEICs as these are treated as Passive Foreign Investment Companies which have severe US tax consequences.

ukelag

Sorry if I am causing confusion. She is residing in the UK with an American Passport stamped 'indefinate leave to stay' works for a British Company and is paid in Sterling (is that not domiciled?). I read on the I.R.S. web site that she would have to earn the equivalent of $80000 to have to pay US tax but she has to submit form, 2555 foreign earned income. As for the $10000 deposited, sounds like an offshore account then.
Hope I have managed to make myself clear this time. Its a minefield!