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My parents in China want send me 200k CNY(about $30k USD) to purchase a car. Due to some Chinese policy, they can not exchange the currency in China. Can I exchange with my friend here? My parents will transfer some CNY to her China bank account, and she will give me some cash in USD or transfer with US banks. Is it good to IRS? Do I have to fill any forms or face any risk? Does it count as gift so she has to fill 709 form? Btw, we will use the currency from google on that day so no one makes any benefit.

Thanks a lot!

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As long as you're documenting everything (emails with the agreements and such), you should be good. If the IRS asks you about the source of the money - you'll provide the documentation. I doubt they will.

When you're dealing with thousands of dollars, better transfer the funds electronically and not in cash. It is not illegal to use cash, but it will require banks and the car dealers to report it to FinCEN (not the IRS, a different agency) as a potential money laundering operation.

If your parents are US tax residents (citizens/green card holders) then this is a gift subject to gift tax. However, with gift splitting, it will still likely be below the exemption. Form 709 may be required to report the splitting. If they're foreigners then nothing is needed unless you've received 100K or more of gifts from foreigners in the same year (in which case form 3520 is required for reporting).

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  • Thanks for your answer. My parents are Chinese citizen, and my friend is US citizen. So does the transfer count as foreign gift or US gift?
    – George
    Commented Oct 22, 2022 at 22:48
  • @George foreign gift. Your friend is just an intermediary, a vessel. They're not the ones getting the gift from your parents or giving the gift to you.
    – littleadv
    Commented Oct 23, 2022 at 3:19
  • So that means I will be ok if I can show a proof that my parents sent same value CNY to her( like a bank statement) right? Thanks a lot!!!!!!
    – George
    Commented Oct 23, 2022 at 15:42
  • @George yes, and some documentation about this agreement (e.g.: an email between her and your parents describing what they're doing)
    – littleadv
    Commented Oct 23, 2022 at 16:40
  • Thanks for your information!!!
    – George
    Commented Oct 23, 2022 at 16:57
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My parents will transfer some CNY to her China bank account, and she will give me some cash in USD or transfer with US banks.

If the money will be wired to you from someplace outside the United States, and the amount exceeds $10,000 it will be reported to the US Government. If your friend gives you the cash then when you buy the car or deposit the cash, it will be reported to the US government.

Does it count as gift so she has to fill 709 form?

It might be a gift. Do you have to pay it back? Are your parents US citizens? Is your friend? Once the initial form is submitted to the US government you might have to explain the transaction so the IRS doesn't think you were hiding income, or you had a undeclared foreign bank account.

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  • Yes, my parent will pay it back in CNY in China at the same time she transferred USD. She will transfer the money through BOA, so do I need to talk to BOA once I recieved the money? Should I tell them it is a currency exchange or gift?
    – George
    Commented Oct 22, 2022 at 22:51

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