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I am currently working at USA holding H1B Visa, and obviously I'm a foreigner, and my parents are not American resident, which means they are not subject to any American Tax, (10% dividend might apply, but capital gain is tax-free).

I have my parents visited me earlier and I opened bank account and IB account for them, so instead of playing the complicated Roth IRA stuff, can I simply wire transfer some money ($15000 gift excursion annually), buy stocks, profit, and when I need money, for example, down payment, just ask them to gift back to me?

Is there any legal or tax issue in this way? Sounds like a better Roth plan.

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  1. A gift is unconditional. You cannot say "I gift you this but you must return it back to me". If you give the money to your parents, they can chose to spend it however they want to. Claiming that something is a gift when it is not for the purpose of paying less taxes is tax fraud.

  2. If you plan in "gifting" the money and then operating with it in your parents'name with the intent of avoiding to pay taxes, that could lead to additional charges. And if it is without your parents knowledge/consent, they may press charges against you for involving them in a criminal schema and/or identity theft.

Rule of thumb: Getting undeserved money by lying to in contracts and other legal documents usually means you are committing fraud. If that involves the IRS, it often is tax fraud.

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  • Thanks for answering, good summary. Here is a little bit context, in our country it's very normal for children to give parents allowance, my siblings are doing and I couldn't left out, so this is unconditional gift to my parents. But they don't need USD for living at this moment and want to invest them into ETFs as a retirement account. They authorized me to operate their brokerage on their behalf. It's their money, their investment. But if in the future I need cash support from parents, like for a downpayment, can they gift me, or lend me, again? Will this be considered as fraud?
    – AuBee
    Commented May 10, 2021 at 0:35
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    @AuBee You have to ask yourself if the possibility of trying to defend your "gift" is easier than dealing with a Roth IRA. Regardless of why you gave the money to you parents, it could look suspicious.
    – chepner
    Commented May 10, 2021 at 17:44

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