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For convenience and/or avoiding some banking fees, one may want to transit a friend's money through one's account. E.g. Alice's bank account in France -> Bob's bank account in France -> Bob's bank account in the US -> Alice's bank account in the US.

Can that cause any issue (e.g., triggering some tax event)?

Assumptions:

  • Neither Alice nor Bob is a scammer.
  • Ignore any potential restrictions/regulations on moving money between countries.
  • What does Bob get for doing this? – quid Feb 4 at 20:27
  • @quid Nothing~~ – Franck Dernoncourt Feb 4 at 20:27
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    I think Franck is asking more about money laundering regulations not about whether or not something is a scam. I do this kind of thing all the time for friends. Friend doesn't have cash so I hand a $20 to cover a valet and friend sends me $20 via venmo or some such, obviously a de minimis amount of money but nonetheless. But the heart of this question is anti-money laundering regulations. – quid Feb 4 at 20:57
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    @quid Correct, hitting some money laundering regulations is indeed one of my concerns. – Franck Dernoncourt Feb 4 at 20:57
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    Also keep in mind that banks can monitor for structured settlements, such as multiple transfers over a 30-day period that add up to a substantial reporting threshold. And no one publishes their thresholds so people can't skirt them. – CKM Feb 4 at 21:13
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Assuming that Alice and Bob are US tax residents, the obvious question is whether Alice made a gift to Bob when she transferred the money to Bob, and Bob made a gift to Alice when he returned the money, and if so, is the amount large enough that gift-tax returns might be required to be filed. No gift tax might need to be paid if both parties choose to charge the amount to their lifetime combined estate and gift tax exemptions (currently $5.4M or so), but with transactions of six-digit amounts (anywhere from $100K to nearly $1M) as mentioned by the OP, these reductions can soon deplete the exclusion, especially if repeated at frequent intervals.

If the money is regarded as a loan from Alice to Bob that is being repaid in the US, it is best to have documentation to say this is a loan with interest at rates at least as large as the minimum specified by the IRS, and even if the loan document insists that the loan is at zero interest, Alice still has imputed income (as if she did get interest from Bob at the IRS-specified minimum rate) that she must declare on her income tax return.

  • Thanks, interesting, are loan and gift the only 2 options to view the transaction, assuming that Alice and Bob are US tax residents? – Franck Dernoncourt Feb 5 at 3:13

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