I visited a Bank of America branch and the representative told me that I can open a Certificate of Deposit account with them and have my mother, a nonresident alien, be the primary account holder while having myself be the secondary account holder.

The representative went on to say that only the primary account holder will receive the taxes forms for the year.

This makes me wonder, that if this is true, isn't this a way to avoid paying taxes on the interests earned on the CD? Are there caveats on this?

Edit: what I found is that

Nonresident aliens who receive interest income from deposits with a U.S. bank, savings & loan institution, credit union, or insurance company, or who receive portfolio interest are exempt from taxation on such interest income as long as such interest income is not effectively connected with a United States trade or business.

In the IRS Publication 519, U.S. Tax Guide for Aliens, we have the following:

Interest income that is not connected with a U.S. trade or business is excluded from income if it is from: • Deposits (including certificates of deposit) with persons in the banking business;

I am assuming that the interests earned from CD account should qualify, but please correct me if I'm mistaken.

  • 3
    This is a textbook tax evasion scheme. Banks were sued by the government for promoting these schemes and taxpayers were sued for following them. Unless you truly intend to give your mother an unconditional gift, don't do this.
    – littleadv
    Commented Sep 16, 2023 at 19:28
  • How much money will the CD be worth? Are you willing to document the gift? What is the other country? How much will the tax be to the other country? Commented Sep 17, 2023 at 11:32
  • @mhoran_psprep We are contemplating whether this is something that can/should be done, so the amount will largely depend on the risks associated with it - it could range from a few 10s of thousands to a few 100s of thousands. I'm assuming documenting the gift means have something in writing to indicate that this is a gift? If it expediates the process and doesn't create much of additional hassle, why not? The other country is China, and taxes there is very elusive as the gov't mostly only show after-tax amounts, and I don't believe there will be tax consequences there if we invest in CDs here.
    – kd8
    Commented Sep 17, 2023 at 12:51
  • @littleadv Thanks for the heads-up.
    – kd8
    Commented Sep 17, 2023 at 13:45


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