I need to legally and quickly transfer $300,000 from China to my US bank account. All of the funds that I need to transfer were obtained through legal means (with proof documents), however China has strict foreign exchange restrictions and in almost all banks one can only wire $50,000 a year. Moreover, behaviors like having too many people wiring to the same foreign person/account in a short period of time would trigger alerts in the government’s monitoring agencies.
However, I was advised that if I execute the transfers in the following steps, it shouldn't be a problem in China:
- Sign agreements with 6 friends in China and a friend in the US;
- I transfer Chinese yuan (local currency) to each of the 6 Chinese friends;
- Chinese friends 1, 2, and 3 each transfers USD 50,000 to my US account;
- Chinese friends 4, 5, and 6 each transfers USD 50,000 to my US friend;
- My US friend transfers USD 150,000 to my US account.
However, I am concerned about US tax consequences for my US friend. What are the tax consequences for them, and what tax documents do they need to file next year?