💵 1️⃣ The Key Shift: Deposit → Cash

We’ve seen:

• Bank deposits = intangible → generally not taxable for NRAs

• Physical cash = tangible → potentially taxable

⚖️ 2️⃣ Why Withdrawal Changes Everything

Under

Internal Revenue Code §2501(a)(2):

• NRAs are taxed on U.S.-situs tangible property

👉 When funds are:

• Withdrawn from a bank →

• They become physical cash

Once withdrawn:

• The cash is tangible personal property

• Its physical location determines tax treatment

• Cash is physically in the United States

• Gift occurs → potentially subject to U.S. gift tax

• Funds remain in the banking system

• Transferred electronically

👉 Result:

• Still intangible property

• Generally not taxable

The tax outcome depends on sequence:

• Transfer first → withdraw later → usually not taxable

• Withdraw first → transfer cash → potentially taxable

👉 Same money, different result.

• Withdrawing cash in the U.S. before gifting ❌

• Mixing physical delivery with electronic transfers ❌

• Failing to consider where and when the transfer occurs ❌

This rule highlights a core principle:

• U.S. gift tax for NRAs depends on:

For non-resident aliens:

• Bank deposits → not taxable

• Withdrawn cash in the U.S. → potentially taxable

In practice:

The risk isn’t the money—it’s turning a non-taxable bank deposit into taxable physical cash at the wrong moment.