Inheritance from abroad from non-US person

Forum|Forum|1 year ago
January 15, 2025
7 replies
72 views

My father-in-law who lived abroad and never lived in the US passed away last year and left a substantial inheritance to my wife (above $100K) in bank accounts and properties.
My wife and I are US citizens and file taxes jointly.
My understanding is that we need to declare that inheritance as part of this year's tax report.

My understanding is also that such money is not taxable in the US since her father was not a "US-person" for tax purposes.
Please let me know what the correct way is for declaring that inheritance, which forms need to be used and if Turbo Tax supports such process.
From my research I found form 3520 part IV and form 8938 but it is not clear which one needs to be used or how and when.

Can you help?

Ask the Experts - MetLife V - Jan 2025

RobertB4444

Level 15

Form 3520 Part IV is the form you use to report an inheritance received from a foreign person in excess of $100,000. Once it is reported then you are correct that it is not taxable to your spouse UNLESS it is property or stocks or bonds, etc., that she has received and she sells that property at a gain. In that instance the gain would be taxable to your spouse.

Sorry for your loss.

@PaulTaguchi

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

PaulTaguchiAuthor

Level 2

Thanks for your quick response, Robert.
One additional question related to this.
The money my wife inherited is invested abroad and she is paying taxes in that country for the profit it produces.
Does she need to declare that profit also here in the US? In that case, how to avoid double-taxation?

RobertB4444

Level 15

She does! All US persons must declare all income from any sources foreign or domestic. But you can also take a deduction for any foreign taxes paid. Your wife can pay the taxes abroad and then take a deduction for the taxes that she pays over here. If the US taxes on what she earns are higher then she'll still owe a little. If the foreign taxes are higher then she'll have an extra credit. Either way she avoids paying the same taxes twice.

@PaulTaguchi

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"