If you are a U.S. person who received a large gift or bequest from a foreign person, you may need to complete Part IV of Form 3520, which is the Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. You must file this form by the 15th day of the fourth month following the end of your income tax year (generally, April 15th for individuals), subject to any extension of time to file that may apply. If you file Form 3520 late or if the information provided is incomplete or incorrect, the IRS may determine the income tax consequences of the receipt of such foreign gift or bequest, and you may be subject to penalties under section 6039F if you do not have reasonable cause.
Here are the key points regarding reporting foreign gifts:
-
General Rule: Foreign Gifts and Bequests:
- A foreign gift or bequest is any amount received from a person other than a U.S. person that the recipient treats as a gift or bequest and excludes from gross income.
- A foreign gift does not include amounts paid for qualified tuition or medical payments made on behalf of the U.S. person.
- A foreign person includes a nonresident alien individual or foreign corporation, partnership, or estate, as well as a domestic trust that is treated as owned by a foreign person.
-
Reporting Requirements:
- You are required to report the receipt of foreign gifts or bequests only if the applicable threshold is exceeded.
- For gifts or bequests from a nonresident alien or foreign estate, you must report the receipt of such gifts or bequests only if the aggregate amount received from that nonresident alien or foreign estate exceeds $100,000 during the taxable year.
- If the gifts or bequests exceed $100,000, you must separately identify each gift in excess of $5,000.
File Form 3520 separately from your income tax return by following the forms instructions.
