Inheritance from Japan

[madcapsel]

Hello,

My father passed away in Japan last December. I will be getting a lump sum of money wired to my bank account in the U.S. I understand that California does not have inheritance tax, and the amount I get is way below the value for it to be applied to the federal estate tax. Do I have to pay any kind of tax for this amount in the year 2024, perhaps it will be treated as an income? 

[DoninGA]

A cash inheritance is not reported on a federal tax return so is not taxable income.

[BillM223]

Was your father a US citizen or US green card holder? If so, you do not report the inheritance on your tax return. However, if your father was a nonresident alien, then you may have to report the inheritance if it was more than $100,000 on form 3520. You don't report the inheritance as income, but the 3520 is an informational form to report a financial transaction with an foreign entity.  

Note that the IRS has not yet updated this form for 2022.

Also note that TurboTax does not support this form, please see the excellent answer from DoninGA here.

[madcapsel]

I am sure the government monitors all international wire transactions over $10,000, and the bank institutions will report it as well. If this lump sum (I'm guessing it will be about $75,000) appears in my account, unless there is a note attached to this transaction saying that the purpose of this transfer is for inheritance, I would think they'll have questions. Perhaps this is something I need to further investigate with my bank. But, for the topic of tax, you are saying it's not taxable (with a caveat that i could prove it is inheritance related)?

[madcapsel]

I apologize, I wasn't aware that there was a second reply to my original question. My father wasn't an American citizen. I will be paying inheritance tax within the Japanese legal system. But I'm relieved I do not have to do so here in the U.S.

[BillM223]

Inheritances are generally not taxable to the recipient, as DoninGA pointed out. 

The instructions for form 3520 state

"Who Must File

File Form 3520 if any one or more of the following apply. You are a U.S. person who, during the current tax year, received either:

...

4. 

More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests"

So, if indeed, the amount is less than $100,000, you don't appear to be required to file the 3520. I agree that the Treasury Department will likely be notified of the transaction, but according to their own rules, you would not have to report it on form 3520.

But it is also a good idea to keep copies of documentation in your tax file, in case anyone ever asks about it.

[madcapsel]

Thanks you all so much for your responses. I think I got all the answers I needed.