Inheritance from Foreign Relative

[Cub3]

Hello,

My US relative inherited a bank account and a real estate property from their relative (who was not a US citizen) who had passed away last year.  As far as I know, they inherited the account and property December of last year, and was the executor of the estate.  The property passed ownership to my relative and will not be used as a rental. I think this is what they would need to do:

1. List both on Form 3520, part IV. I assume the combined value of both would exceed $100k.

2. List only the bank account in FBAR if the value of the bank account is over $10k.

Please correct me if I'm wrong or am missing anything, thanks! However, I'm very much unsure about Form 8938 and am confused about the wording in Part IV: "If you reported specified foreign financial assets on one or more of the following forms, enter the number of such forms filed. You do not need to include these assets on Form 8938 for the tax year." Form 3520 is one of the listed forms.

In the scenario where the inherited bank account exceeded the threshold of $50k: Since the bank account is listed in Form 3520, is Form 8938 still necessary? It would otherwise have been the only asset listed. Do they provide a mostly blank 8938 with Parts I, II, III, V, and VI blank, but  with "1" filled in for "Number of Forms 3520" in Part IV?

Many thanks!

[AmyC]

1. Yes. Form 3520 since the donor was a "non-resident alien" (NRA), any gift or inheritance exceeding $100,000 must be reported in Part IV. This is generally due at the same time as their income tax return (April 15), including extensions.

2. Yes. If the total for all their foreign accounts exceed $10,000 at any point during the year, they must file an FBAR.

3. Form 8938 -the IRS has tightened up on filing the form. 

• No need to file IF the only assets are on the Form 3520 and below the filing threshold.
• Yes need to file IF total value threshold (typically $50,000 on the last day of the year or $75,000 at any point for single filers living in the US, double for married filing joint) is met.

If they meet the threshold to file Form 8938, they would:

1. Complete the identifying information at the top.
2. Go to Part IV (Excepted Specified Foreign Financial Assets).
3. Enter "1" next to Form 3520.
4. Leave Parts I, II, and III blank (assuming the bank account is the only asset they have). The house is not a foreign financial asset for this purpose.

Since this is estate related, there could be additional reporting requirements if the estate held the assets and earned interest. Form 1041 is used for estates and 3520-A may be needed as well.

[Cub3]

Thank you so much, @AmyC ! Since there wasn't a trust, there is no need to file 3520-A, right?

[DaveF1006]

Yes. That is correct. Since this was a direct inheritance from a foreign individual's estate and not through a foreign trust, your relative does not need to file Form 3520-A

[Cub3]

Great to hear, thank you so much @DaveF1006 !