Your Children Live In The United States and you want to make a gift or leave an inheritance upon death
The IRS Has Rules for Reporting Large Foreign Gifts and Inheritances
Internal Revenue Code 6039F, Notice 97-34 and IRS Form 3520
The Internal Revenue Code requires that U.S. persons (including immigrants, legal and illegal, living in the United States) must report certain large foreign gifts. If a U.S. Taxpayer receives annual aggregate gifts above $15,797 (2017) from a foreign corporation or partnership or aggregate gifts or bequests from a non-resident alien or foreign estate exceeding $100,000, the taxpayer must report the amounts and sources of these foreign gifts and bequests on IRS Form 3520 – Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts (From 3520).
The IRS can impose penalties for failure to file a required Form 3520.
The Internal Revenue Tax Code sets the threshold for gifts (or bequests) received from non-resident alien individuals and foreign estates at $10,000. In Notice 97, the IRS raised the threshold on gifts given by non-resident aliens and foreign estates to $100,000. A foreign gift limit given by foreign corporations or partnerships remains at $10,000, but this threshold amount is adjusted yearly for cost-of-living and is currently up to $15,977. Once the threshold is reached, reporting is required regarding each such gift over $5,000. These threshold amounts are calculated on the aggregate gifts received from foreign sources.
The instructions to Form 3520 requires a U.S. person who receives a gift or bequest of more than $100,000 from a foreign estate to file a Form 3520. The IRS requires that a Form 3520 be filed for any gift or bequest received from a person who is not a United States person. There are some exclusions. Large gifts received from foreign persons and properly reported on a Form 3520 are generally non taxable.
The Information Needed to Prepare and File Form 3520
Notice 97-34 requires Form 3520 to be filed once a year for all reportable gifts (and bequests). Form 3520 should be filed separately from a U.S. person’s Form 1040. Form 3520 filings should be mailed to the Internal Revenue Service Centre, P.O. Box 409101, Odgen UT 84409.