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.

DISCLAIMER: Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing a tax planning arrangement or taking an uncertain tax filing, position. Litwin CPA Inc. cannot accept any liability for the tax consequences that may result from acting based on the contents hereof.