Gifts from Foreign Person.note

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Gifts from Foreign Person

International Tax Gap Series

If you are a U.S. person who received foreign gifts of money or other property, you may

need to report these gifts on

. Form 3520 is an information return, not a

tax return, because foreign gifts are not subject to income tax. However, there are

significant penalties for failure to file Form 3520 when it is required.

General Rule: Foreign Gifts

In general, a foreign gift is money or other property received by a U.S. person from a

foreign person that the recipient treats as a gift or bequest and excludes from gross

income. A “foreign person” is a nonresident alien individual or foreign corporation,

partnership or estate.

The IRS may re-characterize purported gifts from foreign partnerships or foreign

corporations as items of income that must be included in gross income. Additionally, gifts

from foreign trusts are subject to different rules than gifts other foreign persons.

A gift to a U.S. person does not include amounts paid for qualified tuition or medical

payments made on behalf of the U.S. person.

Reporting Requirements

You must file Form 3520, Annual Return to Report Transactions with Foreign Trusts and

Receipt of Certain Foreign Gifts, if, during the current tax year, you treat the receipt of

money or other property above certain amounts as a foreign gift or bequest. Include on

Form 3520:

or

Form 3520, Annual Return to Report Transactions with Forei

gn Trusts and Receipt of Certain Foreign Gifts

Gifts or bequests valued at more than $100,000 from a nonresident alien individual or

foreign estate (including foreign persons related to that nonresident alien individual or

foreign estate);

Gifts valued at more than $15,601 for 2015 (adjusted annually for inflation) from

foreign corporations or foreign partnerships (including foreign persons related to the

foreign corporations or foreign partnerships).

You must aggregate gifts received from related parties. For example, if you receive

$60,000 from nonresident alien A and $50,000 from nonresident alien B, and you know or

have reason to know they are related, you must report the gifts because the total is more

than $100,000. Report them in Part IV of Form 3520. Treat gifts from foreign trusts as

trust distributions you report in Part III of Form 3520.

File Form 3520 separately from your income tax return. The due date for filing Form 3520

is the same as the due date for filing your annual income tax return, including extensions.

You file an annual Form 3520 for all reportable foreign gifts and bequests you receive

during the taxable year. See the Instructions for Form 3520 for additional information.

Under a new law effective June 17, 2008, gifts from individuals who ceased to be a U.S.

citizens or green card holders (lawful permanent residents) on or after June 17, 2008 may

be subject to special rules. Refer to the 2008 Instructions for Form 3520 for additional

information.

Special Rules Applicable to Gifts or Bequests from Covered Expatriates

U.S. citizens and residents who receive gifts or bequests from covered under

IRC 877A may be subject to tax under new IRC section 2801, which imposes a transfer

tax on U.S. persons who receive gifts or bequests on or after June 17, 2008, from such

former U.S. citizens or former U.S. lawful permanent residents.

In addition, covered expatriates under IRC 877A are not considered U.S. expatriates for

purposes of , of

a nonresident not a citizen of the United States.

Refer to the September 2015 proposed

(PDF) for additional information.

Where to File Form 3520

Mail Form 3520 to the following address:

Internal Revenue Service Center

P.O. Box 409101

Ogden, Utah 84409

Penalties for Failure to File Form 3520

expatriates

Form 706NA, United States Estate (and Generation-Skipping) Tax Return

Guidance Regarding the Imposition of Tax on Cer

tain Gifts and Bequests from Covered Expatriates

You may be penalized if you do not file your Form 3520 on time or if it is incomplete or

inaccurate. See the Instructions for Form 3520 for more details on penalties that may be

imposed for not timely filing the Form 3520, or if the information is incomplete or incorrect,

for failure to report foreign gifts, and/or for undisclosed foreign financial asset

understatements

Note: You may also be required to file FinCEN Form 114. See

for more details.

References:

Return to:

Page Last Reviewed or Updated: 26-Oct-2016

Report of Foreign Bank an

d Financial Accounts (FBAR)

, and Instructions

Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of

Certain Foreign Gifts

(PDF)

Guidance Regarding the Imposition of Tax on Certain Gifts and Bequests from Covere

d Expatriates

The International Tax Gap Series