Foreign Gifts | When Do You Have To Report Them?

Foreign Gifts And IRS Reporting

U.S. persons who receive gifts or bequests from foreign persons beware—these gifts or bequests may need to be reported to the Internal Revenue Service (“IRS”).  The consequences for failing to do so can be costly.

What Are The General Requirements To Report Foreign Gifts?

For purposes of federal income tax, gross income generally does not include the value of property acquired by gift, bequest, devise, or inheritance.[1]  However, a U.S. person who receives foreign gifts that exceed certain threshold amounts during the taxable year must report the gifts on a Form 3520.[2]

Who’s A U.S. Person?

A “U.S. person” includes 1) a U.S. citizen or resident, 2) a domestic partnership 3) a partnership; 4) an estate other than a foreign estate; and 5) a trust if a U.S. court can exercise primary supervision over the trusts administration and U.S. persons have authority to control all substantial decisions of the trust.[3]  A “foreign estate” is an estate whose income is foreign source and not effectively connected to the conduct of a U.S. trade or business.[4]

What’s A Foreign Gift?

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