When You Receive a Gift from Foreign Persons

When a U.S. person receives a large gift from a foreign source, it can trigger significant tax reporting obligations, even if the gift itself isn’t taxable. If you don't know whether the person who gives you the gift is a nonresident alien for tax purposes, you probably will need to check with them. How to determine someone's tax residency status?

• What Is Form 3520? Form 3520 is an IRS form designed to report information on certain transactions with or ownership of foreign trusts and the receipt of large gifts or bequests from foreign persons.
• Reporting Threshold If you receive gifts from a nonresident alien individual or a foreign estate that exceed $100,000 during the tax year, you are required to file Form 3520.
• Not Everything is a Gift Qualified tuition payments paid directly to schools and most medical payments paid to hospitals are excluded from calculation of gifts.
• Aggregation Rule According to form instructions, 'to calculate the threshold amount ($100,000), you must aggregate gifts from different foreign nonresident aliens and foreign estates if you know (or have reason to know) that those persons are related to each other ... or one is acting as a nominee or intermediary for the other.'

Receiving a significant gift from a foreign source is undoubtedly exciting, but it comes with important responsibilities under U.S. tax law. Failure to file Form 3520 when required can result in substantial penalties.

Unsure about your filing requirements?

Let Copper River Tax handle it. We have extensive experience with the immigrant community where many Form 3520s are filed!