Inheritance or gifts from foreign persons may require Form 3520 reporting

Although a gift or inheritance doesn’t generate any U.S. income tax reporting, it may generate other filing responsibilities for the recipient.

As related to inheritances and gifts from foreign persons to a U.S. citizen or U.S. resident, Form 3520 (Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts) is required if any of the following apply:

  1. You received more than $100,000 in value from a nonresident alien individual or foreign estate, that is treated as a gift or bequest.
  2. You received more than $16,076 in value from a foreign corporation or foreign partnership that is treated as a gift.
  3. You received a distribution from a foreign trust.
  4. You are a beneficiary or owner of a foreign trust and said trust made a loan to you or allowed you uncompensated use of the trust property.

The form is generally due April 15th after the year said event occurred and penalties for not filing, or late filing, can be substantial.

Additionally, if the foreign property is in a financial account or converted to funds that are then transferred into a foreign account, Form Fin Cen 114 (Report of Foreign Bank and Financial Account (FBAR)), and Form 8938 (Statement of Specified Foreign Financial Assets) may also be required.

For more information, contact a ShindelRock tax professional today.