Foreign Gift From Related Persons
Foreign Gift From Related Persons: When a U.S. person receives a gift(s) from a foreign person individual or entity (such as a foreign corporation) and the aggregate value of the gifts within the tax year exceed the reporting threshold, the gift must be reported to the IRS. In calculating the amount, it is important to consider if there are related parties. If there are related parties, and the related party gifts pushes the aggregate value of the gift over the threshold, then it is still reported.
The failure to report the gift may result in penalties, and in recent years, the IRS has begun automatically assessing penalties — which is why a well-written reasonable cause statement submission is your best weapon against form 3520 penalties.
Let’s review the foreign gift from related persons rules.
How to Calculate on Form 3520
The threshold requirements vary based on whether foreign person is an individual or entity:
Foreign Gift From Related Nonresident Aliens and Foreign Estates
“Line 54. 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 (see Related Person, earlier) or one is acting as a nominee or intermediary for the other.
For example, if you receive a gift of $75,000 from nonresident alien individual A and a gift of $40,000 from nonresident alien individual B, and you know that A and B are related, you must answer “Yes” and complete columns (a) through (c) for each gift.
Foreign Gift From Related Person Corporation
“For example, if you, a calendar-year taxpayer during 2019, received $8,000 from foreign corporation X that you treated as a gift, and $10,000 that you received from nonresident alien A that you treated as a gift, and you know that X is wholly owned by A, you must complete columns (a) through (g) for each gift.”
Late Filing Form 3520 Specialist Team
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure, including help clients with form 3520 filing.
Contact our firm today for assistance with getting compliant.