Form 3520 Inheritance

Form 3520 Inheritance

Foreign Inheritance Form 3520 Reporting

Form 3520 Inheritance Reporting: The IRS rules surrounding International tax law is complicated. This is especially true when it comes to a foreign inheritance. That is because with foreign inheritances there are generally two components to international tax: There is the taxation of the income, and the reporting of the account or asset.

While most foreign inheritances will escape tax, they must still be reported to the U.S. government.

The failure to report the money to the U.S. government may result in significant fines and penalties.

Here are some of the basic rules for foreign inheritance reporting:

Foreign Estates & Form 3520

When a person is a foreign person with a foreign estate, the United States does not have any jurisdiction over those assets. 

So in the common situation of a US person receiving an inheritance from a foreign person with foreign assets, the U.S. do not have to pay any tax on that money that they inherit.

Once the US person owns the foreign inheritance assets, if they start to generate income, then the US person will have to pay tax on the income generated from the assets.

Why?

Because the income was generated to the US person after the US person received the asset.

Stated another way, there is no estate tax due from a US person who receives a foreign inheritance from a foreign person, comprised of foreign assets. But, once the US person begins receiving income from those foreign assets, income tax is due on the earnings.

*If the foreign person has U.S. situs in their estate, the U.S. Tax rules may kick-in for the estate of the foreign person as to the U.S. assets, depending on the underlying planning.

US Situs

When a foreign person has U.S situs (such as land/property), the estate tax rules are different.

If you are the recipient of US real estate from a foreign person as a result of an inheritance, the US portion of the estate maybe come subject to estate tax.

Unlike general estate and inheritance rules, the tax rules for a foreign person with the US real estate or other property are not very forgiving – with a much smaller exemption or exclusion amount.

Reporting the Foreign Inheritance on Form 3520

The reporting required in receiving a foreign inheritance, is the same that is required when receiving a gift from a foreign person.

 Why?

Because an inheritance is a gift. And, there is no specific exclusion for not having to report a foreign inheritance gift on form 3520 the same way that a foreign gift from a non-decedent is required.

Learn more about the requirements for reporting foreign gifts.

Form 3520 Inheritance Tax Specialist Team

Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure, including help clients with late reporting of Forms 3520 and 3520-A.

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.

Each case is led by a Board-Certified Tax Law Specialist with 20-years experience, and the entire matter (tax and legal) is handled by our team, in-house.

*Please beware of copycat tax and law firms misleading the public about their credentials and experience.

Less than 1% of Tax Attorneys Nationwide Are Certified Specialists

Our lead attorney is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.

Recent Case Highlights

  • We represented a client in an 8-figure disclosure that spanned 7 countries.
  • We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
  • We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
  • We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
  • We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.

How to Hire Experienced Offshore Counsel?

Generally, experienced attorneys in this field will have the following credentials/experience:

  • 20-years experience as a practicing attorney
  • Extensive litigation, high-stakes audit and trial experience
  • Board Certified Tax Law Specialist credential
  • Master’s of Tax Law (LL.M.)
  • Dually Licensed as an EA (Enrolled Agent) or CPA

Interested in Learning More about our Firm?

No matter where in the world you reside, our international tax team can get you IRS offshore compliant.

We specialize in FBAR and FATCA. Contact our firm today for assistance with getting compliant.

 

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