Non-Cash Gifts are Reported on Form 3520
Are Non-Cash Gifts Reported on Form 3520: Oftentimes, when US Persons are put on notice that they may have to report a gift from a foreign person or trust distribution — they presume (understandably so) that IRS requirements are limited to cash gifts — but this is incorrect. While cash gifts may be the most common type of gift that a US person receives from a foreign individual, entity or trust — it is not the only type of gift that must be reported. This is especially important in situations in which a person receives an inheritance which is oftentimes comprised of many different types of foreign accounts and assets.
Form 3520 Includes More than Just Cash Gifts
The concept behind Internal Revenue Service Form 3520 reporting is that when a US person receives a gift — that gift is not income — and therefore the gift is not included on a Form 1040. In addition, when a nonresident alien person gives a gift — under most circumstances, they are not required to file a Form 709 Gift Tax Return.
Therefore, in order to ensure that the US government is put on notice of asset transfers to US persons by nonresident aliens, certain transactions must be reported on form 3520.
Examples of Foreign Gift Types
Here are some of the more common types of Form 3520 Reportable Gifts:
- Bank Accounts and Investment Accounts
- Mutual Funds and Other Equity Funds
- Interest in A Foreign Business
- Foreign Life Insurance Policies
- Transfer Foreign Pension Plans
Failure to File Form 3520?
If a US person does not timely file an IRS Form 3520, they may become subject to fines and penalties. Oftentimes, these penalties could be minimized or abated by submitting a voluntary disclosure or reasonable cause package. Taxpayers have various mechanisms available to them, including taking an action through the IRS Office of Appeals — and possibly Tax Court or federal court depending on the outcome of the earlier attempts.
About our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure and Form 3520 penalty abatement.
Contact our firm today for assistance.