If the
value of aggregate foreign gifts that you receive during any tax year exceeds a
threshold amount, you must report each foreign gift to the IRS. A foreign gift
is any amount you receive from a non-U.S. person which you treat as a gift or
bequest. A non-U.S. person is any person other than a citizen or resident of
the U.S. or a U.S. partnership or corporation. The term non-U.S. person also
includes a foreign estate. Foreign gifts don't include qualified tuition or
medical payments made on behalf of the recipient, or gifts which are otherwise
properly disclosed on a return under the separate requirements applicable to
amounts received from foreign trusts.
For
purposes of determining whether the receipt of a gift from a foreign person is
reportable, different reporting thresholds are applied for gifts received from
nonresident alien individuals, and foreign estates, and for gifts from foreign
partnerships, and foreign corporations. So, a U.S. person is required to report
the receipt of gifts from a nonresident alien or foreign estate only if the
total amount of gifts from that nonresident alien or foreign estate is more
than $100,000 during the tax year. Once the $100,000 threshold has been met,
the one who receives the gift must separately identify each gift which is more
than $5,000, but doesn't have to identify the donor.
A U.S.
person must report the receipt of purported gifts from foreign corporations and
foreign partnerships if the total amount of purported gifts from all such
entities during the tax year is more than $10,000, subject to cost-of-living
adjustments. (If the total amount of gifts is more than $15,601 for tax years
beginning in 2015; $15,358 for tax years beginning in 2014.) Once the threshold
has been met, the gift recipient must separately identify all purported gifts
from a foreign corporation or foreign partnership, and provide the name of the
donor.
If you
fall within these reporting rules, you have to file Form 3520, Annual Return to
Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.
The form is due on the date that your income tax return is due, including
extensions. The form must be sent to the IRS at the address shown on the IRS
website (irs.gov).
Where
appropriate, I may be able to recommend planning approaches which may allow you
to avoid the reporting requirements. For example, if you are expecting a gift
of $120,000 from a nonresident alien individual or foreign estate, it may be
possible to arrange for the gift to be paid over two years, so that in neither
year does the gift exceed $100,000. If the split gift is the only foreign gift
you receive each year, you will avoid the reporting requirement. Alternatively,
if we can arrange for part of the gift to be made in the form of qualified
tuition or medical payments, the rest of the gift may be reduced enough to
avoid the reporting requirement.
The
penalty for not reporting a foreign gift that must be reported is 5% of the
amount of the gift for each month the failure to report continues, up to a
maximum of 25%. The penalty will be excused if reasonable cause for the failure
to report can be established.
Please
call if you would like me to assist you regarding the requirements outlined
above. Click this link to view our YouTube video http://youtu.be/EYJdQtbPZAI
Amare
Berhie
(651)
621-5777, (952) 583-9108, (612) 224-2476, (763) 269-5396
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