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Do we need to fill out Form 3520 if each of us receives no more than $100,000 per year as gift from foreign person?

Los Angeles, CA |

My parents from Taiwan (non-resident alien) gave $95,000 to me and $95,000 to my husband individually in 2013 as gift. We total received $190,000. They wired the funds directly from their accounts in Taiwan to our bank account in the U.S.. We filed income tax return jointly in the previous years.

My understanding is that form 3520 is required if an individual receives more than $100,000 per year. My husband and I are two people.

Do we need to fill out Form 3520 if each of us receives no more than $100,000 per year as gift from foreign person?

Attorney Answers 3

Posted

http://www.irs.gov/pub/irs-pdf/i3520.pdf

Who Must File
File Form 3520 if any one or more of the following applies:
1. You are the responsible party for reporting a reportable
event that occurred during the current tax year, or you held
an outstanding obligation of a related foreign trust (or an
obligation of a person related to the trust) that you treated as
a qualified obligation during the current tax year. Responsible
party, reportable event, and qualified obligation are defined
later.
Complete the identifying information on page 1 of the form
and the relevant portions of Part I. See the instructions for
Part I.
2. You are a U.S. person who, during the current tax
year, is treated as the owner of any part of the assets of a
foreign trust under the rules of sections 671 through 679.
Complete the identifying information on page 1 of the form
and Part II. See the instructions for Part II.
3. You are a U.S. person who received (directly or
indirectly) a distribution from a foreign trust (including the
uncompensated use of trust property) during the current tax
year or a related foreign trust held an outstanding obligation
issued by you (or an obligation of a person related to you)
that you treated as a qualified obligation (defined later) during
the current tax year.
Complete the identifying information on page 1 of the form
and Part III. See the instructions for Part III.
4. You are a U.S. person who, during the current tax
year, received either:
a. More than $100,000 from a nonresident alien
individual or a foreign estate (including foreign persons
related to that nonresident alien individual or foreign estate)
that you treated as gifts or bequests; or
b. More than $14,723 from foreign corporations or
foreign partnerships (including foreign persons related to
such foreign corporations or foreign partnerships) that you
treated as gifts.
Complete the identifying information on page 1 of the form
and Part IV. See the instructions for Part IV.
Note. You may also be required to file Form TDF 90-22.1,
Report of Foreign Bank and Financial Accounts.
Exceptions To Filing
Form 3520 does not have to be filed to report the following
transactions.
Transfers to foreign trusts described in sections 402(b),
404(a)(4), or 404A.
Most fair market value (FMV) transfers by a U.S. person to
a foreign trust. However, some FMV transfers must
nevertheless be reported on Form 3520 (e.g., transfers in
exchange for obligations that are treated as qualified
obligations, transfers of appreciated property to a foreign
trust for which the U.S. transferor does not immediately
recognize all of the gain on the property transferred, transfers
involving a U.S. transferor that is related to the foreign trust).
See section III of Notice 97-34, 1997-25 I.R.B. 22.
Transfers to foreign trusts that have a current
determination letter from the IRS recognizing their status as
exempt from income taxation under section 501(c)(3).
Transfers to, ownership of, and distributions from a
Canadian registered retirement savings plan (RRSP) or a
Canadian registered retirement income fund (RRIF), where
the U.S. citizen or resident alien holding an interest in such
RRSP or RRIF is eligible to file Form 8891, U.S. Information
Return for Beneficiaries of Certain Canadian Registered
Retirement Plans, with respect to the RRSP or RRIF.
Distributions from foreign trusts that are taxable as
compensation for services rendered (within the meaning of
section 672(f)(2)(B) and its regulations), so long as the
recipient reports the distribution as compensation income on
its applicable federal income tax return.
Distributions from foreign trusts to domestic trusts that
have a current determination letter from the IRS recognizing
their status as exempt from income taxation under section
501(c)(3).
Domestic trusts that become foreign trusts to the extent
the trust is treated as owned by a foreign person, after
application of section 672(f).

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1 comment

David Warren Klasing

David Warren Klasing

Posted

I agree with this answer as long as a foreign trust is not involved.

Posted

You are correct in that you are not required to file form 3520. The IRS instructions to the form indicate that a"U.S. Person" must report the gift in excess of $100,000.00. See link below.Hope this helps!!

Phillip M. Smith Jr.
Los Angeles Tax & Business Attorney
Licensed in the United States Tax Court
www.culvercitytaxandbusinesslaw.com
www.corporateattorney.com

Call: 323-292-4116 or 562-505-1004

THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is philsmithjr@worldclasslawyers.com.

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Posted

Mr. Smith has given you the correct answer: "no." Mr. Klasing has given you the information that you need to confirm that answer.

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