There has been a recent spate of news regarding foreign accounts and foreign taxation, even in expatriation and becoming a foreigner. However, very little has been written regarding how to accept foreign gifts and bequests. Thankfully, there is some small guidance in a recent Forbes article that I thought was worth pointing out. In many ways it’s difficult to be both an American Citizen and a Citizen of the World, but certainly one of the most punishing difficulties is the IRS itself. Of course, in an era of globalization, the intersection with international citizens and loved ones of different citizenship is all the more common. The global village also complicates the world of estate planning and with it, international wealth transfers and taxation. What if you are the recipient of a gift or an inheritor of assets from an international estate? To remain square with the IRS, you’ll want to file a Form 3520 with the IRS and affirm the recently received assets for what they are – foreign gifts or bequests and not taxable income. As gleaned from the original article, you’ll want to file a Form 3520 if: You receive either of the following during the tax year: 1. 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 2. More than $14,375 from foreign corporations or foreign partnerships (including foreign persons related to such foreign corporations or foreign partnerships) that you treated as gifts. But do not tarry! If you delay filing the Form 3520 when required, then expect penalties to apply.
Reference: Forbes (January 27, 2012) “How To Report Foreign Gifts And Bequests To IRS”