A foreign gift is any amount received from a person other than a U.S. person that is treated as a gift or bequest. If you received more than the annual threshold amount you must furnish certain information to the IRS.
For gifts or bequests from a nonresident alien or foreign estate, you are required to report the receipt of such gifts or bequests if the aggregate amount exceeds $100,000 during the tax year. If the gifts or bequests exceed $100,000, you must separately identify each gift in excess of $5,000.
For gifts from foreign corporations or foreign partnerships, you are required to report the receipt of such gifts if the aggregate amount exceeds $20,116 for 2025 and $20,573 for (adjusted annually for inflation). You must separately identify each gift and the identity of the donor. Note that the IRS may recharacterize purported gifts from foreign corporations or foreign partnerships.
For purposes of determining the reporting thresholds, you must aggregate gifts received from related parties.
Although reporting is only required if you know or have reason to know that the donor is a foreign person, the penalty is severe if the IRS determines that you should have filed a report but did not. The penalty doesn’t apply to any failure to report a foreign gift if the failure is due to reasonable cause and not willful neglect.
In order to comply with these rules and not be subject to a penalty, Form 3520 is due on the date that your income tax return is due, including extensions.
Special tax rules impose a transfer tax on certain gifts from an expatriate. Expatriates are individuals who voluntarily relinquish their U.S. citizenship for tax purposes. The special rules apply to individuals who expatriate on or after June 17, 2008 and who have, among other things:
- Net worth of $2 million or more;
- Average annual net income tax for the 5 years ending before the date of expatriation or termination of residency of more than a specified amount that is adjusted for inflation; ($206,000 for 2025); or
- Failed to certify that they complied with all U.S. federal tax obligations for the five years before the date of expatriation.
Since the penalty for not reporting can be so severe, it is important that you be certain whether or not the reporting requirements apply to you.
Please contact our team if you have any questions or would like to discuss your particular situation in more detail.
