Reporting a Gift from a Foreign Source

Posted by Lee Reams Sr., BSME, EA on

If the value of the aggregate “foreign gifts” (described below) received by a U.S. person (other than an exempt organization) exceeds specified amounts, the U.S. person must report each foreign gift to the IRS. (Code Sec. 6039F) These amounts are:

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 are treated as gifts or bequests (Notice 97-34); or

b. More than $16,389 in 2019 ($16,076 in 2018) (Rev Procs 2018-57 and 2018-18) from foreign corporations or foreign partnerships (including foreign persons related to such foreign corporations or foreign partnerships) that are treated as gifts.

Foreign Gifts - Foreign gifts generally include any amounts received from a person that isn't a U.S. person that the recipient treats as a gift or bequest. The term doesn't include any qualified tuition or medical payments made on behalf of a U.S. person.

Reporting Requirements:

  • 1040 Schedule B – Individuals with foreign gifts need to answer the line 8 question correctly at the bottom of the Schedule B.
  • Form 3520 - Complete the identifying information on page 1 of Form 3520 and Part IV. See the instructions for Part IV.
  • FBAR - Taxpayers may also be required to file FinCEN Form 114 if the conditions of transfer and account balance require it.

Caution - If the ultimate donor is a foreign trust, then treat the amount as a distribution from a foreign trust. 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. (Code Sec. 6039F(c)(1)(B)).