Solving the foreign gift puzzle

Dear Tax Talk,
I am a little puzzled about receiving cash/monetary gifts from foreigners (not a U.S. citizen or permanent resident) and the filing requirement (Form 3520) to the Internal Revenue Service. The three CPAs I consulted all gave different answers. Would you please clarify the following at your earliest convenience (assuming A and B are nonrelated foreigners and my wife and I file joint tax returns):

1. If Foreigner A gives me $90,000 in the year 2004 and again in 2005, need I report to the IRS in 2005 since the aggregate amount from the same foreigner is more than $100,000 by 2005? In other words, for the purpose of IRS reporting, are cash gifts from one nonresident alien to one U.S. person tax-year specific or cumulative from different years?

2. If a relative Foreigner A gives my wife and I each $90,000 (household total is $180,000) in the tax year 2004, must the cash gifts be reported to the IRS since the aggregate amount is more than the $100,000 threshold for 2004?

3. If Foreigner A gives me $90,000 and Foreigner B also gives me $90,000 in 2004, need I report the cash gifts to the IRS since the total amount is more than $100,000 in the same year although each gift is from a different alien?

4. If Foreigner A gives me $90,000 and Foreigner B gives my wife $90,000 in 2004, need we report the cash gifts to the IRS since the total amount is more than $100,000 in the same year although each gift is from a different alien?

Thanks. -- Bair

Dear Bair,
I hope my answer conforms to an answer from one of the other CPAs, and I hope he was the brightest looking.

A U.S. person that receives a large gift or bequest from a foreign person needs to disclose the receipt of the gift on Form 3520. As pointed out in the instructions, Form 3520 is not a joint tax return and it is not filed with your Form 1040, but is instead mailed by the due date of your tax return to the IRS in Philadelphia.

A large gift is a gift or a series of gifts that exceeds more than $100,000 during the tax year from any one foreign individual or from related foreign individuals. So in answer to your questions:

1. The answer is "no" since the $100,000 threshold is an annual and not cumulative limitation for disclosure.

2. The answer is "no" since the threshold applies individually and not jointly.

3. The answer is "no" unless A and B are related, in which case the answer would be that it is reportable. Related would include siblings, spouses, ancestors and lineal descendents.

4. I don't see the difference with situation number 2, even though from different foreigners.