Dear Tax Talk,
I am a little puzzled about the requirements of reporting cash gifts from foreign relatives. Specifically, I'm inquiring about receiving cash/monetary gifts from foreigners (not U.S. citizens or permanent residents) and the filing requirement (Form 3520) to the IRS.
If a grandma gives my son $85,000 and my mom gives me $50,000 in the tax year 2014, must the cash gifts be reported to the IRS? Thanks.
The IRS filing requirements for Form 3520 for certain foreign gifts apply to U.S. persons who have received more than $100,000 in gifts or bequests during the current year from a nonresident alien individual or a foreign estate.
In calculating the $100,000, you have to also include gifts or bequests from foreign persons related to that nonresident alien individual or foreign estate. This means that for each U.S. individual, you have to include all gifts from different foreign nonresident aliens and foreign estates that are related to one another. This includes your brothers, sisters, parents, grandparents, lineal descendants such as your children or grandchildren and the spouses of any of those persons. In other words, if you received more than $100,000 from related nonresident aliens, you would have to aggregate all the amounts together and thus have to file the form.
You receive $85,000 from your foreign mother. The gift is not more than $100,000, so no form is required. But if you were to receive $25,000 from your foreign brother also, then the gifts from foreign-related individuals must be aggregated and you would be required to report the income.
In your situation, you and your son are considered to be two separate individuals, so each of you can receive up to $100,000 before you are required to file Form 3520.
As you can see, the IRS reaches as far as it can in the calculation of the $100,000 limit.
Thanks for the great question.