As a US citizen who has received foreign gifts of money or other property, you may need to report any gifts your receive from a foreign person on a Form 3520. A Form 3520 is an informative return, not a tax return, because foreign gifts are not subject to income tax. However, there are significant penalties for failure to file a Form 3520 when it is required.
Generally, foreign gifts that a subject to a form 3520 are money or property. A foreign person is regarded as a nonresident alien individual or foreign corporation, partnership or estate.
Qualified tuition or medical payments on behalf of a U.S. citizen are not regarded as gifts by the HMRC and therefore are not subject to be mentioned in a Form 3520.
Who must file a Form 3520?
Those who receive money or other property above the set threshold you must file a Form 3520.
The threshold is currently set at:
· Gifts valued at more than $15,601 from foreign corporations or foreign partnerships
· Gifts and bequests valued at ore than $100,000 from a nonresident alien individual or foreign estate.
Gifts or Bequests from Expats
U.S. citizens and residents that receive suited gifts or bequests from covered expatriates under the IRC 877A may be subject to tax under the new IRC section 2801, which states that there is a transfer tax on U.S. persons who receive gifts or bequests on or after June 17, 2008, from such former U.S. citizens or former U.S. lawful permanent residents.
Penalties for Failure to File Form 3520
You may be penalised if you do not file your Form 3520 on time or if it is incomplete or inaccurate. See the Instructions for Form 3520 for more details on penalties that may be imposed for not timely filing the Form 3520, or if the information is incomplete or incorrect, for failure to report foreign gifts, and/or for undisclosed foreign financial asset understatements
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