Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

Foreign gift reporting requirements

Generally speaking, the United States imposes gift tax on all gifts above a certain threshold. In other words, the reporting of a foreign gift must meet a certain threshold to be taxable. But in general, in the case of a nonresident and not a citizen of the United States, gift tax shall apply to a transfer only if the property is situated in the United States.

CAVEAT…. a U.S. recipient of this gift may have disclosure requirements with respect to the gift of non United States property from a non U.S. person. The U.S. citizen or resident who receives the gift is required to report the gift to the IRS if the value is above a certain threshold and is reportable on Form 3520, Part IV.

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To determine whether a person is a U.S. resident or nonresident for gift tax purposes, the facts and circumstances should be carefully analyzed. If the individual is domiciled in the United States at the time of the gift, he/she is determined to be a resident for gift tax purposes. A person is usually domiciled in the U.S. by residing there with no immediate intent of leaving, however, the residency rules should be thoroughly reviewed before making any determination.

A U.S. citizen or resident is required to report a foreign gift that exceeds $16,076 (adjusted annually for inflation) during the year if the gift is from a foreign corporation or foreign partnership. The reporting threshold is increased to $100,000 when the gift is from a nonresident alien individual or foreign estate. The U.S. gift recipient should total all gifts from that foreign donor and any foreign person related to the donor for the year to determine if the reporting threshold has been met. For example, a U.S. citizen or resident receives gifts totaling $80,000 during the year from a nonresident alien individual. During that same year, $30,000 was received from a second nonresident alien individual. These gifts are generally not required to be reported unless there is reason to believe the donors are related.

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Penalties for noncompliance are equal to five percent of the gift amount for each month past the due date of filing, not to exceed 25 percent. This information is general in nature and should not be relied on. Please contact a tax professional to assist with your foreign gift reporting requirements.

Jill A. Helm, CPA