Foreign Trusts and Forms 3520 / 3520-A
Do I have to report a gift or inheritance from someone abroad?
Short answer
It depends: a U.S. person generally must report gifts or bequests totaling more than $100,000 from a nonresident alien individual or foreign estate during the year on Form 3520. That threshold is fixed, not inflation-adjusted; purported gifts from foreign corporations or partnerships have a separate, inflation-adjusted threshold. A genuine gift or inheritance generally is not federal taxable income to the recipient, but reporting can still be required.
Who this applies to: U.S. citizens, resident aliens and other U.S. persons receiving gifts or inheritances from foreign sources.
Identify the actual donor
The donor’s tax status matters more than the country where the transfer originated. Money arriving from an overseas account is not automatically a foreign gift. Determine whether the source is a nonresident individual, a foreign estate, a corporation, a partnership or a trust. Compensation, business receipts and distributions do not become gifts simply because a transfer description says “family support.”
Apply the correct threshold and aggregation rules
For the $100,000 test, combine gifts and bequests from the same nonresident individual or foreign estate and from foreign persons you know or have reason to know are related to that donor. For purported gifts from foreign corporations or partnerships, consult the applicable year’s inflation-adjusted amount and aggregation rules. Those entity payments may also be recharacterized as income; reporting them does not establish gift treatment.
Separate the receipt from later income
Cash and property can both count toward foreign-gift reporting. Keep evidence of the transfer date, value, donor and relationship. Although a genuine gift or bequest is generally excluded from income, income in respect of a decedent and later interest, dividends or gains require separate analysis. Property basis is not necessarily its value when received, so preserve the donor’s or estate’s supporting records.
Check separate reporting obligations
Foreign trust distributions follow different Form 3520 rules and do not qualify for the ordinary foreign-gift threshold. A foreign account holding the funds may separately require FBAR or Form 8938 reporting. Form 3520 is filed separately from the income tax return; attaching a note to Form 1040 or reporting an account on FBAR does not replace it.
Practical example
Hypothetically, a U.S. resident receives $120,000 from her nonresident father as a genuine gift. She generally reports it on Form 3520 even if it creates no federal income tax; additional gifts from related donors must also be considered.
Common mistakes
- Treating a bank transfer description as proof that the payment is a gift.
- Assuming tax-free means no information return, or treating $100,000 as an indexed threshold.
Filing requirements
- For a calendar-year individual, Form 3520 is generally due April 15; special rules apply to certain taxpayers abroad.
- A qualifying income tax return extension generally extends Form 3520; follow the separate filing instructions.
Potential penalties
- Failure to report a foreign gift can trigger a penalty of 5% of the gift for each month of failure, up to 25%, unless reasonable cause applies.
Related IRS forms
What to consider next
- Gather donor identification, transfer records and property valuations.
- Check related-donor totals and whether any payment came through a trust or entity.
- Ask Chirino USA to review the reporting obligations before filing.
Discuss your situation with Chirino USA
Every situation depends on its facts. If you would like a professional to review yours, message us on WhatsApp, email us, or request a consultation — in English or Spanish.
General information, not tax advice
This page provides general educational information about U.S. federal tax rules. It is not individualized tax, legal or accounting advice, and it does not create a client relationship. Results depend on each taxpayer's specific facts.
Written by Roger I. Chirino, founder of Chirino USA Accountants & Advisors P.A.
Supported by licensed CPAs, IRS Enrolled Agents (EAs), and experienced U.S. tax professionals focused on cross-border compliance and planning.
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