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Gift Tax From Foreign Resident

Several questions regarding gift taxes from a foreign citizen to a US citizen:

1) If a US citizen has a foreign relative who dies and leaves that US citizen some money, is it correct that there is no estate tax or gift tax (or any tax) paid by the receiver on that inheritance? It looks to me like US Gift Tax laws all penalize the giver, and if the giver is a person outside the US then the gift tax laws of the US do not come into play.

2) If the foreign citizen has their money in an offshore trust, and the inheritance is coming from that trust, does this change the situation, and would the US citizen still not owe tax on the inherited amounts?

3) How does the US citizen properly disclose this inheritance to the IRS?
Reply to
W
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"W" wrote in news:nNKdnbVDhP-TkbzUnZ2dnUVZ snipped-for-privacy@giganews.com:

AFAIK, the only things to do are:

  1. record the date that the property becomes that of the US citizen and determine its value in either the foreign currency or US currency. If only value in foreign currency is known, the exchange rate for US$ needs to be known as of the date of the inheritance (usually the date of death).
  2. If total value in US is equal to or greater than ,000.00, you have to file a form where the account is etc. I forget the form number. I believe the date for filing this form is June 1. Check the IRS site.

Sorry for incomplete information ...

Reply to
Han

Does one have to report the inheritance on form 3520? Form 3520 is to report gifts from foreign citizens in excess of a certain threshold (presently 100k from an individual and 13+k from a corporation), and is due 90 days after the receipt of each gift, and the penalties for not filing are steep, though there is no tax due. I don't know if you need to file this form for an inheritance, but why not just to avoid the steep penalty because an inheritance is basically a gift.

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It is form TD F 90-22.1 and is due June 30 at the Treasury Department.

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However, this form is to report foreign accounts. So if all of the foreign person's assets are converted to US dollars and sent here, there are no foreign accounts and nothing to report.

If you receive foreign real property, this form does not apply, but I suppose you should put it on form 3520.

Reply to
removeps-groups

Yes, Form 3520 must be filed for inheritances as well. The instructions to Form 3520 provide in part:

"File Form 3520 if . . . [y]ou are a U.S. person who, during the current tax year, received . . . [m]ore than $100,000 from a nonresident alien individual or a foreign estate . . . that you treated as gifts or bequests"

Reply to
jmail7

snipped-for-privacy@andrewmitchel.com wrote in news:877abcab-4f3f-4883-a77b- snipped-for-privacy@n33g2000pri.googlegroups.com:

That's good information. I'm not sure off-hand whether I should have filed

3520 or not (have to go back into the records). If I have had to, I hope that the statute of limitations has run out. Or could I still file, claiming that I didn't know?
Reply to
Han

They probably won't go easy on you if you plead ignorance. But they do have amnesty programs from time to time.

See for example

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but that one ended on April 15, 2003.

The million dollar question -- is there am amnesty program in effect now?

Reply to
removeps-groups

I know of no specific rule that keeps the statute of limitations open for failure to report the receipt of the foreign bequest (like the specific rules keeping the statute open for failure to file Form 5471 and other portions of Form 3520 -- Code § 6501(c)(8)). However, in general when a separate tax return needs to be filed and is not filed, the statute of limitations does not begin to run. The reporting requirement and the potential penalties were enacted for gifts & bequests received after August 20, 1996. Thus, if you received the bequest after this date, you may want to file a late 3520 with an explanation. The IRS tends to be lenient in these circumstances (although I hear that they may be getting stricter on Form 5471 penalties).

Reply to
jmail7

snipped-for-privacy@andrewmitchel.com wrote in news: snipped-for-privacy@l14g2000yqj.googlegroups.com:

Thanks.

As mentioned this was an inheritance from Dad, in 2002, and I have to check up on the amounts involved.

Reply to
Han

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