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Richard , Tax Attorney
Category: Tax
Satisfied Customers: 53318
Experience:  29 years of experience as a tax, real estate, and business attorney.
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I received a $150,000 gift from my parent last year and $120,000

Resolved Question:

I received a $150,000 gift from my parent last year and $120,000 this year. I haven't reported anything to the IRS yet (never submit form 3520). I am planning to report it on this year's tax return.
For your information, my parent is not a US citizen nor a US permanent resident.

My questions:
1. Do I need to pay any U.S tax on these gifts?
2. Do I need to pay any penalty for the $150,000 that I didn't report last year.
3. Is there any maximum limit on gifts a person can receive in a year or in a lifetime from a person living abroad (what if the amount exceed $2,000,000)?

Thank you
Submitted: 3 years ago.
Category: Tax
Expert:  Richard replied 3 years ago.

Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good morning. You owe no tax in the U.S. on a gift from a person not a U.S. citizen. For any amounts received in excess of $100,000 per calendar year, you must file Form 3520 with the IRS; this is only a reporting requirement; there is no tax. There is no maximum amount of gifts you can receive from a non-U.S. citizen. I don't know what the laws are regarding the donor in their country, however.

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Customer: replied 3 years ago.

What about the $150,000 that I received last year and didn't report it. I would like to report it with my current tax return. Is there any penalty for that?

Expert:  Richard replied 3 years ago.

This is not income and thus it does not get reported on your income tax return. You simply file the Form 3520.

The penalties for failure to file Form 3520, Annual Return to Report
Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts
, can
be substantial. Penalties for not filing in a timely manner or if the
information provided is incomplete or incorrect are assessed at 35 percent of
the gross value of the "reportable event." The reportable event could be a
distribution from the trust or a transfer of property to the trust. The
beneficiary must file the form if there has been a distribution from a trust or
estate. The transferor must file the form if there has been a transfer to a
trust. Gifts (in excess of specified thresholds) from foreign persons must also
be reported by US donees. The penalty for failing to report a gift is 5 percent
of the amount of the gift for each month for which the failure continues
(maximum 25 percent). Form 3520 is due at the same time as the tax return of the
U.S. person (including extensions) according to the form instructions. However,
the Internal Revenue Code (IRC) Section 6048 provides that Form 3520 is due on
or before the 90th day (or such later day as the Secretary may prescribe) after
any reportable event. The practice seems to be to file in accordance with the
Form 3520 filing instructions; however, penalties may be assessed. To avoid any
risk of penalties it would be advisable to file Form 3520 within 90 days of a
reportable event.

Relief from penalties is provided if the taxpayer can demonstrate that the
failure to comply was due to reasonable cause and not willful neglect. A written
submission to the IRS must be made to request abatement from penalties assessed.
Lack of reporting due to foreign country or foreign fiduciary limitations is not
considered reasonable cause.

You might want to determine that the 2011 funding was actually a loan which is forgiven in 2012....thus the report could then be timely made based on the gift at the time of forgiveness.

Richard, Tax Attorney
Category: Tax
Satisfied Customers: 53318
Experience: 29 years of experience as a tax, real estate, and business attorney.
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