Reporting of foreign gifts received by U.S. persons.

• Author: Berger, Harvey J.
• Position: Brief Article

The Small Business Job Protection Act of 1996 (SBJPA) imposed new reporting requirements on U.S. persons who receive gifts from foreign persons, with severe penalties for noncompliance.

The SBJPA adds some new provisions to the Code to deal with perceived abuses; there are several new rules covering foreign trusts. However, one new provision, Sec. 6039F, will affect many taxpayers who have no thought of noncompliance, but are merely the recipients of funds from abroad.

Sec. 6039F requires any U.S. person to report foreign gifts received after Aug. 20, 1996 to the IRS if they aggregate more than $10,000 (indexed for inflation) in any tax year. Tax-exempt organizations are not covered by this rule.

"Foreign gifts" are amounts received from someone other than a U.S. person, which the recipient treats as a gift or bequest. Payments described in Sec. 2053(e)(2) made directly for education or medical care of a U.S. person are not included as foreign gifts.

The Service will provide guidance as to how and when to report gifts received. At this time, no official information is available. However, unofficially, we understand that the IRS is considering using Form 3520, Creation of or Transfers to Certain Foreign Trusts (Under section...