Information reporting required for large gifts received from foreign persons or estates.

• Author: Corrick, Stephen R.

Sec. 6039F and Notice 97-34 impose an annual requirement that U.S. persons must report receipt of large gifts or bequests from a nonresident alien or a foreign estate. This is done on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, which must be attached to the taxpayer's income tax return by the return's due date (including extensions). A copy of Form 3520 must also be filed with the IRS Service Center in Philadelphia. A significant penalty may be imposed on a recipient who, without reasonable cause, fails to report a gift; the penalty is 5% of the value of the gift for each month the gift is not reported (not to exceed 25%).

For purposes of these provisions, a foreign gift is any amount received from a person other than a U.S. person if treated by the recipient as a gift or bequest. The recipient must report aggregate gifts of more than $10,256 received during 1997 ($10,000 in 1996) from a foreign corporation, partnership or trust. Gifts and bequests received from a nonresident alien or foreign estate need only be reported if the aggregate amount received from a particular nonresident alien in 1997 (or 1996) exceeded $100,000. Notice 97-34 and the instructions to Form 3520 provide additional details on aggregation rules for gifts received from related persons, as well as what information the taxpayer must provide.

Related Information Reporting Requirements

There are also separate, complex reporting requirements if a U.S. person has had certain transactions with respect to a foreign trust; see Sec. 6048 and Notice 97-34. Before 1996...