In general, if a US person receives gifts, bequests or inheritance from a foreign person, it is excluded from gross income and are not subject to tax. However, if the amount received exceeds a certain amount ($100,000 for the year 2016), you may have to file Form 3520. This is only an information return and not a tax return. Failure to file this form can however, result in severe penalties.
Reporting Requirements
You must file Form 3520 if you fulfill the following conditions :
- You receive gifts or bequests valued at more than $100,000 from a nonresident alien individual or foreign estate (including foreign persons related to that nonresident alien individual or foreign estate);
or
- You receive gifts valued at more than $15,601 for 2015 (adjusted annually for inflation) from foreign corporations or foreign partnerships (including foreign persons related to the foreign corporations or foreign partnerships).
You must aggregate gifts received from related parties. For example, if you receive $60,000 from your mother who is a nonresident alien and $50,000 from your father who is also a nonresident alien, you must report the gifts because the total is more than $100,000.
What happens of you are filing as “Married Filing Joint”
According to the IRS, since each of you and your spouse constitute a US person, you can individually receive a gift up to $100,000. So, to the extent each of you received the gift less than the reporting threshold, you will not have to fill out Form 3520 even though the collective amount may be more than $100,000.
However, make sure that you are not using this as a loophole to evade the reporting requirement. For e.g. say you and your spouse each receive $ 90,000 from the same non resident alien and you deposit the amount in a joint account, the IRS can percieve the transaction as carried out to evade the reporting requirement.
Filing other forms like FBAR and 8938.
Although you may not have to file Form 3520 since you do not fall under the reporting threshold, you may still need to comply with the requirements of FBAR and Form 8938 of you are despositing the amount in a foreign bank account.
