1. Who Must Report
IRC § 6039F requires a U.S. person who receives a large gift or bequest from a foreign person to report it. Both sides of that definition matter.
The recipient: a U.S. person
U.S. citizens, green card holders, individuals who meet the substantial presence test, and domestic entities. Status is tested when the gift is received: a gift received before a person became a U.S. resident is generally not reportable, which matters in the year of arrival.
The donor: a foreign person
A nonresident alien individual, a foreign estate, a foreign corporation, a foreign partnership, or a domestic trust treated as owned by a foreign person. A U.S. citizen or green card holder living abroad is not a foreign person, so a gift from a U.S. citizen parent residing overseas is not reported on Form 3520.
Where the money is located does not matter. A wire from a parent's account in Mumbai to a U.S. bank account and a deposit into the recipient's own account abroad are both receipts. The source of the gift, not its location, determines reporting.
2. The Thresholds
| Donor | Reporting threshold (per tax year) | What Part IV requires |
|---|---|---|
| Nonresident alien individual or foreign estate | More than $100,000, aggregating related donors (not indexed) | Each gift over $5,000 described separately (date, description, fair market value). The donor need not be named. |
| Foreign corporation or foreign partnership | More than the indexed amount: $20,116 (2025), $20,573 (2026) | Each purported gift and the identity of the donor. The IRS may recharacterize the payment. |
The $100,000 threshold is a reporting trigger, not an exclusion. Once total gifts from nonresident aliens and foreign estates exceed $100,000 for the year, the recipient reports, and every gift above $5,000 is listed, not just the amount above $100,000.
The threshold is measured by the recipient's tax year, not per donor and not per transfer. Several smaller wires over the course of a year count together.
3. Aggregation: Why "Each Parent Gave Less Than $100,000" Is Not the Answer
In applying the $100,000 test, the recipient must aggregate gifts from foreign persons the recipient knows or has reason to know are related to one another. The Form 3520 instructions apply the related-person definition of IRC § 643(i)(2)(B), which brings in family members under § 267(c)(4): brothers and sisters, spouses, ancestors, and lineal descendants, as well as certain related entities.
In practice, this means a mother and father are counted together, as are grandparents and parents, and a father and his brother. It is one of the most common reasons Part IV filings are missed: each donor stayed under $100,000, but the family as a whole did not.
4. Worked Examples
Example 1: Both parents contribute to a home purchase
A U.S. citizen's mother and father, both nonresident aliens living in India, each wire $60,000 in March 2026 for a down payment. The parents are related, so the gifts are aggregated: $120,000 exceeds $100,000. The recipient files Form 3520, Part IV, for 2026, listing both gifts.
Example 2: Father and uncle
A recipient receives $90,000 from her father and $15,000 from her father's brother, both nonresident aliens. The father and uncle are brothers and therefore related. Aggregate gifts are $105,000, and Part IV reporting is required. Had the $15,000 come from an unrelated family friend, the related-group total would be $90,000, and the friend's gift would be tested separately.
Example 3: An inheritance from a foreign estate
A U.S. resident's grandmother, a U.K. resident and citizen, dies in 2025. Her estate distributes £90,000 to the grandchild in 2026, worth more than $100,000 when received. The bequest is reported in Part IV for 2026, the year of receipt, with its U.S. dollar value on the date received.
Example 4: A family company pays "as a gift"
A father's foreign operating company transfers $25,000 to his U.S. son, described as a gift. Because the payor is a foreign corporation, the lower threshold applies ($20,573 for 2026). The payment is reported in Part IV with the identity of the company, and the IRS may recharacterize it, for example as a distribution or compensation, based on the facts.
Example 5: A U.S. citizen parent abroad
A U.S. citizen father who has lived in Germany for 30 years gives his U.S. daughter $200,000. The father is a U.S. person, so this is not a foreign gift and Form 3520 is not required. The father may instead have a U.S. gift tax return (Form 709) obligation.
5. What Is (and Is Not) a Foreign Gift
Reported in Part IV
- Cash gifts and wires from foreign relatives
- Gifts of property, such as real estate, shares, or jewelry, at fair market value
- Bequests and inheritances received from a foreign estate or nonresident alien decedent
- Purported gifts from foreign corporations or partnerships
Not reported in Part IV
- Qualified tuition or medical payments made directly to the provider on the recipient's behalf
- Distributions from a foreign trust (reported in Part III instead)
- Gifts from U.S. persons, wherever they live
- Bona fide loans that are documented and expected to be repaid
The loan-versus-gift question deserves attention. A transfer labeled a loan with no note, no interest, and no repayment history may be treated as a gift, and a gift later called a loan does not avoid reporting. Contemporaneous documentation is what settles it.
6. Related U.S. Tax Points Clients Ask About
No income tax and no gift tax for the recipient
Gifts and inheritances are excluded from the recipient's gross income under IRC § 102. The recipient owes no U.S. gift tax. A nonresident alien donor is subject to U.S. gift tax only on gifts of U.S.-situs real and tangible property, which rarely applies to family wires.
Income after receipt is taxable
Interest, dividends, rent, and gains earned on the gifted property after receipt are taxable to the U.S. recipient. Gifted property generally takes the donor's basis (IRC § 1015); inherited property generally takes a basis equal to fair market value at death (IRC § 1014).
Foreign accounts
If the gift is held in an account abroad, FBAR (FinCEN Form 114) and Form 8938 may apply independently of Form 3520.
Gifts from covered expatriates
If the donor is a former U.S. citizen or long-term resident who is a covered expatriate, the U.S. recipient may owe tax under IRC § 2801 and file Form 708. See our Form 708 overview.
7. Deadline and Filing
- Due date: the due date of the recipient's income tax return, including extensions: generally April 15, June 15 for U.S. citizens and residents living abroad, or October 15 with a timely Form 4868. Year-by-year dates are in Form 3520 & 3520-A Due Dates by Year.
- Separate paper filing: Form 3520 is mailed to the IRS in Ogden, Utah, separately from the income tax return, even when the Form 1040 is e-filed. See Can Form 3520 or 3520-A Be E-Filed?
- Proof of mailing: use USPS Certified Mail or an IRS-designated private delivery service so that timely filing can be established under IRC § 7502.
8. Penalties and Missed Years
The § 6039F(c) penalty is 5% of the amount of the gift for each month the failure continues, up to 25%, unless the failure was due to reasonable cause and not willful neglect. The IRS may also determine the income tax consequences of the receipt. On a $400,000 inheritance, the maximum penalty is $100,000 on money that was never taxable.
Late Part IV filings are common, because recipients rarely know the requirement exists. Delinquent returns are typically filed for each missed year with a reasonable-cause statement. Reliance on tax software that did not ask about foreign gifts has been raised as reasonable cause in litigation (see Huang v. United States). For the framework, see Form 3520 Penalty Relief & Reasonable Cause.
9. Frequently Asked Questions (FAQ)
Do I pay U.S. tax on a gift from my parents abroad?
Generally no. A gift or inheritance received by a U.S. person is not taxable income, and the recipient does not owe U.S. gift tax. The obligation is informational: if the threshold is exceeded, the gift must be reported on Form 3520, Part IV. A separate tax under IRC section 2801 can apply if the donor is a covered expatriate.
What is the Form 3520 threshold for gifts from family abroad?
Gifts and bequests from nonresident alien individuals and foreign estates must be reported when the total received during the tax year exceeds $100,000, aggregating gifts from persons who are related to one another. Gifts from foreign corporations and foreign partnerships have a lower, inflation-adjusted threshold: $20,116 for 2025 and $20,573 for 2026.
Do gifts from my mother and father count separately?
No. Gifts from foreign persons who are related to one another are aggregated for the $100,000 test. If each parent gives $60,000 in the same tax year, the recipient has received $120,000 from related persons and must file Form 3520, Part IV.
Is an inheritance from a relative abroad reported on Form 3520?
Yes, if the threshold is exceeded. Bequests from a foreign estate or nonresident alien decedent are reported in Part IV together with gifts. Distributions from a foreign trust are different and are reported in Part III.
What is the penalty for not reporting a foreign gift?
Under IRC section 6039F, the penalty is 5% of the amount of the gift for each month the failure continues, up to a maximum of 25%, unless the failure was due to reasonable cause and not willful neglect. The IRS may also determine the income tax consequences of the unreported receipt.
Does a gift from a U.S. citizen parent living abroad count?
No. Part IV applies to gifts from foreign persons. A U.S. citizen or U.S. resident is a U.S. person wherever he or she lives, so a gift from a U.S. citizen parent residing abroad is not a foreign gift for Form 3520 purposes, although the parent may have U.S. gift tax filing obligations.
Preparing a Part IV Foreign Gift Return?
Agena Software's gift-only Form 3520 applies the related-donor aggregation and threshold tests, lists each reportable gift, and produces a print-ready filing package with an Ogden mailing checklist, plus an optional user-authored reasonable-cause statement for late filings.