Form 708 for Gifts and Bequests From Covered Expatriates

Supports calendar years 2025 and 2026. Form 708 and its Form 7004 are filed on paper.

Section 2801 reverses the usual gift and estate tax rule: when a covered expatriate makes a gift or bequest to a U.S. person, the recipient pays the tax. A covered expatriate is a former U.S. citizen or long-term resident who met the tax-liability test, the $2 million net-worth test, or failed to certify five years of tax compliance on Form 8854 when they expatriated.

• U.S. citizens and residents who receive covered gifts or bequests, directly or indirectly;
• Domestic trusts, including a foreign trust that became a domestic trust during the year (a migrated foreign trust);
• Foreign trusts electing to be treated as domestic trusts for section 2801, which then report the covered gifts and bequests they receive; and
• U.S. beneficiaries of non-electing foreign trusts, for the part of each distribution attributable to covered gifts and bequests, measured by the section 2801 ratio.

A return is generally required only when the year’s covered gifts and bequests exceed the section 2801(c) amount, or when a trust is electing or migrating. For the definitions, exceptions, and trust rules in depth, see our Section 2801 and Form 708 practice guide.

Form 708 is generally due by the 15th day of the 18th month after the end of the calendar year of receipt: June 15, 2027 for 2025 receipts and June 15, 2028 for 2026 receipts. Special rules apply to a covered bequest received after the year of the expatriate’s death, and to migrated and electing foreign trusts; the software applies them from the dates you enter and shows the basis for the date it uses.

Form 7004 with return code 37 gives an automatic 6-month extension of time to file. It does not extend the time to pay, so the estimated tax is paid with the extension.

The recipient often cannot easily confirm whether a donor is a covered expatriate. The regulations let the recipient ask the IRS for the donor’s relevant return information with the donor’s authorization; a living donor who will not authorize disclosure is presumed to be a covered expatriate unless the recipient can show otherwise.

A recipient who concludes that the donor is not a covered expatriate, or that a transfer is not a covered gift or bequest, can file a protective Form 708 under the safe harbor in Regulations section 28.6011-1(b) to start the period of limitations. The software lists the items concluded not covered and prepares the affidavit: the information relied on, the efforts made to obtain other relevant information, and whether IRS return information was obtained.

A distribution from a non-electing foreign trust is a covered gift or bequest only to the extent it is attributable to covered gifts and bequests the trust received. Part VI tracks each contribution to the trust and carries the ratio forward; Part IV, Section 2 multiplies each distribution by the ratio on its date.

The software computes the ratio from the contributions you enter, rounded to two decimal places as the form’s columns direct, and carries it to each distribution. A foreign trust that elects to be treated as a domestic trust instead files its own Form 708, with its U.S. agent, prior distributions, and permissible distributees in Part VII and the trustee’s declaration in Part VIII.

The two returns answer different questions. Form 3520 is an information return for large gifts from foreign persons (Part IV) and foreign trust distributions (Part III). Form 708 reports and pays tax when the donor, or the trust’s contributor, is a covered expatriate. The same gift can require both.

When the Form 3520 is already in your workspace, start the Form 708 from it. Choose whether to bring over the foreign gifts, the trust distributions, or both, so only what traces to a covered expatriate is copied; then enter each expatriation date and the trust’s contributions.