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Foreign gift

The Form 3520 instructions describe a foreign gift as a gift or bequest received by a U.S. person from a foreign person or estate. The term appears in rules for reporting certain receipts on Form 3520.

Where the term appears

The instructions place gifts and bequests from foreign persons in Part IV of Form 3520. The IRS overview also identifies certain large gifts or bequests from foreign persons as a reason a U.S. person may need to file that form.[1][7]

A gift for this purpose excludes amounts paid for qualified tuition or medical payments on behalf of the U.S. person.

For gifts or bequests from a nonresident alien individual or a foreign estate, the Form 3520 instructions use an aggregate amount over $100,000 as the threshold for completing specified information. The recipient must aggregate gifts from different foreign persons if the recipient knows, or has reason to know, that they are related or that one acts as a nominee or intermediary for the other. Each gift above $5,000 is separately identified.[1]

For gifts from foreign corporations or foreign partnerships, including foreign persons the recipient knows or has reason to know are related to them, the instructions use a section 6039F threshold amount that is published for each tax year on IRS.gov. The IRS gives the threshold as an aggregate of more than $20,116 for 2025 and $20,573 for 2026, adjusted annually for inflation. Once it is exceeded, each purported gift and the donor must be separately identified, and the IRS may recharacterize a purported gift from a foreign corporation or partnership as income.[10] The 2024 proposed regulations would add related-person identification rules; those rules are proposed and not yet in force.[1]

A distribution from a foreign trust goes in Part III as a trust distribution, not Part IV as a gift. A distribution from a domestic trust treated as owned by a foreign person is reported by the U.S. recipient in Part IV as a gift from a foreign person.[1]

Contributions made by foreign persons to trusts with U.S. beneficiaries generally are not reported by those beneficiaries in Part IV unless they are treated as receiving the contribution in the transfer year. The instructions give ownership under section 678 as an example where the beneficiary reports it. A domestic trust not treated as owned by another person reports its foreign contribution in Part IV.[1]

Reporting context

Form 3520 is an information return covering several types of foreign trust transactions and certain foreign gifts. The foreign gift rules therefore sit alongside separate rules for trust transfers, trust distributions, and ownership reporting. The classification in Part IV turns on who made the transfer and whether the receipt is treated as a gift or bequest under the instructions.[1][7]

Questions and answers

Which Form 3520 part covers a foreign gift?

Part IV covers gifts or bequests received by a U.S. person from a foreign person or estate. A distribution from a foreign trust is reported in Part III instead.[1]

Do tuition or medical payments count as gifts under this rule?

The instructions exclude amounts paid for qualified tuition or medical payments made on behalf of the U.S. person.

What if the transfer comes from a foreign trust?

A distribution from a foreign trust is treated as a trust distribution and reported in Part III. If a domestic trust is treated as owned by a foreign person, its distribution to a U.S. person is reported in Part IV as a gift.[1]

Can a trust beneficiary have to report a trust contribution as a gift?

A beneficiary generally does not report a foreign contribution to a trust in Part IV unless treated as receiving the contribution in the transfer year. The instructions cite ownership of that portion under section 678 as an example.[1]

  • Related person: Related persons are defined through sections 267 and 707(b) in the Form 3520 instructions. Examples include family members and majority-owned corporations.
  • U.S. person: A U.S. person includes a U.S. citizen or resident alien, a domestic partnership or corporation, a domestic trust, or an estate other than a foreign estate.
  • Distribution from a foreign trust: A foreign trust distribution triggers section 6048(c) reporting for the U.S. person who receives it.
  • U.S. beneficiary of a foreign trust: U.S. beneficiary status affects how foreign trust distributions and ownership are reported on Form 3520.

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Sources and data notes
  1. Internal Revenue Service, Instructions for Form 3520. https://www.irs.gov/instructions/i3520. Retrieved .
  2. Internal Revenue Service, Instructions for Form 3520-A. https://www.irs.gov/instructions/i3520a. Retrieved .
  3. Internal Revenue Service, 26 CFR 301.7701-7 Trusts, domestic and foreign. https://ecfr.io/Title-26/Section-301.7701-7. Retrieved .
  4. Internal Revenue Service, 26 CFR 301.7701-4 Trusts. https://www.ecfr.gov/current/title-26/section-301.7701-4. Retrieved .
  5. Internal Revenue Service, 26 U.S.C. 679. https://uscode.house.gov/us/usc/119-118/t26/s679/. Retrieved .
  6. Internal Revenue Service, 26 U.S.C. 6048. https://uscode.house.gov/us/usc/119-118/t26/s6048/. Retrieved .
  7. Internal Revenue Service, Foreign trust reporting requirements and tax consequences. https://www.irs.gov/businesses/international-businesses/foreign-trust-reporting-requirements-and-tax-consequences. Retrieved .
  8. Loeb & Loeb LLP, Do You Have To File Form 3520? Reporting Foreign Trusts and Foreign Gifts to the IRS. https://www.loeb.com/en/insights/publications/2022/10/do-you-have-to-file-form-3520--reporting-foreign-trusts-and-foreign-gifts-to-the-irs. Retrieved .
  9. The Tax Adviser, Offshore and out of mind: Reporting foreign assets and gifts. https://www.thetaxadviser.com/issues/2024/apr/offshore-and-out-of-mind-reporting-foreign-assets-and-gifts/. Retrieved .
  10. Internal Revenue Service, Gifts from foreign person. https://www.irs.gov/businesses/gifts-from-foreign-person. Retrieved .

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