Foreign Gifts From China – Reporting Gifts on IRS Form 3520
At Golding & Golding, we represent numerous clients from China on all issues involving foreign gifts, income, assets and investments.
There is one issue which is very common among our clients in China – they now reside in the United States and due to currency restrictions in China, it is a bit difficult for one individual living in China with a significant amount of money to gift it to an individual residing in the United States.
Typical Example: Michael is originally from China but now resides in the United States. His parents still reside in China and are wealthy – they want to transfer a large amount of money to Michael so that he can purchase a home.
Reporting the Gift (IRS Form 3520)
Individuals residing in the United States who receive gifts from foreign persons are required to report the receipt of the gift on IRS form 3520. The individual residing in the United States does not need to pay tax on the receipt of the gift, but most important to the US government is that if the gift exceeds $100,000 in any year — it must be reported on Form 3520.
It does not matter if it is one gift of the $150,000 or 10 gifts of $15,000 – if total amount of gift the individual residing in the United States received is more than $100,000 from a person overseas and therefore must report the gift.
Gift Money Transfer Split
Due to currency restrictions, generally the maximum amount of money any one individual residing in China can transfer to a person living in the United States is $50,000 annually. Therefore, it is very common for the person transferring money from China to utilize friends and family to transfer much more than the $50,000 limit.
For example: Michael’s parents utilize 15 of their best friends and family members to transfer $50,000 each to Michael. Usually the process goes like this: Michael’s parents will take the $750,000 and transfer each $50,000 to 15 different people in China. Then Michael’s parents will open a bank account for Michael in China in which the money is transferred from the friends, to Michael in China. Then, Michael will transfer the money from China to himself.
Do I Report this on a 3520?
Technically, yes. That is because Despite how the money was transferred to the United States, the fact of the matter is the gift was from Michael’s parents in China and the combined value of the gift was more than $100,000 (from each parent; aka each parent can gift Michael $100,000 before Michael has to report both gifts).
Unreported or Undisclosed Foreign Gift?
At Golding and Golding, we limit our entire law practice to offshore disclosure. Many times, clients come to us when they realize they have not reported or disclosed foreign gifts, income accounts, investments, etc.
We can safely get you back into compliance by utilizing one of the approved voluntary offshore disclosure methods.
IRS Voluntary Disclosure of Offshore Accounts
Offshore Voluntary Disclosure Tax law is very complex. There are many aspects that go into any particular tax calculation, including the legal status, marital status, business status and residence status of the taxpayer.
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
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Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.
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