Gifts from family abroad, inheritances and foreign trusts
Form 3520 for Gifts and Inheritances from Outside the US
A gift from parents in India or Canada is generally excluded from a US recipient's income, but a large one can still have to be reported, and the penalty for missing it is steep. Gurleen Kaur, CPA licensed in British Columbia and Washington State, reviews the facts and prepares Form 3520.
Quick answer
When do you need to file Form 3520 for a foreign gift?
Under the Form 3520 instructions, a US person files Part IV when they receive more than US$100,000 in a year from a nonresident alien individual or a foreign estate, counting gifts from related persons together, or more than a separate inflation-adjusted threshold from foreign corporations or partnerships. Form 3520 is also used for transactions with foreign trusts. It is due by the 15th day of the 4th month after year end, or the 6th month if you live and work outside the US. The penalty for not reporting a foreign gift is 5% of the gift for each month, up to 25%.
When Form 3520 applies
Thresholds apply per tax year. Whether a payment is a gift, a loan or compensation is a facts question that should be documented.
| Situation | Reportable on Form 3520? | Source |
|---|---|---|
| Gifts or bequests totalling more than US$100,000 in a year from a nonresident alien individual or foreign estate (related persons counted together) | Yes, Part IV | 3520 instructions |
| Gifts from foreign corporations or foreign partnerships above the section 6039F threshold | Yes, Part IV; threshold published each year | IRS inflation adjustments |
| Distributions from a foreign trust | Yes, Part III | 3520 instructions |
| Creating or transferring property to a foreign trust | Yes, Part I | 3520 instructions |
| A foreign trust with a US owner | The trust files Form 3520-A by the 15th day of the 3rd month after its year end | 3520-A instructions |
Penalties
- Unreported foreign gifts: 5% of the gift amount for each month the failure continues, up to 25%, and the IRS may determine the income tax consequences of the payment.
- Unreported distributions from a foreign trust: 35% of the gross distribution.
- Foreign trust that fails to file Form 3520-A: 5% of the trust assets treated as owned by the US person.
- No penalty if the failure was due to reasonable cause and not willful neglect.
Source: Form 3520 instructions.
Records to keep
- Gift letter or will showing the donor and the nature of the transfer
- Bank records of the transfer and exchange rate on the date received
- Donor's residence and citizenship
- For inheritances: the estate documents and date of death
- For India: remittance documents, such as bank advice, kept with the gift letter
Missed a Form 3520?
For Forms 3520 and 3520-A, the IRS states that reasonable-cause statements are considered before a penalty is assessed, which differs from most other late information returns. Write "Reasonable Cause Statement attached" on the top of the first page (IRS). Compare your options in our catch-up guide.
Common questions
Is a gift from my parents in India taxable in the US?
The IRS describes a foreign gift as an amount the recipient treats as a gift and excludes from gross income. It still has to be reported on Form 3520 if gifts from that person and related persons exceed US$100,000 in the year, with each gift over US$5,000 identified separately.
Do gifts from both parents count together?
Yes. The instructions count gifts from related persons together when testing the US$100,000 amount.
When is Form 3520 due?
By the 15th day of the 4th month after the end of your tax year, which is April 15 for most people, or the 15th day of the 6th month if you live and work outside the US. Extensions follow your income tax return extension.
What is the penalty for not filing?
For an unreported foreign gift, 5% of the gift for each month the failure continues, up to 25%, unless the failure was due to reasonable cause.
Does an inheritance from Canada need Form 3520?
If the bequest from a nonresident alien or foreign estate exceeds US$100,000 in the year, yes. An inheritance of Canadian accounts can also create FBAR and other reporting going forward.
I missed a Form 3520. What now?
File it with a reasonable-cause statement. For Forms 3520 and 3520-A, the IRS considers the statement before assessing a penalty.
Sources
Every rule and figure on this page links to the IRS, CRA or other official source it comes from. Amounts change; we re-check them before each engagement.
- IRS: Instructions for Form 3520
- IRS: Gifts from foreign person
- IRS: Instructions for Form 3520-A
- IRS: Inflation adjustment amounts
- IRS: Delinquent international information return submission procedures
Gurleen Kaur, CPA licensed in British Columbia and Washington State. Last updated October 21, 2026. This page is general information, not tax or legal advice for your situation.
Related guides: Form 3520-A, NRI property sale in India, Behind on US filings.
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