Category Archives: Non-citizens

Reporting Foreign Gifts

gift packageDear Liza: Does a person receiving a gift from a sibling in another country have to pay gift tax on that gift in the United States? In the United States, gifts are not considered ordinary income, so you don’t have to report them or pay income tax on the amount you’ve received. (If a US citizen, the person who gave the gift, called the donor, has to report all gifts over $14,000 per person per year, and will have to use up some of their lifetime exclusion from gift and estate tax for gifts over this amount. If they are super generous and give more than the amount excluded, currently $5.43 million, they would have to pay gift tax on those gifts.)

But, if you have received a gift from someone who is not a US citizen, then you may have to report to the IRS, even if you don’t owe gift tax. Here’s the rule, copied from a helpful IRS article:

“You must file Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, if, during the current tax year, you treat the receipt of money or other property above certain amounts as a foreign gift or bequest.  Include on Form 3520:

  • Gifts or bequests valued at more than $100,000 from a nonresident alien individual or foreign estate (including foreign persons related to that nonresident alien individual or foreign estate);


  • Gifts valued at more than $13,258 (adjusted annually for inflation) from foreign corporations or foreign partnerships (including foreign persons related to the foreign corporations or foreign partnerships).”

The IRS may recharacterize certain distributions from foreign partnerships, corporations, or trusts as not gifts, and then subject these to income tax or additional reporting requirements.

Probate for U.S. Assets; Estate Tax for Non-Resident Aliens

pot of goldDear Liza: My brother and I are dual citizens (Japan and US).  We both reside in the US. Our Japanese mother recently passed away. She had some cash/ stock/ annuities/ mutual funds in the US, and some property in Japan that we will inherit jointly, with no disputes. She has a social security number and had a green card at one time, many years ago. She has not lived in the US for over 30 years. There was no will. Given that she was a non-resident foreign national, do we have to go through probate to distribute her US assets (around $650,000)?  Sorry about your Mom. To settle your Mom’s U.S.-based estate you are going to need a probate proceeding to transfer the assets because your mother didn’t leave a Will. This is not because she was a non-resident alien.  This is because she owned significant property in her own name.  That means that you and your brother are going to inherit her property as the intestate heirs (that’s state law for who inherits when someone dies without a Will). Because she owned property worth more than a minimal amount, you will need a court order to get those assets transferred to you, which is the end result of a probate proceeding.

The issues that relate to her citizenship status is this: your mother’s estate is going to have to pay U.S. estate tax.  The rules for non-resident, non-citizen owners of U.S.-based property are complex, but basically, her estate will be taxed on U.S. assets worth more than $60,000. Japan, though, has a taxation treaty with the U.S., so her estate won’t be subject to double estate taxation (in both the U.S. and Japan).   Click here for a link to an IRS summary of these rules.