Form 3520: Foreign Gifts for Asian-American Families

If you are a U.S. person and receive money or property from parents or relatives who are foreign persons for U.S. tax purposes, Form 3520 reporting may apply. A genuine gift is generally excluded from the recipient’s gross income, but reporting can still be required. Special rules, including tax on certain gifts from covered expatriates, must be considered.

Form 3520 can apply to families with connections to China, Japan, South Korea, India or any other country. Nationality and the location of a bank account do not alone determine the filing obligation. Start with the parties’ U.S. tax status, the nature of the transfer and the applicable reporting threshold.

What Is IRS Form 3520?
The $100,000 Reporting Threshold
What Counts as a Foreign Gift?
Common Scenarios: China, Japan, Korea & India
Penalties for Not Filing Form 3520
How to File Form 3520
Already Behind? Late-Filing Options
Frequently Asked Questions
Get Help From an International Tax Attorney

What Is IRS Form 3520?

Form 3520 is an annual information return used by U.S. persons to report certain foreign gifts or bequests, certain transactions with foreign trusts, and ownership of foreign trusts under the grantor trust rules. It is filed separately from an income tax return and does not itself compute income tax due on a gift.

Reporting a transfer does not decide its tax treatment. A genuine gift generally differs from compensation, a loan or a foreign-trust distribution. Those categories can have different reporting and tax consequences; calling a payment a family gift does not settle the issue.

Failing to report a covered foreign gift on time can result in a penalty of up to 25% of its value, even when the gift produces no income tax. Reasonable cause and current IRS processing procedures matter, as discussed below.

The $100,000 Reporting Threshold

A U.S. recipient generally must report more than $100,000 in gifts or bequests from a nonresident alien individual or foreign estate during the recipient’s tax year. Include gifts from other foreign persons when you know or have reason to know they are related to that donor, or one acts as a nominee or intermediary for another.

A few important nuances:

Tax-year threshold: For a calendar-year recipient, a $90,000 gift in December and a $20,000 gift in the following January fall in different tax years. Each year’s other gifts and related-donor rules must also be considered.
Related foreign donors: If both parents are nonresident aliens, gifts from them are combined when you know they are related. Gifts totaling $130,000 from the two parents during your tax year exceed the threshold even if neither parent individually gave more than $100,000.
Foreign corporations or partnerships: The separate aggregate threshold for purported gifts is $20,116 for 2025 and $20,573 for 2026. Include amounts from all foreign corporations and partnerships and foreign persons you know or have reason to know are related to them. The IRS may recharacterize a purported company gift; it is not necessarily a tax-free family gift.

The $100,000 reporting threshold for nonresident-alien individuals and foreign estates comes from IRS administrative guidance in Notice 97-34. It is distinct from the annually inflation-adjusted statutory threshold applied to purported gifts from foreign corporations and partnerships.

What Counts as a “Foreign Gift”?

For this reporting rule, a foreign gift or bequest generally means an amount received from a foreign person that the recipient treats as a gift or bequest and excludes from gross income. The rule excludes qualifying direct tuition and medical payments. Examples of transfers that require analysis include:

Bank transfers: Parents who are foreign persons may send cash to a U.S. recipient’s U.S. or foreign account. Receipt in a U.S. account is not a prerequisite to reporting.
Real estate transfers: A parent deeds foreign real estate to a US child, or contributes proceeds from a foreign property sale.
Inheritance from a foreign estate: A U.S. person receives a bequest from an estate classified as foreign under U.S. tax law. The decedent’s nationality or place of death alone does not establish that classification.
Payment of US expenses by foreign family: Direct payments qualifying for the tuition or medical exclusion are not reportable foreign gifts for this purpose. Money sent to you for tuition, or payments of a mortgage or general living expenses, must be evaluated under the gift-reporting rules.
Foreign-trust distributions: These generally belong in Part III, not the foreign-gift section in Part IV, and have separate reporting and tax rules. The $100,000 gift threshold does not provide a general exemption for trust distributions.

Other transfers: Compensation and repayment of a genuine loan are not gifts merely because relatives are involved. A foreign spouse’s gift is not automatically exempt from Form 3520 reporting. For a purported family loan, document the actual obligation, terms, payments and surrounding facts; below-market interest and debt forgiveness require separate tax analysis. An agreement or a stated interest rate alone does not establish a genuine loan.

Family-Gift Examples: China, Japan, South Korea and India

The following examples illustrate U.S. reporting questions for families with connections to these countries. The same U.S. tax-status and aggregation rules apply across countries. Local tax, banking and exchange-control requirements need a separate review before a transfer.

Chinese-American Families

If a parent in China sends gifts through relatives or intermediaries, identify the actual donor and apply the related-person and nominee rules. Breaking one donor’s gift into several transfers does not itself avoid the reporting threshold.

If a parent gives proceeds from selling property in China, determine whether the recipient received a gift, sale proceeds from their own property, or another type of payment. A reportable gift can be received abroad; moving the proceeds into the United States is not what creates the reporting rule.

Indian-American Families

For a transfer from a parent in India, first establish whether the parent is a nonresident alien for U.S. tax purposes and whether the payment is a genuine gift. A foreign bank’s approval of a transfer does not determine the recipient’s U.S. reporting duties.

A home-purchase gift, an inheritance and funding for a business can have different legal character. A genuine gift or bequest from a qualifying foreign individual or estate is tested against the $100,000 threshold and aggregation rules. A loan, capital investment or payment from a company needs its own analysis.

Korean-American Families

For example, a parent in South Korea might pay a child’s housing costs or education expenses. General living expenses and money sent to the child for tuition can count toward the gift threshold. Qualifying tuition paid directly to the educational institution and qualifying medical payments are excluded from this foreign-gift reporting rule.

Japanese-American Families

For a gift from a parent in Japan, determine U.S. reporting separately from any foreign tax filing. The recipient’s U.S. status, the donor’s status, the amount and applicable exclusions determine whether Form 3520 is required; payment of tax abroad does not by itself satisfy that obligation.

Penalties for Not Filing Form 3520

Penalties can apply to late, incomplete or incorrect reporting, but they are not inevitable. The IRS ended automatic assessment at filing for late Form 3520 Part IV foreign-gift and bequest reports, as announced in 2024. That processing change did not repeal section 6039F. Reasonable cause, facts and any IRS notice must still be evaluated.

Foreign-gift reporting: Section 6039F provides a penalty of 5% of the gift’s value for each month the reporting failure continues, up to 25%, unless the reasonable-cause exception applies.
Foreign-trust reporting: Under section 6677, the initial penalty is generally the greater of $10,000 or 35% of the gross value of an unreported transfer to, or distribution from, a foreign trust. Owner-reporting failures generally use a 5% trust-asset base instead. Applicable limits and reasonable cause must be considered.
Different penalty regimes: The $10,000 initial minimum for applicable section 6677 trust failures is not a minimum for an ordinary Part IV foreign-gift penalty under section 6039F.
Responding to a notice: Check which statute, year, amount and deadline the IRS identifies. Late information reporting and intentional tax evasion are different issues; a late gift form alone does not establish criminal conduct.

For illustration, 25% of a $500,000 reportable gift is $125,000. That arithmetic describes the potential statutory maximum, not an automatic assessment or a prediction for a particular case.

Review the relevant notices, filing history, records, and deadlines before choosing a response. Evaluate professional assistance according to the facts, applicable law, and agreed scope of representation. Related resources: IRS penalty abatement services.

How to File Form 3520

File Form 3520 separately from your income tax return. It is generally due on the 15th day of the fourth month after your tax year ends: April 15, 2026 for a 2025 calendar-year individual. A properly obtained income-tax filing extension generally extends Form 3520 to October 15 for a calendar-year filer; a later discretionary income-tax extension does not extend it beyond that date. Weekend and legal-holiday rules apply.

Additional filing points: Qualifying U.S. citizens or residents living and working outside the United States and Puerto Rico, or on military or naval duty outside those areas, generally have until June 15 for a calendar year. Include the required statement explaining qualification. Confirm the conditions in the current instructions.

The current mailing address is: Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409. Do not attach Form 3520 to your Form 1040. Check the current instructions before sending it, and retain proof of filing.
After the individual-or-estate threshold is exceeded, separately report each gift or bequest exceeding $5,000 on line 54 with its date, description and fair market value. If none exceeds $5,000, follow the special notation in the instructions. For reportable purported gifts from foreign corporations or partnerships on line 55, identify each gift and its donor as required.
Report U.S.-dollar values as of receipt. For a gift denominated in foreign currency, use a documented exchange rate applicable on the date received; do not assume an annual-average rate is interchangeable for a particular gift. Keep the rate source and calculation.
For a gift of real property or other noncash property, document its fair market value when received, expressed in U.S. dollars. Preserve the deed, valuation support and relevant exchange-rate calculation.
Include every attachment the applicable form instructions require. Keep wire confirmations, account records, gift letters, deeds and valuation evidence with your records; they are not all automatically required attachments for an ordinary Part IV gift report. Trust reporting may require additional statements.

Complete records make preparation easier, but late filings, uncertain donor status and foreign-trust distributions can require more analysis. Consider professional assistance when needed; hiring a professional is not itself a filing requirement.

Already Behind? Compare Late-Filing Options

A missed gift report does not automatically make you eligible for streamlined procedures. Start with the IRS delinquent international information return guidance and current Form 3520 instructions. Taxpayers not under IRS civil examination or criminal investigation and not already contacted about the delinquent returns generally file through normal procedures. Follow a notice’s instructions if the IRS has contacted you.

Streamlined procedures may be relevant when there are qualifying non-willful offshore income and reporting failures. Their two routes have different requirements:

Streamlined Domestic Offshore Procedures (SDOP): Eligible taxpayers fail the foreign non-residency test, previously filed required returns for the most recent 3 due tax years, and have qualifying non-willful foreign-income failures. A submission generally includes 3 years of amended returns and required information returns, 6 years of due FBARs, tax and interest, and a 5% miscellaneous offshore penalty calculated from the highest aggregate year-end balance or value of assets subject to that penalty during the covered periods.
Streamlined Foreign Offshore Procedures (SFOP): Eligible taxpayers must meet the applicable non-residency test and non-willfulness conditions. A qualifying submission generally includes the most recent 3 due years of returns with required information returns, 6 due years of FBARs, and payment of tax and interest. Specified penalties are waived when all requirements are met; it is not a universal zero-penalty solution, and previously assessed penalties are not automatically abated.

Both streamlined routes require a complete, truthful non-willfulness certification and compliance with all eligibility and submission rules. An IRS civil examination or criminal investigation makes a taxpayer ineligible. Separately, current delinquent-return guidance says reasonable-cause statements for Forms 3520 and 3520-A are considered before penalty assessment; mark the form “Reasonable Cause Statement attached” when asserting it. Relief is not guaranteed.

Frequently Asked Questions

My parents sent me $150,000 to help buy a house. Do I owe taxes on that?

A genuine $150,000 gift from parents who are nonresident aliens is generally excluded from a U.S. recipient’s gross income, but it exceeds the Form 3520 reporting threshold after related-donor aggregation. Special rules, such as section 2801 for covered expatriates, may affect tax. Failure to report can expose the recipient to section 6039F penalties, subject to reasonable cause and applicable procedures.

What if the money was sent in multiple smaller transfers throughout the year?

For a U.S. recipient with a calendar tax year, gifts from nonresident-alien parents of $30,000 in March, $40,000 in July and $40,000 in November total $110,000 and exceed the threshold. Related-person and nominee rules apply; dividing the gifts into installments does not change that result.

What if my parents hold green cards or otherwise have U.S. tax residency?

A parent who is a U.S. citizen or U.S. resident for the applicable tax rules is generally not a foreign donor for this purpose. Green-card and substantial-presence rules, exceptions and relevant treaty positions require a status analysis. Do not classify a donor solely by citizenship, an overseas address or possession of a green card without checking the applicable facts and rules. Other gift-tax reporting obligations may be separate.

I received an inheritance from my grandmother who passed away in China. Is that different from a gift?

A bequest from a foreign estate is generally tested under the same more-than-$100,000 threshold as gifts from nonresident-alien individuals, including applicable related-person aggregation. Death in China does not alone establish that an estate is foreign. Report covered gifts and bequests in Part IV; a distribution from a foreign trust generally belongs in Part III under its separate rules.

Can the Form 3520 penalty be waived?

A section 6039F penalty does not apply if the reporting failure was due to reasonable cause and not willful neglect. The conclusion depends on the facts and evidence; lack of awareness alone is not a guaranteed defense. Preserve relevant advice, filing records and correspondence, and respond within the deadline in any notice.

Get Help From an International Tax Attorney

Before choosing how to correct a filing, identify the parties’ tax status, each transfer’s character, the reporting years, any tax due and any IRS contact. An international tax attorney can help evaluate ordinary delinquent filings, reasonable-cause arguments and any applicable compliance procedure.

Gather the transfer dates, donor relationships, currency values, bank records and any trust or estate documents. These records help distinguish an ordinary foreign gift from a trust distribution, loan or taxable payment.

Have questions about Form 3520 or foreign gift reporting? Contact Segal, Cohen & Landis (SCL) today for a confidential consultation with an international tax attorney.

This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax attorney about your specific situation.

Form 3520 for Asian-American Families: Reporting Gifts From Parents in China, Japan, Korea, and India

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