REPORTING FOREIGN TRANSFERS: RECENT DEVELOPMENTS AFFECT U.S. DONEES

In recent years, US tax law has been significantly modified to track the flow of funds received by US persons from non-US sources. Specifically, US persons (citizens, green card holders, and residents) that receive property that they treat as gifts or bequests from foreign persons or entities must now report these transactions on an annual basis. Generally, even though there is no estate or gift tax levied upon the recipient of the gift or bequest, under US law, failure to comply with these new rules may result in significant penalties. Furthermore, if not properly reported, an otherwise tax-free transfer could be recharacterized as taxable income. The relevant information must be reported annually to the IRS on Form 3520. A discussion as to why the IRS wants this information is presented.