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Foreign Gift Tax

Getting gifts from people out side of your national borders just like getting them locally attract taxes depending on the prevailing tax conditions. Many countries have systems in place to check the movement of any gifts and their values. Such measures are necessary in order to check on cross border crimes or any possibilities of irregular dealings. In case any body receives gifts from foreigners, it is their duty to report to the tax authority even though no tax will be due on the gift. This is because only the donor is supposed to pay tax on any gift item if at all it exceeds the annual limit of gift tax exemption.

Since taxing a foreigner may not be an easy task or in some cases, it may amount to double taxation as the donor might have paid taxes from his/her country of origin. In the case of monetary gifts from foreigners, the U.S is least likely to tax the donor or the recipient. However if the foreigner gives a gift in the form of a U.S based property like a house or real estate, then the gift will be eligible for taxation if it exceeds the gift tax limit for the particular year. Whether the gift attracts a tax or not, the recipient of the gift is required to fill the form 3520 within the next tax year in order to notify the IRS of the gift. The tax year ends every April 15th and therefore returns should be filled before this date.

Threshold for the filling of foreign gift tax form 3520

There are two thresholds for filling this foreign gift tax form; the first threshold is of gifts exceeding $100,000 received from non resident foreigners and given to resident aliens in the U.S. The resident alien could b relatives to the non resident foreigners or may be linked to their estates. The other threshold is of any gifts exceeding $13,258 given to people within the U.S from foreign companies or business entities. The government is usually quite cautious about such gifts as they may be compensations for some unclear dealings given that it is not very common for businesses or co operations to give out gifts any how.

Lastly it is quite important to note that the bottom line of any gift tax is dependent on the donor of the gift, the recipient only has the obligation to fill the necessary form 3520 as a means of informing the authorities of the gift and its possible source.

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if a gift from switzerland for $99,900 to a NON Resident US Alien still have to file the 3520 form?

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