The Internal Revenue Service (IRS) does not require you to declare your gifts or inheritances that you received during the tax year on your Federal income tax returns unless you fall within a few exceptions. In most cases, as the recipient of a gift or inheritance, you do not have to pay income taxes on those gifts. Instead, the donor of the gift pays income taxes if his gift exceeds the annual threshold. For the 2011 tax year, the annual gift limit is $13,000 per recipient. Thus, a donor does not have to pay income taxes if his gift per recipient is up to $13,000. However, if you receive a foreign gift, you may have to report it on IRS Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. It is important to understand your responsibilities as a U.S. resident receiving a foreign gift.
Note that the federal tax law is not an income tax paying requirement; it is a reporting requirement. This means that your legal obligation as a U.S. resident is to report it in some cases (depending on the dollar amount and type of gift donor). Under the Internal Revenue Code, the IRS does not require you to pay federal income taxes on your foreign gifts. It is also important to understand the IRS’ definition of a “foreign gift.” A foreign gift is a gift of property or money received from a foreign individual or entity by a U.S. resident.
Stephen A. Mendel, Estate Planning Attorney
Latest posts by Stephen A. Mendel, Estate Planning Attorney (see all)
- Famous Estates-Champ or Chump? Jane Fonda - September 13, 2019
- Texas Trivia – Name the first of six flags to fly over Texas. - September 6, 2019
- Famous Estates-Champ or Chump? Paul Walker - August 30, 2019
