Foreign Inheritance & US International Tax Issues | Form 3520 Lawyer & Attorney Austin Texas
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I’m an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I’m continuing my series of blogs from Austin, Texas. In this series of blogs, I’m talking about the US tax reporting requirements that concern immigrants who came to live and work in Austin.
Today, I would like to discuss a very important topic of foreign inheritance. Foreign inheritance, as I’ve said in one of my seminars, is a Pandora’s box of US tax reporting requirements because it’s not only about the reporting of foreign inheritance itself, but also the continuous reporting requirements that may stem from the original foreign inheritance. These reporting requirements may continue for many many years and can be very diverse; so let’s discuss first things first.
Is foreign inheritance taxable in the United States? The answer is usually ‘no’. Of course, US situs property inherited in the United States may be taxed in the United States and the reporting and taxation requirements, will apply to the foreign estate, not to the person who inherited the asset.
The second question is: Is foreign inheritance reportable in the United States? The answer to this question is absolutely, yes. It is highly important that you disclose your foreign inheritance in a timely manner here in the United States. Failure to do so on form 3520, may lead to the imposition of absolutely humongous penalties, up to 25% of the foreign inheritance. I have seen personally, where the IRS imposed penalties like these and I had to fight them.
The other aspect that I mentioned, are the reporting requirements that are associated with foreign inheritance, because usually people inherit assets. That means foreign assets; that means sometimes foreign financial accounts. It may mean foreign businesses; it may mean a foreign trust or beneficiary interest. It may mean other foreign financial assets likely bonds or bond certificates; it also may mean real estate. These foreign assets, which were inherited, may have and usually do have special reporting requirements associated with each of these assets and sometimes, even if they don’t, aside from the Form 3520 reporting of inherited real estate, there may not be any other reporting requirements for the real estate because personally, there may be income tax reporting requirements that are tied to your Form 3520 compliance and may reappear all of a sudden 10, 15, 20 years later.
In some cases, a foreign inheritance may be tied to an IRS audit and there, it could be very significant. For example, I’ve had audits where we had to go back to the 1980s with respect to foreign inheritance and establishing the fair market value of those assets.
Foreign inheritance is not just one reporting requirement; it’s a whole family of reporting requirements that may come in sometimes at the time of a foreign inheritance as well as after the foreign inheritance.
If you would like to learn more about your foreign inheritance reporting requirements, you can contact me at [email protected] or call me at (952) 500-8159.
Thank you for watching, until the next time.
