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Fill out paperwork for foreign gifts

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in Small Business Tax

Q: My elderly father lives in Spain and plans to give large financial gifts to our family this year. Are there any special IRS requirements we must meet? T.D., Vero Beach, Fla.

A: Yes. If you receive foreign gifts totaling more than $12,097 in 2004 (this figure is adjusted annually for inflation), you must provide the IRS with this information on Form 3520 (Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts). If you fail to file the form, the IRS could hit you with an excise penalty equal to five percent of the gift's value each month it's not reported (up to a maximum of 25 percent). Tip: You no longer need to attach Form 3520 to your return, but it's still due by your tax-return due date, including extensions.

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