Gift from overseas

[TaxmannEA]

I just had clients ask me about 2 items that involve the family in Malaysia. Husband and wile are both US citizens. Husband received  $50K from elderly father in Malaysia as a gift. I assume that it's not includable in income, but is there any reporting required as it came from a foreign country? It was never his money, so I'm assuming not, but I want to be sure.

The second question has to do with the wife owning a condo in Malaysia worth about $60K. She doesn't collect rent as family is living in it, but does she need to report the asset anyway? I know that there are those on this board that know a lot more about this area than I do.

[Max W]

If the foreign cash gift is under $100K, there is no reporting.  Over $100K, file form 3520.

As for the condo, as long as she is the owner and not a foreign corp, only financial assets have to be reported.  Of course if she starts receiving rental income, that would have to be reported.

Be sure to ask if they have any foreign bank accounts that had a value of over $10K any time during the year.  The penalties are steep for not reporting.

https://www.irs.gov/businesses/corporations/basic-questions-and-answers-on-form-8938#CashQ2

[Catherine]

2 hours ago, Max W said:

The penalties are steep for not reporting.

Not quite, Max W - the penalties are VICIOUS.  They start at 50% of the maximum value during the year and go UP from there.  And that instance is for negligence (forgetting to report), rather than intention not to report.

[TaxmannEA]

Thanks to you both. I'm just about fried from the client load and just couldn't get my head around this. I'll double check about the condo. They had told me that they had no bank accounts overseas and I believe them. They've always been straight, just a little hard to understand sometimes.