Do foreign gifts in Form 3520 apply to receiving real estate in foreign countries?

Thanks for clarifying! Do you know if I need to get an official appraisal of the property to determine its exact value for the form? And what about the timing - if my uncle starts the transfer process in December 2024 but it doesn't complete until January 2025, which tax year would this fall under?

For reporting purposes, you should have documentation supporting the fair market value of the property. While a formal appraisal is ideal, sometimes recent comparable sales or a realtor's professional estimate can be sufficient. The IRS wants reasonable accuracy, but understands valuation can be complicated for foreign property. The timing question is important - what matters is when you acquire beneficial ownership of the property. If legal title doesn't transfer until January 2025 and you don't have control of the property until then, it would be reported on your 2025 tax return (filed in 2026). The form follows the timing of when you actually receive the gift, not when the process started.

This is really helpful, thanks! I have a couple follow-up questions. First, do I need to get an official appraisal done for IRS purposes, or would the Japanese property tax assessment be sufficient? Second, if the transfer process starts in December but doesn't finalize until February 2025, which tax year would I report this in?

You don't necessarily need a formal US-style appraisal, but you do need reasonable documentation of the property's fair market value. A Japanese property tax assessment might be acceptable if it reflects actual market value (in some countries, tax assessments are significantly lower than market values). Other documentation could include a recent professional appraisal done in Japan, comparable sales data, or a formal opinion letter from a licensed real estate professional in Japan. For the timing question, you would report this on your 2025 tax return (filed in 2026) if the transfer doesn't legally complete until February 2025. What matters is when

Did you have any issues with the language barrier? My situation is with property in Korea and all the documents are in Korean. I'm wondering if taxr.ai can handle foreign language documents or if I need translations first?

I'm skeptical about these AI tools for tax stuff. How accurate was it really? Did you have a tax professional review it afterward? I'm dealing with a similar situation with property in Portugal and I'm nervous about relying on software for something this complex.

The tool handled the Greek documents surprisingly well - it extracted the key information and provided translations of the important parts. I think it works with multiple languages, but you might want to check if Korean is specifically supported. If not, having key sections translated might help. I was also skeptical at first, but it was actually very accurate. I did have my accountant review everything afterward, and he was impressed with how thorough the analysis was. He only made minor adjustments to how we reported the valuation. The software specifically helped identify which parts of Form 3520 applied to real estate transfers versus cash gifts, which was confusing in the IRS instructions.

How does this actually work? Do they just keep calling until they get through or do they have some special connection to the IRS? Seems too good to be true that they can just magically get through when everyone else is stuck on hold for hours.

This sounds like a scam. Why would I give my personal tax information to some random service? I bet they're just collecting data to sell or using it for identity theft. No way the IRS would approve of this.

It works by using automated technology to dial and navigate through the IRS phone system. When you set it up, you tell it which department you need to reach, and it handles the calling and waiting parts automatically. Once an agent answers, it calls your phone and connects you directly to that live agent. There's no special connection - they're just handling the tedious waiting part for you. I had the exact same concerns about security. They don't actually receive any of your tax information - they're just connecting the call. When the IRS agent comes on the line, that's when you join the call and provide your information directly to the IRS. The service doesn't listen in or collect any tax data from you. It's essentially just a sophisticated call routing service.

That's a great point I hadn't considered. Do you know if there's any way to offset those foreign taxes paid against US tax obligations? And did you have to hire a local tax professional in Germany to handle that side of things?

Yes, you may be able to claim a foreign tax credit on your US taxes for any transfer/gift taxes paid to the foreign government. This requires filing Form 1116 along with your regular tax return. The credit can help offset your US tax liability, though there are limitations based on your overall tax situation. I did end up hiring a local tax professional in Germany, and it was worth every penny. Tax systems vary dramatically between countries, and having someone who understands both the local laws and how they interact with US reporting requirements was invaluable. In my case, there was a reduced tax rate available for family transfers that I wouldn't have known about otherwise.

For IRS purposes, you should use the fair market value - which means what the property would sell for in an arm's length transaction. The Thai government's tax assessment value likely won't be accepted if it's significantly below market value. While a formal international appraisal is the safest approach, sometimes you can use alternative documentation: recent sales of comparable properties in the same area, a letter from a local real estate agent with their professional opinion of value, or sometimes even online valuation tools that are recognized in that country. Whatever method you use, document your approach thoroughly and keep all supporting evidence in case of questions.

Omg that's terrifying! Did she try getting help from the Taxpayer Advocate Service? I've heard they can sometimes intervene in these penalty situations especially if there was genuine confusion about the requirements.

She did contact the Taxpayer Advocate Service, and they were helpful in getting the IRS to actually review her reasonable cause argument. The process is still ongoing, but they've at least gotten the collection activities paused while they review her case. The TAS representative explained that the IRS considers several factors for reasonable cause: whether she tried to learn about filing requirements, if there was a history of compliance with other tax obligations, and if this was her first time dealing with international tax issues. Having documentation of her efforts to understand the requirements has been crucial to her case.

Thank you for bringing this up. The property isn't currently being rented out, but I might want to do that in the future. Is there a good resource you found that explains all these different forms? I feel like I'm discovering new requirements every day.

The IRS has a decent publication called "U.S. Citizens and Resident Aliens Abroad" (Publication 54) that covers many of these requirements. There's also a specific section on their website about international taxpayers that lists the various forms. I found the most comprehensive help came from a tax attorney who specializes in international taxation. It was expensive, but worth it for the initial setup year. Once I understood all the requirements, I was able to handle most of it myself in subsequent years using tax software that supports international situations. Just be aware that not all tax software handles these specialized international forms well - you might need to use one of the more comprehensive packages.