Foreign Assets

Foreign Assets, Gifts & Ownership

1.1.1

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Gifts Received

1.1.2

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Gifts Made

1.1.3

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Foreign Passive Investments

1.1.4

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A practical tool designed to help identify U.S. international information reporting requirements based on ownership thresholds.

This page focuses specifically on reporting requirements related to Foreign Financial Assets, Gifts (received and made), and Foreign Passive Interests, providing a structured way to identify when U.S. international information reporting is required in these areas.

Within each category, reporting requirements are presented as flashcards, each tied to a specific triggering condition.

Each flashcard follows a consistent structure. The front of the card describes the relevant fact pattern or ownership threshold, while the back identifies the required IRS form or forms.

This format allows tax professionals to quickly match a client’s facts to the applicable reporting obligation and determine the correct forms to include with the tax return.

1.1 FOREIGN FINANCIAL ASSETS

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Had financial interest in or signature authority over foreign financial account(s) AND the aggregate maximum value exceeds $10,000 at any time during the calendar year.

FinCEN Form 114 - Report of Foreign Bank and Financial Accounts (FBAR)

The FBAR is a separate filing requirement from the federal income tax return. It is filed electronically with the Financial Crimes Enforcement Network (FinCEN), not with the IRS.
The FBAR is not attached to Form 1040 or any other income tax return. Most software can generate the form and e-file it with FinCEN along with the Form 1040.
The $10,000 threshold applies to the aggregate maximum value of all foreign financial accounts

Lived in the United States, and the total value of your foreign financial assets exceeded the applicable threshold: Single / MFS / HH more than $50,000 at year-end or more than $75,000 at any time during the year; MFJ more than $100,000 at year-end or more than $150,000 at any time during the year.

Form 8938 — Statement of Specified Foreign Financial Assets

Form 8938 is filed with the IRS and attached to the individual income tax return.
Higher reporting thresholds apply to individuals living outside the United States.
Foreign assets may also be reportable on the FBAR, depending on asset type

Lived outside the United States, and the total value of foreign financial assets exceeded the applicable threshold: Single / MFS / HH $200,000 at year-end or $300,000 at any time during the year; MFJ $400,000 at year end, or $600,000 at any time during the year

Form 8938 — Statement of Specified Foreign Financial Assets

Form 8938 applies to U.S. individuals who meet the IRS definition of living abroad
Reporting thresholds depend on filing status and U.S. residency.
Some assets may be reportable on both Form 8938 and the FBAR, but the requirements are separate

1.2 GIFTS RECEIVED

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Received gifts or inheritances from a foreign individual or foreign estate totaling more than $100,000 during the year.

Form 3520 — Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts

Form 3520 is used to report certain foreign gifts and inheritances received by U.S. individuals.
The $100,000 threshold applies to the aggregate amount received during the year.
Form 3520 is filed separately from the individual income tax return

Received gifts from a foreign corporation totaling more than $19,570 during the year.

Form 3520 - Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts

Form 3520 is required to report certain gifts received from foreign corporations
The reporting threshold applies to the aggregate value of gifts received during the year.
Form 3520 is filed separately from the individual income tax return.

1.3 GIFTS MADE

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Made gifts to a foreign individual or to a foreign partnership that exceed $19,000 per recipient, or $38,000 per recipient if married and electing to split gifts.

Form 709 — United States Gift (and Generation-Skipping Transfer) Tax Return

Form 709 is required to report gifts that exceed the annual exclusion (for both US and international gifts).
Gifts to partnerships are treated as gifts to the individual partners based on ownership interests.
Gift tax may not be owed if the lifetime exemption applies, but filing may still be required.
Form 709 is filed separately from the individual income tax return.

Made gifts to a spouse who was not a U.S. citizen that exceeded the 2025 annual exclusion of $190,000 during the year.

Form 709 — United States Gift (and Generation-Skipping Transfer) Tax Return

Form 709 is filed separately from the individual income tax return.
Gifts to a non-U.S. citizen spouse do not qualify for the unlimited marital deduction.
In 2025, the special annual exclusion for gifts to a non-U.S. citizen spouse was $190,000.

1.4 FOREIGN PASSIVE INVESTMENTS

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U.S. person owns shares in a PFIC and the aggregate value of PFIC stock exceeds $25,000 (single) or $50,000 (MFJ)

Form 8621 - Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund

Form 8621 has some of the most complex reporting and calculation requirements in international tax
May overlap with FBAR and Form 8938.
A PFIC can also be a Controlled Foreign Corporation (CFC). If the entity is a CFC, PFIC rules may not apply.
Instead, income may be reported under Subpart F and/or GILTI

U.S. person owns shares in a PFIC* and receives a distribution or sells, exchanges, or disposes of the PFIC

Form 8621 - Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund

Form 8621 is required to report distributions and dispositions of PFIC stock
Distributions are analyzed to determine if they are excess distributions*
Excess distributions and gains on sale are subject to:
- income allocation over holding period
- tax at highest ordinary rates for prior years
- interest charges (PFIC penalty regime)

U.S. person owns shares in a PFIC* and makes a Qualified Electing Fund (QEF) or Mark-to-Market Election

Form 8621 - Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund

Form 8621 may also be filed to make an election to reduce the tax implications of the excess distribution PFIC tax regime.
The election should be made in the first year. A late election will require a purging election and an excess distribution calculation at that time.
The Qualified Electing Fund (QEF) election requires the cooperation of the Foreign Financial Fund to ensure it is providing the taxpayer with the necessary statements that the IRS requires.
Mark-to-Market (MTM) treats unrealized gains as ordinary income. MTM avoids the excess distribution regime, but may accelerate income recognition

PFIC - Passive Foreign Investment Company

A foreign company is a PFIC if it meets either:

the income test = 75% or more of gross income is passive, such as dividends, interest, or royalties or
the asset test = 50% or more of assets produce/are held to produce passive income

Excess Distribution*:

The amount of a distribution that exceeds 125% of the average distributions received in the prior 3 years (or holding period, if shorter)