Foreign Grantor Trusts - 2010 HIRE ActPage 2
Under the “Act”, if the value of the aggregate “foreign gifts”received by a U.S. person during any tax year exceeds $10,000, theU.S. person must report each foreign gift to the IRS. A “foreign gift” isany amount received from a non-U.S. person which the recipienttreats as a gift or bequest. The term “foreign gift” does not includequalified tuition or medical payments made on behalf of a U.S. personor any distribution properly disclosed on a return.If a U.S. person fails, without reasonable cause to report theforeign gift within designated time, the IRS is authorized to determinethe treatment of the unreported gifts. The IRS’s authority to make adetermination of reasonableness will be subject to judicial reviewunder an arbitrary or capricious standard, which provides a highdegree of deference to its determination. In addition, the U.S. personis subject to a penalty of 5% of the amount of the gift for each monththat the failure continues, limited to a total penalty of 25% of theamount.
Amounts received after date of enactment of the 1996 Act in taxyears ending after date of enactment of the 1996 Act.Small Business Job Protection Act of 1996, Sec. 1905. IRC §6939F.
Information Reporting Requirement and Penalties -
Prior to the Act, any U.S. person who created a foreign trust or transferred money or property to a foreign trust was required to reportthat event to the IRS without regard to whether the trust was agrantor or a nongrantor trust. Such persons were required to report,