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I am a US citizen and a permanent resident living in the US. My family resides in Iran. My father which is a non-resident alien is currently supporting me financially and lives in Iran.

Due to OFAC sanctions, funds (gifts for financial support) cannot be transferred directly from my father's bank account in Iran to my bank account in the US. The funds (gifts) have to be transferred via a third country and using bank accounts which do not belong to my father. For example, my father would ask friends residing in Europe to send me funds from their European bank accounts and in turn my father would deposit funds into their accounts in Iran. I have already spoken to OFAC officials - such transfers are permitted from their end.

1) Would these transfers qualify as "Gifts from Foreign Persons” and therefor not be subject to income tax? Would I need any documentation to prove that these transfers are “Gifts from Foreign Persons” and not income?

(as defined on your website: https://www.irs.gov/businesses/gifts-from-foreign-person)

2) I understand that if I receive more than $100,000 in a given tax year from an individual (or a collection of individuals which are related) I’d have to file the 3520 Form. My question is that if different individuals who are not related send me an amount less than $100,000 each - but I receive a total of over $100,000 in a given tax year from different individuals sending me funds on behalf of my father, would I have to file the 3520 Form with my father listed as the ‘indirect’ sender of the funds?

Thanks!

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(1) Yes. No.

(2) You should file 3520. You do not need to identify the sender. The purpose of the form is to itemize any related gifts from a foreign source. Since the gifts are related, they should be itemized together.

Note that the form contains a trap. In Section IV, the gift section, it reads "property received". In US tax law transfers of tangible property are taxable, even if they are from a foreign source. The IRS is trying to trick you into declaring a gift of "property" so they can justify taxing it. In one case, the IRS sued a person for receiving a gift of cash (federal reserve notes) from a foreign relative because the Federal Reserve notes were "tangible" according to them. LOL. It's absurd. IRS agents are paid on commission so they will try anything.

The right procedure is to list the gifts in Section IV, but cross out the word "property" wherever it appears in the form and write "intangible funds". Section IV, part 54, only contains 3 lines. If you received more transfers than this, then write "(see attached)" in Part 54 and attach a separate sheet of paper that states "I received intangible funds in the following amounts", and then just list the amounts and the date received. The dates should match the entries in your bank account.

I suggest making a notarized copy and sending it certified mail. That way they can't lie and say they never received it.

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  • Thank you! I've been reading the language over and over and I can only see that the file 3520 is required if the senders are related and not if the gifts themselves are related. Is that incorrect? – IndividualThinker Apr 29 at 3:10
  • "You must aggregate gifts received from related parties. For example, if you receive $60,000 from nonresident alien A and $50,000 from nonresident alien B, and you know or have reason to know they are related, you must report the gifts because the total is more than $100,000." – IndividualThinker Apr 29 at 3:11
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    Your type of gift involves "related parties" since the money is coming from one person. All you need to do is what I said: list each transfer and date it. You do not have to do anything else. – Five Bagger Apr 29 at 21:53

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