Ezel / IRS Rulings / 201402010

Penalties for unreported foreign gifts and interests

Number
201402010
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Notice of Large Gifts Received from Foreign Persons
Topics
Procedure, penalties, and administration
Code sections
§ 6039F, § 6501
Ruling dated
September 6, 2013
Publicly released
January 10, 2014
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2014, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2014
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

The Chief Counsel advice addresses penalties for failing to report a large foreign gift on Form 3520. It states that the assessment period has not begun when a taxpayer has not filed the form, and that the IRS may assess a penalty of 5 percent, up to 25 percent, of the unreported gift under section 6039F. It also explains that if the failure to file Form 5471 was willful rather than due to reasonable cause, section 6501(c)(8) keeps the assessment period open for an adjustment involving unreported interest income.

Ruling snapshot

  • Question: Can the IRS assess penalties and make an income adjustment when Forms 3520 and 5471 were not filed?
  • Outcome: Advice given
  • Key authorities: IRC §§ 6039F(c)(1)(B), 6501(c)(3), and 6501(c)(8)

Full text (IRS public release)

ID: CCA_2013090614055395
UILC: 6039F.00-00

Number: 201402010
Release Date: 1/10/2014
From:
Sent: Friday, September 06, 2013 2:05:53 PM
To:
Cc:
Bcc:
Subject: Request for assistance under 6039F and 6501

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You asked us whether the Service can assess a penalty for the two tax years at issue with respect to the taxpayers’ failure to file a Form 3520 under section 6039F. Under section 6501(c)(3), the statute of limitations has not begun to run in the case where a U.S. taxpayer has not filed a Form 3520 reporting the receipt of a large gift from a foreign person, and pursuant to section 6039F(c)(1)(B), the Service may assess a 5% penalty (up to 25%) on the amount of the unreported gift.

In addition, if the taxpayers' failure to file Form 5471 for the ------- tax year was due to willful neglect and not due to reasonable cause, under section 6501(c)(8), the statute would remain open for the Service to also make an adjustment for the unreported interest income for that tax year.

Please let me know if you have any additional questions.

Best,
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