We have clients who received $4 million from their father-in-law that he passed away in 2017. Is this money are taxable and reportable? Would the $549000.00 life time exclusion be applicable. The clients are US citizens and their father-in-law was a foreigner and lived in Hong Kong. Hong Kong has no estate tax. In this case, the $4million fund would it be reported on the clients tax return of 2017? We need some input of opinions.
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Here is some guidance
Starting point is that inheritances are not taxable income. However you may have some foreign reporting requirements.
At a minimum look at Form 3520 as that will be needed as the inheritance is greater than $100,000.
Could also be FBAR and Form 8938 reporting needed if the funds were distributed in Hong Kong to beneficiary owned accounts before the funds were moved to the US.
Also see if there is any income due/earned by the beneficiaries whilst the funds were in the estate.
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