The Short Answer

1. Is the Money From Your Parents Taxable Income?

Generally, no. Property received as a genuine gift is ordinarily excluded from the recipient’s gross income under federal income tax law.

Suppose your parents in Korea give you $150,000 toward a down payment on a home in the United States. Assuming the payment is a genuine gift, you generally would not include the $150,000 as taxable income on Form 1040.

California generally does not include a gift itself in taxable income either. However, interest, dividends, or other income subsequently earned on the gifted funds can be taxable.

A transfer from a family member is not automatically a gift. If you are expected to repay the money, the arrangement may be a loan, even if everyone informally calls it family help.

2. Who Pays U.S. Gift Tax?

Federal gift tax is generally imposed on the donor, the person giving the property. Receiving money from your parents does not, by itself, make you responsible for a U.S. gift tax payment.

If a parent is a U.S. citizen or is domiciled in the United States for gift tax purposes, the regular U.S. gift tax rules must be considered. A donor who is a nonresident and not a U.S. citizen is generally subject to U.S. gift tax only on certain property situated in the United States.

For such a nonresident noncitizen donor, gifts of U.S.-situated real estate or tangible personal property can be subject to gift tax. Many gifts of intangible property are generally excluded under IRC §2501(a)(2).

This makes the form and location of the funds important. Giving cash physically located in the United States or making a gift by check drawn on a U.S. bank account should not automatically be treated the same as transferring a bank deposit directly from an account abroad. The property classification, its situs, and the point at which the gift is completed may all matter.

For a substantial transfer, it is worth reviewing the structure before moving money into a U.S. account for the purpose of making the gift.

Also, residence for U.S. gift tax purposes is not necessarily the same as residence for income tax purposes. Gift tax residency generally turns on domicile, determined from the surrounding facts.

3. Form 3520 May Be Required Even When No Tax Is Due

Form 3520 is an information return used, among other things, to report certain gifts received from foreign persons.

A U.S. person, including a U.S. citizen or resident alien, generally must report gifts received from nonresident alien individuals or foreign estates when the aggregate amount exceeds $100,000 during the tax year. The reporting is made in Part IV of Form 3520.

The $100,000 amount is not a U.S. gift tax exemption. It is an information-reporting threshold for this category of foreign gifts. Receiving exactly $100,000 is different from receiving more than $100,000.

Living in Korea does not automatically make a parent a foreign person for this purpose. For example, a parent who is a U.S. citizen does not become a nonresident alien simply by sending funds from a Korean bank account. The U.S. donor’s potential Form 709 obligations must be considered instead.

Gifts involving foreign trusts, foreign corporations, or foreign partnerships can be subject to different Form 3520 provisions or thresholds. This guide focuses on a personal cash gift from parents living abroad.

4. What if Each Parent Gives Less Than $100,000?

You cannot necessarily apply the threshold separately to each parent. Gifts from related foreign donors are aggregated for Form 3520 reporting.

For example, suppose you receive $60,000 from your father and $50,000 from your mother during the same year. The combined amount is $110,000. Because the donors are related, the gifts generally exceed the Form 3520 reporting threshold when the other requirements are met.

Multiple transfers from the same donor during the year must also be considered together.

Once the reporting threshold is exceeded, individual gifts of more than $5,000 generally must be separately identified in Part IV, including the date and amount. If funds arrive in several installments, keep records showing each transfer and the actual donor.

5. When Is Form 3520 Due, and What Happens if You Miss It?

For an individual who uses the calendar year, Form 3520 is generally due on April 15 of the following year. A properly obtained extension for the individual income tax return can generally extend the Form 3520 deadline to October 15. Certain U.S. citizens or residents living outside the United States and Puerto Rico whose place of business or post of duty is also abroad, as well as qualifying military or naval personnel on duty abroad, generally have until June 15 to file Form 3520. They must attach a statement establishing their eligibility. Even with a valid income tax filing extension, Form 3520 is due no later than October 15.

Form 3520 is filed separately from Form 1040. You do not report a genuine gift as taxable income on Form 1040 simply because Form 3520 is required.

Under IRC §6039F(c), a failure to report can generally lead to a penalty of 5% of the unreported gift amount per month, up to 25%. Relief may be available if reasonable cause is established, but saying you did not know about the filing requirement does not automatically eliminate the penalty.

That is why the reporting question matters even when the gift itself creates no U.S. income tax.

6. Taxes and Transfer Rules Abroad Are a Separate Question

This guide focuses on U.S. federal tax and California individual income tax. A gift from parents abroad may also involve gift tax, bank documentation, or foreign-exchange reporting requirements in their home country.

The fact that a gift is not U.S. taxable income, or that only Form 3520 reporting is required in the United States, does not establish that it is exempt abroad. Before making the transfer, confirm the applicable rules with an adviser and financial institution in the relevant country.

7. Does Moving Money Into the United States Make It Taxable?

A cross-border transfer does not, by itself, create a new item of U.S. taxable income. The underlying transaction still matters: was it a gift or a loan, who actually provided the funds, and when was the gift completed?

Routing personal funds through a family company or another third-party account can complicate identification of the true donor and the applicable reporting category. Purported gifts from foreign corporations or partnerships can have different Form 3520 thresholds and consequences.

Foreign-bank source-of-funds requirements are separate from U.S. Form 3520 reporting. If a closing date is approaching, check both the sending bank’s and the mortgage lender’s documentation requirements before the funds are transferred.

8. What Does a Mortgage Lender Need in a Gift Letter?

A mortgage lender needs to determine whether the funds are truly a gift and whether the borrower has any obligation to repay them.

Under Fannie Mae’s personal-gift guidance, gift funds from an eligible donor may be used for certain home purchases, including eligible down payments and closing costs. The rules depend on the loan program, occupancy, and property type; gifts are not permitted for investment-property transactions under those guidelines.

A gift letter generally must identify the amount, the donor’s name, address, telephone number, relationship to the borrower, and state that no repayment is expected. It must be signed by the donor.

The lender may also require evidence of the donor’s funds and the transfer, such as account records or electronic-transfer documentation. A deposit into the borrower’s U.S. bank account does not necessarily satisfy every underwriting requirement.

A gift letter serves the lender’s underwriting process. Form 3520 serves an IRS information-reporting purpose. Completing one does not replace the other.

9. What if the Money Is Actually a Loan?

If your parents expect to be repaid, the arrangement may be a loan rather than a gift.

Telling the lender that the funds are an unconditional gift while privately agreeing to repay them creates a conflict between the documentation and the actual arrangement.

A genuine loan may require review of its principal, interest, repayment terms, and payment history. The mortgage lender may treat it as a borrower liability. Interest-free or below-market loans can also raise separate tax questions.

Decide whether the funds are a gift or a loan first, and make sure the documents reflect what is actually agreed upon.

10. What if Your Parents Buy the House or Take Joint Title?

Your parents giving you cash to buy a home in your own name is not the same transaction as your parents acquiring an ownership interest in the property.

Direct or joint ownership can introduce separate questions involving U.S. property ownership, a future sale, rental income, and estate tax. Both arrangements may provide family support, but their tax consequences are not interchangeable.

This guide addresses a cash gift. A purchase or co-ownership arrangement involving the parents requires a separate analysis.

11. Records to Gather Before the Transfer

It is generally easier to collect the tax and mortgage documentation together before the transfer than to reconstruct it after closing.

• The parents’ U.S. citizenship status and facts relevant to gift-tax domicile
• Whether the transfer is a gift or a loan, who actually provided the funds, and their source
• When the gift was completed and how the money moved between accounts
• Other foreign gifts received during the year, including gifts from related donors
• Any tax or foreign-transfer requirements in the sending country, if applicable
• The lender’s gift letter, proof of funds, and transfer records
• Whether Form 3520 is required and its filing deadline

Common Mistakes

“Money my parents send from Korea is automatically taxable income in the United States.”
A genuine gift is generally not taxable income to the recipient. Foreign-gift reporting on Form 3520 is a separate question.

“If no U.S. gift tax is due, I do not need Form 3520.”
Gift tax liability and foreign-gift information reporting are different rules. Form 3520 may still be required even when no tax is due.

“Each parent gave less than $100,000, so there is nothing to report.”
Gifts from related foreign donors are aggregated for the reporting threshold. Splitting a gift between parents does not automatically avoid filing.

“I have a gift letter, so the tax paperwork is finished.”
A gift letter supports the mortgage application. It does not replace a Form 3520 filing when that form is required.

“We can call it a gift now and repay my parents later.”
If there is a genuine obligation to repay, the arrangement may be a loan. The actual repayment agreement should not contradict the gift letter.

The Key Distinction

1. A genuine gift is generally not taxable income to the U.S. recipient, but Form 3520 reporting must be evaluated separately.

2. U.S. gift tax generally concerns the donor, while Form 3520 is a separate information return for the recipient. Gifts from related foreign donors may need to be combined.

3. Before the transfer, establish whether the funds are a gift or loan, identify who is making the transfer and when, and confirm what the lender will require.

Your parents’ help may make the home purchase possible. The structure of that help, and the records supporting it, should be decided before the money moves.

Reference

U.S. Gift Tax and Foreign Gift Reporting

IRS — Gifts from Foreign Persons
IRS overview of foreign gifts, related-donor aggregation, Form 3520 thresholds, filing deadlines, and penalties.

IRS — Instructions for Form 3520
Detailed guidance on the Part IV $100,000 threshold, related donors, identifying individual gifts, and filing requirements.

IRS — Gift Tax
Overview of donor-level gift tax, gift-tax domicile, and the distinction between Forms 709 and 709-NA.

IRS — Gift Tax for Nonresidents Not Citizens of the United States
Official guidance distinguishing gifts of U.S.-situated tangible property from generally excluded intangible property.

IRS — Gift Tax FAQs for Nonresident Noncitizens
Additional IRS guidance on donor liability, taxable transfers, and reporting rules for nonresident noncitizens.

Mortgage Documentation and California

Fannie Mae Selling Guide — Personal Gifts
Guidelines on eligible gift funds, acceptable donors, gift-letter requirements, and verification of funds and transfers.

California FTB — Gifts and Inheritance
California guidance distinguishing a nontaxable gift itself from income earned on gifted assets.

Related Tax Guide

Buying a Home: What Actually Changes on Your Tax Return?

How your down payment is funded is only one part of the home-purchase tax picture. This guide explains how mortgage interest, property taxes, closing costs, and basis may affect your return after the purchase.