Calculating USD Equivalent for a Foreign Gift
3520file editorial
The methods
Three accepted methods for converting a foreign-currency gift to USD on Form 3520:
- Spot rate on date of receipt (preferred, primary).
- Date-of-wire-initiation rate (acceptable for some cases).
- Settlement-day rate from your bank (acceptable, especially for wires).
The IRS accepts any reasonable method as long as it is documented, consistent, and applied to the date of receipt (or the date of constructive control, see below).
Method 1: Spot rate on date of receipt
This is the standard method. Use the closing spot rate for the receipt date from a reputable source.
| Item | Source |
|---|---|
| Major currencies (EUR, GBP, JPY, etc.) | Treasury daily rate or OpenExchangeRates close |
| Emerging-market currencies (BRL, INR, MXN, etc.) | OpenExchangeRates close or your bank rate |
| Restricted/exotic currencies | Treasury quarterly rate or commercial provider with documentation |
This method works for cash, securities, and property transfers when there is a clear date of receipt.
Method 2: Date-of-wire-initiation rate
For wire transfers where you have evidence of the date the donor initiated the wire (not the date you received it), some preparers use the initiation date as the conversion date. This is less common and slightly disfavored by the IRS — the receipt date is the standard.
Use only when:
- The wire was initiated and posted on the same day (no settlement delay).
- You have specific documentation showing the initiation date.
- You apply this method consistently for all gifts.
Method 3: Bank settlement-day rate
Your US bank converted the incoming foreign-currency wire to USD at its own rate when it settled into your account. The settlement-day USD amount is shown on your bank statement.
This method is acceptable and often the easiest. Just use the USD value as recorded by your bank. The IRS accepts your bank's rate as a credible source.
Caveat: bank rates often include a foreign-exchange margin (about 0.5% for major currencies, more for emerging markets). Strictly speaking the gross gift amount is the pre-margin USD value. In practice, the IRS does not adjust for bank margins on individual transactions, so the bank rate is fine.
A worked example using all three methods
Your foreign donor sent €100,000 from a German bank account.
- Donor initiated wire: April 1, 2025. EUR/USD that day: 1.0890.
- Wire posted to your US account: April 4, 2025. EUR/USD that day: 1.0925.
- Your US bank converted and credited: April 4, 2025. Bank rate: 1.0900 (with margin baked in).
| Method | USD Value |
|---|---|
| Date of receipt spot rate | €100,000 × 1.0925 = $109,250 |
| Date of initiation spot rate | €100,000 × 1.0890 = $108,900 |
| Bank settlement rate | $109,000 (bank's credited amount) |
All three are within 0.3% of each other. All three are over $100,000. All three trigger Form 3520. You file with whichever you can document — the most defensible is the date-of-receipt spot rate.
When the methods diverge
For gifts that fall close to the threshold, the methods can give meaningfully different answers. ₹8,200,000 received on a date when:
- OpenExchangeRates close: 0.01210 → $99,220 (below threshold, no filing)
- Treasury daily reporting rate: 0.01215 → $99,630 (below threshold, no filing)
- Bank's actual conversion rate (with margin): 0.01200 → $98,400 (below threshold)
In this case, all three methods give below-threshold answers, so the conclusion is the same.
But for a different number — ₹8,300,000:
- OpenExchangeRates: 0.01210 → $100,430 (above, file)
- Treasury rate: 0.01215 → $100,845 (above, file)
- Bank rate: 0.01200 → $99,600 (below threshold per this method, do not file)
Same gift, different conclusion depending on method. The cautious approach: use the rate that gives the higher USD value, file Form 3520, document your method.
Non-cash gifts
For property (real estate, vehicles, securities, jewelry), the conversion is not a simple FX lookup. You need:
- Fair market value in the foreign currency on the date of receipt (independent appraisal or comparable-market analysis).
- Spot exchange rate to convert that foreign-currency value to USD.
The USD-equivalent calculation requires both numbers. The FX rate alone is not enough.
Our recommendation
Use the OpenExchangeRates close-of-day spot rate for the receipt date. It is:
- The standard for tax-preparer software.
- Available for almost all currencies.
- Auditable (date, source, rate all documented).
- Close enough to the Treasury rate for most cases.
This is what our app does by default. The rate, source, and lookup timestamp are recorded so you can defend the conversion later.
3520file is software, not a CPA firm or law firm. We prepare IRS Form 3520 based on the facts you provide. For advice on your specific situation, talk to a tax attorney or CPA. The above is plain-English explanation, not tax advice.