Instructions For Form 3520 - Annual Return To Report Transactions With Foreign Trusts And Receipt Of Certain Foreign Gifts - 2008

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Department of the Treasury
Internal Revenue Service
Instructions for Form 3520
Annual Return To Report Transactions With Foreign Trusts
and Receipt of Certain Foreign Gifts
such foreign corporations or foreign partnerships) that you
Section references are to the Internal Revenue Code unless
treated as gifts.
otherwise noted.
Complete the identifying information on page 1 of the
form and Part IV. See the instructions for Part IV.
What’s New
Note. You may also be required to file Form TD F 90-22.1,
Line 57 of the form is new. U.S. persons who receive a
Report of Foreign Bank and Financial Accounts.
covered gift or bequest of more than $12,000 from a
covered expatriate are subject to a new tax under section
Exceptions To Filing
2801. See the instructions for line 57 for details.
Form 3520 does not have to be filed to report the following
transactions.
General Instructions
Transfers to foreign trusts described in sections 402(b),
404(a)(4), or 404A.
Purpose of Form
Most fair market value (FMV) transfers by a U.S. person
to a foreign trust. However, some FMV transfers must
U.S. persons (and executors of estates of U.S. decedents)
nevertheless be reported on Form 3520 (e.g., transfers in
file Form 3520 to report:
exchange for obligations that are treated as qualified
Certain transactions with foreign trusts and
obligations, transfers of appreciated property to a foreign
Receipt of certain large gifts or bequests from certain
trust for which the U.S. transferor does not immediately
foreign persons.
recognize all of the gain on the property transferred,
A separate Form 3520 must be filed for transactions with
transfers involving a U.S. transferor that is related to the
each foreign trust.
foreign trust). See Section III of Notice 97-34, 1997-25 I.R.B.
22.
Who Must File
Transfers to foreign trusts that have a current
determination letter from the IRS recognizing their status as
File Form 3520 if:
exempt from income taxation under section 501(c)(3).
1. You are the responsible party for reporting a
Transfers to, ownership of, and distributions from a
reportable event that occurred during the current tax year, or
Canadian registered retirement savings plan (RRSP) or a
you held an outstanding obligation of a related foreign trust
Canadian registered retirement income fund (RRIF), where
(or a person related to the trust) that you treated as a
the U.S. citizen or resident alien holding an interest in such
qualified obligation during the current tax year. Responsible
RRSP or RRIF is eligible to file Form 8891, U.S. Information
party, reportable event, and qualified obligation are defined
Return for Beneficiaries of Certain Canadian Registered
on pages 3 and 4.
Retirement Plans, with respect to the RRSP or RRIF.
Complete the identifying information on page 1 of the
Distributions from foreign trusts that are taxable as
form and the relevant portions of Part I. See the instructions
compensation for services rendered (within the meaning of
for Part I.
section 672(f)(2)(B) and its regulations), so long as the
2. You are a U.S. person who, during the current tax
recipient reports the distribution as compensation income on
year, is treated as the owner of any part of the assets of a
its applicable federal income tax return.
foreign trust under the grantor trust rules.
Distributions from foreign trusts to domestic trusts that
Complete the identifying information on page 1 of the
have a current determination letter from the IRS recognizing
form and Part II. See the instructions for Part II.
their status as exempt from income taxation under section
3. You are a U.S. person who received (directly or
501(c)(3).
indirectly) a distribution from a foreign trust during the
Domestic trusts that become foreign trusts to the extent
current tax year or a related foreign trust held an
the trust is treated as owned by a foreign person, after
outstanding obligation issued by you (or a person related to
application of section 672(f).
you) that you treated as a qualified obligation (defined on
page 3) during the current tax year.
Joint Returns
Complete the identifying information on page 1 of the
form and Part III. See the instructions for Part III.
Two transferors or grantors of the same foreign trust, or two
4. You are a U.S. person who, during the current tax
U.S. beneficiaries of the same foreign trust, may file a joint
year, received either:
Form 3520, but only if they file a joint income tax return.
a. More than $100,000 from a nonresident alien
individual or a foreign estate (including foreign persons
Additional Reporting Information
related to that nonresident alien individual or foreign estate)
that you treated as gifts or bequests; or
For more information on foreign trust reporting, including
abusive foreign trust schemes, go to the IRS website at
b. More than $13,561 from foreign corporations or
foreign partnerships (including foreign persons related to
Cat. No. 23068I

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