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such statement did not contain all six of the items specified

should be treated for U.S. tax purposes as owned by

under the instructions for line 29 or line 30 below.

another person. This statement is not necessary if the trust

has appointed a U.S. agent.

Line 25. If you, or a person related to you, received a loan

6. A statement as to whether the foreign trust has

from a related foreign trust, it will be treated as a distribution

appointed a U.S. agent (defined on page 4). If the trust has

to you unless the obligation you issued in exchange is a

a U.S. agent, include the name, address, and taxpayer

qualified obligation.

identification number of the agent.

For this purpose, a loan to you by an unrelated third party

that is guaranteed by a foreign trust is generally treated as a

Line 30. If “Yes,” attach the Foreign Nongrantor Trust

loan from the trust.

Beneficiary Statement from the foreign trust. A Foreign

Nongrantor Trust Beneficiary Statement must include the

Line 25, column (e). Answer “Yes” if your obligation

following items:

given in exchange for the loan is a qualified obligation

(defined on page 3).

1. An explanation of the appropriate U.S. tax treatment

of any distribution or deemed distribution for U.S. tax

Line 26. See Lines 12 and 26 on page 5.

purposes, or sufficient information to enable the U.S.

Line 27. Penalties may be imposed for failure to accurately

beneficiary to establish the appropriate treatment of any

report all distributions received during the current tax year.

distribution or deemed distribution for U.S. tax purposes.

See Penalties on page 2.

2. A statement identifying whether any grantor of the

trust is a partnership or a foreign corporation. If so, attach an

Line 28. Provide information on the status of any

explanation of the relevant facts.

outstanding obligation to the foreign trust that you reported

3. A statement that the trust will permit either the IRS or

as a qualified obligation in the current tax year. This

the U.S. beneficiary to inspect and copy the trust’s

information is required in order to retain the obligation’s

permanent books of account, records, and such other

status as a qualified obligation. If relevant, attach a

documents that are necessary to establish the appropriate

statement describing any changes to the terms of the

treatment of any distribution or deemed distribution for U.S.

qualified obligation. If the obligation fails to retain the status

tax purposes. This statement is not necessary if the trust

of a qualified obligation, you will be treated as having

has appointed a U.S. agent.

received a distribution from the foreign trust, which must be

4. The Foreign Nongrantor Trust Beneficiary Statement

reported as such on line 25. See Section V(A) of Notice

97-34.

must also include items 1, 4, and 6, as listed for line 29

above as well as basic identifying information (e.g., name,

Lines 29 and 30. If any of the six items required for the

address, TIN, etc.) about the foreign trust and its trustee.

Foreign Grantor Trust Beneficiary Statement (see Line 29

below) or for the Foreign Nongrantor Trust Beneficiary

Statement (see Line 30 below) is missing, you must check

Schedule A—Default Calculation of Trust

“No” on line 29 or line 30, as applicable.

Distributions

Also, if you answer “Yes” to line 29 or line 30, and the

If you answered “Yes” to line 30, you may complete either

foreign trust or U.S. agent does not produce records or

Schedule A or Schedule B. Generally, however, if you

testimony when requested or summoned by the IRS, the

complete Schedule A in the current year (or did so in the

IRS may redetermine the tax consequences of your

prior years), you must continue to complete Schedule A for

transactions with the trust and impose appropriate penalties

all future years, even if you are able to answer “Yes” to line

under section 6677.

30 in that future year. (The only exception to this

consistency rule is that you may use Schedule B in the year

Line 29. If “Yes,” attach the Foreign Grantor Trust

that a trust terminates, but only if you are able to answer

Beneficiary Statement (page 4 of Form 3520-A) from the

“Yes” to line 30 in the year of termination.)

foreign trust and do not complete the rest of Part III with

respect to the distribution. If a U.S. beneficiary receives a

Line 32. To the best of your knowledge, state the number

complete Foreign Grantor Trust Beneficiary Statement with

of years the trust has been in existence as a foreign trust

respect to a distribution during the tax year, the beneficiary

and attach an explanation of your basis for this statement.

should treat the distribution for income tax purposes as if it

Consider any portion of a year to be a complete year. If this

came directly from the owner. For example, if the distribution

is the first year that the trust has been a foreign trust, do not

is a gift, the beneficiary should not include the distribution in

complete the rest of Part III (you do not have an

gross income.

accumulation distribution).

In addition to basic identifying information (i.e., name,

Line 33. Enter the total amount of distributions that you

address, TIN, etc.) about the foreign trust and its trustee,

received during the 3 preceding tax years (or the number of

this statement must contain these items:

years the trust has been a foreign trust, if less than 3). For

1. The first and last day of the tax year of the foreign

example, if a trust distributed $50 in year 1, $120 in year 2,

trust to which this statement applies.

and $150 in year 3, the amount reported on line 33 would be

2. An explanation of the facts necessary to establish that

$320 ($50 + $120 + $150).

the foreign trust should be treated for U.S. tax purposes as

owned by another person. (The explanation should identify

Line 35. Divide line 34 by 3 (or the number of years the

the Code section that treats the trust as owned by another

trust has been a foreign trust if fewer than 3). Consider any

person.)

portion of a year to be a complete year. For example, a

3. A statement identifying whether the owner of the trust

foreign trust created on July 1, 2006, would be treated on a

is an individual, corporation, or partnership.

2008 calendar year return as having 2 preceding years

4. A description of property (including cash) distributed

(2006 and 2007). In this case, you would calculate the

or deemed distributed to the U.S. person during the tax

amount on line 35 by dividing line 34 by 2. Do not disregard

year, and the FMV of the property distributed.

tax years in which no distributions were made. The IRS will

5. A statement that the trust will permit either the IRS or

consider your proof of these prior distributions as adequate

the U.S. beneficiary to inspect and copy the trust’s

records to demonstrate that any distribution up to the

permanent books of account, records, and such other

amount on line 31 is not an accumulation distribution in the

documents that are necessary to establish that the trust

current tax year.

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Instructions For Form 3520 - Annual Return To Report Transactions With Foreign Trusts And Receipt Of Certain Foreign Gifts - 2008 Page 7

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