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Line 36. Enter this amount as ordinary income on your tax

trust accumulation distributions in 2008 multiplied by the

return. Report this amount on the appropriate schedule of

applicable number of years from 2008.)

your tax return (e.g., Schedule E (Form 1040), Part III).

Using the examples above, the trust’s 2009 weighted UNI

Note. If there is an amount on line 37, you must also

would be $1,150, calculated as follows.

complete line 38 and Schedule C — Calculation of Interest

Charge, to determine the amount of any interest charge you

2008 weighted UNI . . . . . . . . . . . . . . . . . . . . . . . .

$1,260

may owe.

UNI at beginning of 2008 . . . . . . . . . . . . . . . . . . . . .

+ 350

Schedule B—Actual Calculation of Trust

Trust earnings in 2008 . . . . . . . . . . . . . . . . . . . . . .

+ 100

Distributions

Trust distributions in 2008 . . . . . . . . . . . . . . . . . . . .

- 200

You may only use Schedule B if:

Weighted trust accumulation distributions in 2008

•

You answered “Yes” to line 30,

($100 X 3.6) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- 360

•

You attach a copy of the Foreign Nongrantor Trust

2009 weighted UNI . . . . . . . . . . . . . . . . . . . . . . . .

$1,150

Beneficiary Statement to this return, and

•

You have never before used Schedule A for this foreign

Line 47. Calculate the trust’s applicable number of years

trust or this foreign trust terminated during the tax year.

by dividing line 46 by line 45. Using the examples in the

Line 40. Enter the amount received by you from the foreign

instructions for lines 45 and 46, the trust’s applicable

trust that is treated as ordinary income of the trust in the

number of years would be 3.6 in 2008 (1,260/350) and 4.6 in

current tax year. Ordinary income is all income that is not

2009 (1,150/250).

capital gains. Report this amount on the appropriate

schedule of your tax return (e.g., Schedule E (Form 1040),

Note. Include as many decimal places as there are digits

Part III).

in the UNI on line 45 (e.g., using the example in the

instructions for line 45, include three decimal places).

Line 42. Enter the amount received by you from the foreign

trust that is treated as capital gain income of that trust in the

Schedule C—Calculation of Interest Charge

current tax year. Report this amount on the appropriate

schedule of your tax return (e.g., Schedule D (Form 1040)).

Complete Schedule C if you entered an amount on line 37

or line 41.

Line 45. Enter the foreign trust’s aggregate undistributed

net income (UNI). For example, assume that a trust was

Line 49. Include the amount from line 48 of this form on

created in 2002 and has made no distributions prior to 2008.

line 1, Form 4970. Then compute the tax on the total

Assume the trust’s ordinary income was $0 in 2007, $60 in

accumulation distribution using lines 1 through 28 of Form

2006, $124 in 2005, $87 in 2004, $54 in 2003, and $25 in

4970. Enter on line 49 the tax from line 28 of Form 4970,

2002. Thus, for 2008, the trust’s UNI would be $350. If the

Tax on Accumulation Distribution of Trusts.

trust earned $100 and distributed $200 during 2008 (so that

$100 was distributed from accumulated earnings), the trust’s

Note. Use Form 4970 as a worksheet and attach it to Form

2009 aggregate UNI would be $250 ($350 + $100 - $200).

3520.

Line 46. Enter the foreign trust’s weighted undistributed net

Line 51. Interest accumulates on the tax (line 49) for the

income (weighted UNI). The trust’s weighted UNI is its

period beginning on the date that is the applicable number

accumulated income that has not been distributed, weighted

of years (as rounded on line 50) prior to the applicable date

by the years that it has accumulated income. To calculate

and ending on the applicable date. For purposes of making

weighted UNI, multiply the undistributed income from each

this interest calculation, the applicable date is the date that

of the trust’s years by the number of years since that year,

and then add each year’s result. Using the example from

is mid-year through the tax year for which reporting is made

line 45, the trust’s weighted UNI in 2008 would be $1,260,

(e.g., in the case of a 2008 calendar year taxpayer, the

calculated as follows:

applicable date would be June 30, 2008). Alternatively, if

you received only a single distribution during the tax year

No. of years

that is treated as an accumulation distribution, you may use

since that

UNI from

the date of that distribution as the applicable date.

Year

year

each year

Weighted UNI

For portions of the interest accumulation period that are

2007

$ 0

prior to 1996 (and after 1976), interest accumulates at a

2006

120

2005

124

372

simple rate of 6% annually, without compounding. For

2004

348

portions of the interest accumulation period that are after

2003

270

1995, interest is compounded daily at the rate imposed on

2002

150

underpayments of tax under section 6621(a)(2). This

compounded interest for periods after 1995 is imposed not

TOTAL

$350

$1,260

only on the tax, but also on the total simple interest

To calculate the trust’s weighted UNI for the following

attributable to pre-1996 periods.

year (2009), the trust could update this calculation, or the

If you are a 2008 calendar year taxpayer and you use

weighted UNI shown on line 46 of the 2008 Form 3520

June 30, 2008, as the applicable date for calculating

could simply be updated using the following steps:

interest, use the table below to determine the combined

1. Begin with the 2008 weighted UNI.

interest rate and enter it on line 51. If you are not a 2008

2. Add UNI at the beginning of 2008.

calendar year taxpayer or you choose to use the actual date

3. Add trust earnings in 2008.

of the distribution as the applicable date, calculate the

4. Subtract trust distributions in 2008.

combined interest rate using the above principles and enter

5. Subtract weighted trust accumulation distributions in

it on line 51.

2008. (Weighted trust accumulation distributions are the

-8-

Instructions For Form 3520 - Annual Return To Report Transactions With Foreign Trusts And Receipt Of Certain Foreign Gifts - 2008 Page 8

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