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Schedule B—Gratuitous Transfers

U.S. income tax principles. For example, the statements

must not treat capital gains as additions to trust corpus.

Complete the applicable portions of Schedule B with respect

Schedule C—Qualified Obligations

to all reportable events (defined on page 4) that took place

during the current tax year.

Outstanding in the Current Tax Year

Line 13

Line 19. Provide information on the status of outstanding

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In your column (b) description, indicate whether the

obligations of the related foreign trust (or person related to

property is tangible or intangible.

•

the foreign trust) that you reported as a qualified obligation

You may aggregate transfers of cash during the year on a

in the current tax year. This information is required in order

single line of line 13.

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to retain the obligation’s status as a qualified obligation. If

If there is not enough space on the form, please attach a

relevant, attach a statement describing any changes in the

statement.

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terms of the qualified obligation.

For transfers reported on attachments, you must enter

“Attachment” on one of the lines in column (b), and enter the

If the obligation fails to retain the status of a qualified

total amount of transfers reported on the attachment on line

obligation, you will be treated as having made a gratuitous

13, columns (c), (d), (e), (f), (h), and (i).

transfer to the foreign trust, which must be reported on

Schedule B, Part I. See section III(C)(2) of Notice 97-34.

Note. Penalties may be imposed for failure to report all

required information. See Penalties on page 2.

Part II—U.S. Owner of a Foreign Trust

Line 13, column (d). Enter the U.S. adjusted basis of the

Complete Part II if you are considered the owner of any

property transferred.

assets of a foreign trust under the rules of sections 671

If the transfer was a bequest and the executor of the

through 679 during the tax year. You are required to enter a

estate made the special election under section 301(c) of the

taxpayer identification number for such foreign trust on line

2010 Tax Relief Act, there are special rules for determining

2b on page 1 of the form.

basis and holding period. See Special election under section

Note. You are required to complete Part II even if there

301(c) of the 2010 Tax Relief Act on page 2 for additional

have been no transactions involving the trust during the tax

information.

year.

Line 13, column (e). Only include gain that is immediately

Line 20. Enter information regarding any person other than

recognized at the time of the transfer.

yourself who is considered the owner of any portion of the

Note. For any transfer by a U.S. person to a foreign

trust under the rules of sections 671 through 679. Also,

nongrantor trust after August 4, 1997, the transfer is treated

enter in column (e) the specific Code section that causes

as a sale or exchange and the transferor must recognize as

that person to be considered an owner for U.S. income tax

a gain the excess of the FMV of the transferred property

purposes. See the grantor trust rules under sections 671

over its adjusted basis. Although the gain is not recognized

through 679.

on Form 3520, it must be reported on the appropriate form

Line 21. In columns (a) and (b), enter the applicable

or schedule of the transferor’s income tax return. See

two-letter code from the list at:

section 684.

Line 22. If “Yes,” the copy of the Foreign Grantor Trust

Line 13, column (f). Generally, if the reported transaction

Owner Statement (page 3 of Form 3520-A) should show the

is a sale, you should report the gain on the appropriate form

amount of the foreign trust’s income that is attributable to

or schedule of your income tax return.

you for U.S. income tax purposes. See section IV of Notice

Line 15. Enter the name, address, whether the person is a

97-34.

U.S. beneficiary (defined on page 5), and taxpayer

If “No,” to the best of your ability, complete and attach a

identification number, if any, of all reportable beneficiaries.

substitute Form 3520-A for the foreign trust. Otherwise, you

Include specified beneficiaries, classes of discretionary

may be liable for a penalty equal to the greater of $10,000 or

beneficiaries, and names or classes of any beneficiaries that

5% of the gross value of the portion of trust assets that you

could be named as additional beneficiaries. If there is not

are treated as owning, plus additional penalties for

enough space on the form, please attach a statement.

continuing failure to file after notice by the IRS. See section

Line 17. Enter the name, address, and taxpayer

6677. Also see Penalties on page 2.

identification number, if any, of any person, other than those

Line 23. Enter the FMV of the trust assets that you are

listed on line 16, that has significant powers over the trust

treated as owning. Include all assets at FMV as of the end of

(e.g., “protectors,” “enforcers,” any person that must

the tax year. For this purpose, disregard all liabilities. The

approve trustee decisions or otherwise direct trustees, any

trust should send you this information in connection with its

person with a power of appointment, any person with

Form 3520-A. If you did not receive such information (line 9

powers to remove or appoint trustees, etc.). Include a

of the Foreign Grantor Trust Owner Statement) from the

description of each person’s powers. If there is not enough

trust, complete line 23 to the best of your ability. At a

space, attach a statement.

minimum, include the value of all assets that you have

Line 18. If you checked “No” on line 3 (or you did not

transferred to the trust. Also use Form 8082 to notify the IRS

complete lines 3a through 3g) attach:

that you did not receive a Foreign Grantor Trust Owner

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A summary of the terms of the trust that includes a

Statement. However, filing Form 8082 does not relieve you

summary of any oral agreements or understandings you

of any penalties that may be imposed under section 6677.

have with the trustee, whether or not legally enforceable.

See Penalties on page 2.

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A copy of all trust documents (and any revisions),

including the trust instrument, any memoranda of wishes

Part III—Distributions to a U.S.

prepared by the trustees summarizing the settlor’s wishes,

Person From a Foreign Trust During

any letter of wishes prepared by the settlor summarizing his

or her wishes, and any similar documents.

the Current Tax Year

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A copy of the trust’s financial statements, including a

balance sheet and an income statement similar to those

If you received an amount from a portion of a foreign trust of

shown on Form 3520-A. These financial statements must

which you are treated as the owner and you have correctly

reasonably reflect the trust’s accumulated income under

reported any information required on Part II and the trust

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Instructions For Form 3520 - Annual Return To Report Transactions With Foreign Trusts And Receipt Of Certain Foreign Gifts - 2010 Page 7

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