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payment received exceeds the FMV of the property transferred

Part I, Lines 3a through 3g, on page 3) in applying sections

or services rendered, the excess will be treated as a distribution

7602, 7603, and 7604 with respect to:

•

to you.

Any request by the IRS to examine records or produce

testimony related to the proper U.S. tax treatment of amounts

Examples

distributed, or required to be taken into account under the

1. If you sell stock with an FMV of $100 to a foreign trust

grantor trust rules, with respect to a foreign trust or

and receive $150 in exchange, you have received a distribution

•

Any summons by the IRS for such records or testimony.

of $50.

A U.S. grantor, a U.S. beneficiary, or a domestic corporation

2. If you receive $100 from the trust for services performed

controlled by the grantor or beneficiary may act as a U.S. agent.

by you for the trust, and the services have an FMV of $20, you

However, you may not treat the foreign trust as having a U.S.

have received a distribution of $80.

agent unless you enter the name, address, and taxpayer

If you, or a person related to you, received a loan from a

identification number of the U.S. agent on lines 3a through 3g. If

related foreign trust, it will be treated as a distribution to you

the person identified as the U.S. agent does not produce

unless the obligation you issued in exchange is a qualified

records or testimony when requested or summoned by the IRS,

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

the IRS may redetermine the tax consequences of your

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

transactions with the trust and impose appropriate penalties

a loan from the trust. See Section V of Notice 97-34, 1997-25

under section 6677.

I.R.B. 22.

The agency relationship must be established by the time the

Foreign Trust

U.S. person files Form 3520-A for the relevant tax year and

must continue as long as the statute of limitations remains open

A foreign trust is any trust other than a domestic trust.

for the relevant tax year. If the agent resigns, liquidates, or its

A domestic trust is any trust if:

responsibility as an agent of the trust is terminated, see Section

1. A court within the United States is able to exercise

IV(B) of Notice 97-34.

primary supervision over the administration of the trust and

U.S. Beneficiary

2. One or more U.S. persons have the authority to control

all substantial decisions of the trust.

A U.S. beneficiary generally includes any person that could

possibly benefit (directly or indirectly) from the trust (including

Grantor

an amended trust) at any time, whether or not the person is

A grantor includes any person who creates a trust or directly or

named in the trust instrument as a beneficiary and whether or

indirectly makes a gratuitous transfer of cash or other property

not the person can receive a distribution from the trust in the

to a trust. A grantor includes any person treated as the owner of

current year. In addition, a U.S. beneficiary includes:

•

any part of a foreign trust’s assets under sections 671 through

A foreign corporation that is a controlled foreign corporation

679, excluding section 678.

(as defined in section 957(a)),

•

A foreign partnership if a U.S. person is a partner of the

Note: If a partnership or corporation makes a gratuitous

partnership, and

transfer to a trust, the partners or shareholders are generally

•

A foreign estate or trust if the estate or trust has a U.S.

treated as the grantors of the trust, unless the partnership or

beneficiary.

corporation made the transfer for a business purpose of the

partnership or corporation.

A foreign trust will be treated as having a U.S. beneficiary

unless the terms of the trust instrument specifically prohibit any

If a trust makes a gratuitous transfer to another trust, the

distribution of income or corpus to a U.S. person at any time,

grantor of the transferor trust is treated as the grantor of the

even after the death of the U.S. transferor, and the trust cannot

transferee trust, except that if a person with a general power of

be amended or revised to allow such a distribution.

appointment over the tranferor trust exercises that power in

favor of another trust, such person is treated as the grantor of

U.S. Person

the transferee trust, even if the grantor of the transferor trust is

A U.S. person is:

treated as the owner of the transferor trust.

•

A citizen or resident alien of the United States (see Pub. 519,

Grantor Trust

U.S. Tax Guide for Aliens, for guidance on determining resident

alien status),

A grantor trust is any trust to the extent that the assets of the

•

A domestic partnership,

trust are treated as owned by a person other than the trust. See

•

A domestic corporation,

the grantor trust rules in sections 671 through 679. A part of the

•

Any estate (other than a foreign estate, within the meaning of

trust may be treated as a grantor trust to the extent that only a

section 7701(a)(31)), and

portion of the trust assets are owned by a person other than the

•

Any trust if it is not a foreign trust (defined above).

trust.

Gross Value

Gross value is the FMV of property as determined under

Specific Instructions

section 2031 and its regulations as if the owner had died on the

valuation date. Although formal appraisals are not generally

Period Covered

required, you should keep contemporaneous records of how

you arrived at your good faith estimate.

File the 2003 return for calendar year 2003 and fiscal years that

begin in 2003 and end in 2004. For a fiscal year, fill in the tax

Nongrantor Trust

year space at the top of the form.

A nongrantor trust is any trust to the extent that the assets of

the trust are not treated as owned by a person other than the

Initial Return, Final Return, Amended

trust. Thus, a nongrantor trust is treated as a taxable entity. A

Return

trust may be treated as a nongrantor trust with respect to only a

portion of the trust assets. See Grantor Trust above.

Initial return. If this is the foreign trust’s first return, check the

“Initial return” box.

Owner

Final return. If the foreign trust ceases to exist, check the

An owner of a foreign trust is the person that is treated as

“Final return” box.

owning any of the assets of a foreign trust under the grantor

trust rules.

Amended return. If this Form 3520-A is filed to amend a Form

3520-A that you previously filed, check the “Amended return”

Property

box.

Property means any property, whether tangible or intangible,

including cash.

Part I—General Information

U.S. Agent

Identification numbers. Use social security numbers or

A U.S. agent is a U.S. person (defined below) that has a

individual taxpayer identification numbers to identify individuals.

binding contract with a foreign trust that allows the U.S. person

Use employer identification numbers to identify estates, trusts,

to act as the trust’s authorized U.S. agent (see instructions for

partnerships, and corporations.

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Instructions For Form 3520-A - Annual Information Return Of Foreign Trust With A U.s. Owner - 2003 Page 2

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