Instructions For Form 3520-A - Annual Information Return Of Foreign Trust With A U.s. Owner - 2005


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Department of the Treasury
Internal Revenue Service
Instructions for
Form 3520-A
Annual Information Return of Foreign Trust
With a U.S. Owner
Section references are to the Internal Revenue Code unless otherwise noted.
General Instructions
The U.S. owner is subject to a penalty equal to 5% of the gross
Purpose of Form
value of the portion of the trust’s assets treated as owned by
the U.S. person at the close of that year if the foreign trust:
Form 3520-A is the annual information return of a foreign trust
(a) fails to file a timely Form 3520-A or (b) does not furnish all of
with at least one U.S. owner. The form provides information
the information required by section 6048(b) or includes incorrect
about the foreign trust, its U.S. beneficiaries, and any U.S.
information. See section 6677(b). Additional penalties may be
person who is treated as an owner of any portion of the foreign
imposed if noncompliance continues after the IRS mails a
notice of failure to comply with required reporting. See section
Who Must File
Criminal penalties may be imposed under sections 7203,
A foreign trust with a U.S. owner must file Form 3520-A in order
7206, and 7207 for failure to file on time and for filing a false or
for the U.S. owner to satisfy its annual information reporting
fraudulent return.
requirements under section 6048(b). Each U.S. person treated
as an owner of any portion of a foreign trust under sections 671
Reasonable cause. No penalties will be imposed if the
through 679 is responsible for ensuring that the foreign trust
taxpayer can demonstrate that the failure to comply was due to
files Form 3520-A and furnishes the required annual statements
reasonable cause and not willful neglect.
to its U.S. owners and U.S. beneficiaries.
Note. The fact that a foreign country would impose penalties
Exception. Canadian registered retirement savings plans
for disclosing the required information is not reasonable cause.
(RRSPs) and Canadian registered retirement income funds
Similarly, reluctance on the part of a foreign fiduciary or
(RRIFs) are not required to file Form 3520-A with respect to a
provisions in the trust instrument that prevent the disclosure of
U.S. citizen or resident alien interest holder who is eligible to file
required information is not reasonable cause.
Form 8891, U.S. Information Return for Beneficiaries of Certain
Canadian Registered Retirement Plans, with respect to the
RRSP or RRIF. In addition, other eligible Canadian plans within
the meaning of section 3 of Rev. Proc. 2002-23, 2002-15 I.R.B.
744, are relieved of any obligation to file Form 3520-A with
A distribution is any gratuitous transfer of money or other
respect to a U.S. citizen or resident alien beneficiary who has
property from a trust, whether or not the trust is treated as
made an election in accordance with section 4 of Rev. Proc.
owned by another person under the grantor trust rules, and
2002-23 and has complied with the annual reporting
without regard to whether the recipient is designated as a
requirements of Rev. Proc. 2002-23.
beneficiary by the terms of the trust. A distribution includes the
receipt of trust corpus and the receipt of a gift or bequest
When and Where To File
described in section 663(a).
File a complete Form 3520-A (including pages 3 and 4) with the
A distribution also includes constructive transfers from a
Internal Revenue Service Center, Philadelphia, PA 19255, by
trust. For example, if charges you make on a credit card are
the 15th day of the 3rd month after the end of the trust’s tax
paid by a foreign trust or guaranteed or secured by the assets
year. Give copies of the Foreign Grantor Trust Owner
of a foreign trust, the amount charged will be treated as a
Statement (page 3) and the Foreign Grantor Trust
distribution to you by the foreign trust. Similarly, if you write
Beneficiary Statement (page 4) to the U.S. owners and U.S.
checks on a foreign trust’s bank account, the amount will be
beneficiaries by the 15th day of the 3rd month after the end of
treated as a distribution.
the trust’s tax year.
Also, if you receive a payment from a foreign trust in
An extension of time to file Form 3520-A (including the
exchange for property transferred to the trust or services
statements) may be granted. For details, see Form 7004,
rendered to the trust, and the fair market value (FMV) of the
Application for Automatic 6-Month Extension of Time To File
payment received exceeds the FMV of the property transferred
Certain Business Income Tax, Information, and Other Returns.
or services rendered, the excess will be treated as a distribution
to you.
Who Must Sign
If the return is filed by:
1. If you sell stock with an FMV of $100 to a foreign trust
An individual or fiduciary, it must be signed and dated by that
and receive $150 in exchange, you have received a distribution
individual or fiduciary.
of $50.
A partnership, it must be signed and dated by a general
2. If you receive $100 from the trust for services performed
partner or limited liability company member.
by you for the trust, and the services have an FMV of $20, you
A corporation, it must be signed and dated by the president,
have received a distribution of $80.
vice president, treasurer, assistant treasurer, chief accounting
officer, or any other corporate officer (such as a tax officer)
If you, or a person related to you, received a loan from a
authorized to sign.
related foreign trust, it will be treated as a distribution to you
The paid preparer must complete the required preparer
unless the obligation you issued in exchange is a qualified
information and:
obligation. For this purpose, a loan to you by an unrelated third
Sign the return in the space provided for the preparer’s
party that is guaranteed by a foreign trust is generally treated as
a loan from the trust. See Section V of Notice 97-34, 1997-25
Give a copy of the return to the filer.
I.R.B. 22.
Cat. No. 25096U


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