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Using the examples above, the trust’s 2002 weighted

Schedule B—Actual Calculation of Trust

UNI would be $1,150, calculated as follows.

Distributions

You may only use Schedule B if:

2001 weighted UNI . . . . . . . . . . . . . . . . . . . . . . . .

$1,260

•

You answered “Yes” to line 30,

•

You attach a copy of the Foreign Nongrantor Trust

UNI at beginning of 2001 . . . . . . . . . . . . . . . . . . . . .

+ 350

Beneficiary Statement to this return, and

•

Trust earnings in 2001 . . . . . . . . . . . . . . . . . . . . . .

+ 100

You have never before used Schedule A for this

foreign trust or this foreign trust terminated during the tax

− 200

Trust distributions in 2001 . . . . . . . . . . . . . . . . . . . .

year.

− 360

Weighted trust accumulation distributions

Line 40. Enter the amount received by you from the

in 2001 ($100 X 3.6) . . . . . . . . . . . . . . . . . . . . . .

foreign trust that is treated as ordinary income of the trust

2002 weighted UNI . . . . . . . . . . . . . . . . . . . . . . . .

$1,150

in the current tax year. Ordinary income is all income that

is not capital gains. Report this amount on the

appropriate schedule of your tax return (e.g., Schedule E

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

(Form 1040), Part III).

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

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

Line 42. Enter the amount received by you from the

number of years would be 3.6 in 2001 (1,260/350) and

foreign trust that is treated as capital gain income of that

4.6 in 2002 (1,150/250).

trust in the current tax year. Report this amount on the

appropriate schedule of your tax return (e.g., Schedule D

Note: Include as many decimal places as there are

(Form 1040)).

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

Line 45. Enter the foreign trust’s aggregate undistributed

instructions for line 45, include three decimal places).

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

Schedule C—Calculation of Interest Charge

created in 1995 and has made no distributions prior to

2001. Assume the trust’s ordinary income was $0 in

Complete Schedule C if you entered an amount on line

2000, $60 in 1999, $124 in 1998, $87 in 1997, $54 in

37 or line 41.

1996, and $25 in 1995. Thus, for 2001, the trust’s UNI

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

would be $350. If the trust earned $100 and distributed

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

$200 during 2001 (so that $100 was distributed from

accumulation distribution using lines 1 through 28 of

accumulated earnings), the trust’s 2002 aggregate UNI

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

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

4970.

Line 46. Enter the foreign trust’s weighted undistributed

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

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

its accumulated income that has not been distributed,

Form 3520.

weighted by the years that it has accumulated income.

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

To calculate weighted UNI, multiply the undistributed

period beginning on the date that is the applicable

income from each of the trust’s years by the number of

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

years since that year, and then add each year’s result.

applicable date and ending on the applicable date. For

Using the example from line 45, the trust’s weighted UNI

purposes of making this interest calculation, the

in 2001 would be $1,260, calculated as follows:

applicable date is the date that is mid-year through the

tax year for which reporting is made (e.g., in the case of a

No. of years

2001 calendar year taxpayer, the applicable date would

since that

UNI from

Year

year

each year

Weighted UNI

be June 30, 2001). Alternatively, if you received only a

single distribution during the tax year that is treated as an

2000

$ 0

accumulation distribution, you may use the date of that

1999

120

distribution as the applicable date.

1998

124

372

For portions of the interest accumulation period that

1997

348

are prior to 1996 (and after 1976), interest accumulates

1996

270

at a simple rate of 6% annually, without compounding.

1995

150

For portions of the interest accumulation period that are

after 1995, interest is compounded daily at the rate

TOTAL

$350

$1,260

imposed on underpayments of tax under section

6621(a)(2). This compounded interest for periods after

To calculate the trust’s weighted UNI in 2002, the trust

1995 is imposed not only on the tax, but also on the total

could repeat this calculation, or the weighted UNI shown

simple interest attributable to pre-1996 periods.

on line 46 of the 2001 Form 3520 could simply be

updated using the following steps:

If you are a 2001 calendar year taxpayer and you use

June 30, 2001, as the applicable date for calculating

1. Begin with the 2001 weighted UNI.

interest, use the Table of Combined Interest Rate

2. Add UNI at the beginning of 2001.

Imposed on the Total Accumulation Distribution on

3. Add trust earnings in 2001.

page 9 to determine the combined interest rate and enter

4. Subtract trust distributions in 2001.

it on line 51. If you are not a 2001 calendar year taxpayer

5. Subtract weighted trust accumulation distributions

or you choose to use the actual date of the distribution as

in 2001. (Weighted trust accumulation distributions are

the applicable date, calculate the combined interest rate

the trust accumulation distributions in 2001 multiplied by

using the above principles and enter it on line 51.

the applicable number of years from 2001.)

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Instructions For Form 3520 - Annual Return To Report Transactions With Foreign Trusts And Receipt Of Certain Foreign Gifts - 2001 Page 8

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