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such statement did not contain all six of the items specified

permanent books of account, records, and such other

under the instructions for line 29 or line 30 below.

documents that are necessary to establish that the trust

should be treated for U.S. tax purposes as owned by

Line 25. If you, or a person related to you, received a loan

another person. This statement is not necessary if the trust

from a related foreign trust, it will be treated as a distribution

has appointed a U.S. agent.

to you unless the obligation you issued in exchange is a

6. A statement as to whether the foreign trust has

qualified obligation.

appointed a U.S. agent (defined on page 4). If the trust has

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

a U.S. agent, include the name, address, and taxpayer

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

identification number of the agent.

loan from the trust.

Line 30. If “Yes,” attach the Foreign Nongrantor Trust

Line 25, column (e). Answer “Yes” if your obligation

Beneficiary Statement from the foreign trust. A Foreign

given in exchange for the loan is a qualified obligation

Nongrantor Trust Beneficiary Statement must include the

(defined on page 3).

following items:

Line 26. See Lines 12 and 26 on page 5.

1. An explanation of the appropriate U.S. tax treatment

Line 27. Penalties may be imposed for failure to accurately

of any distribution or deemed distribution for U.S. tax

report all distributions received during the current tax year.

purposes, or sufficient information to enable the U.S.

See Penalties on page 2.

beneficiary to establish the appropriate treatment of any

Line 28. Provide information on the status of any

distribution or deemed distribution for U.S. tax purposes.

outstanding obligation to the foreign trust that you reported

2. A statement identifying whether any grantor of the

as a qualified obligation in the current tax year. This

trust is a partnership or a foreign corporation. If so, attach an

information is required in order to retain the obligation’s

explanation of the relevant facts.

status as a qualified obligation. If relevant, attach a

3. A statement that the trust will permit either the IRS or

statement describing any changes to the terms of the

the U.S. beneficiary to inspect and copy the trust’s

qualified obligation. If the obligation fails to retain the status

permanent books of account, records, and such other

of a qualified obligation, you will be treated as having

documents that are necessary to establish the appropriate

received a distribution from the foreign trust, which must be

treatment of any distribution or deemed distribution for U.S.

reported as such on line 25. See Section V(A) of Notice

tax purposes. This statement is not necessary if the trust

97-34.

has appointed a U.S. agent.

Lines 29 and 30. If any of the six items required for the

4. The Foreign Nongrantor Trust Beneficiary Statement

Foreign Grantor Trust Beneficiary Statement (see Line 29

must also include items 1, 4, and 6, as listed for line 29

below) or for the Foreign Nongrantor Trust Beneficiary

above as well as basic identifying information (e.g., name,

Statement (see Line 30 below) is missing, you must check

address, TIN, etc.) about the foreign trust and its trustee.

“No” on line 29 or line 30, as applicable.

Schedule A—Default Calculation of Trust

Also, if you answer “Yes” to line 29 or line 30, and the

foreign trust or U.S. agent does not produce records or

Distributions

testimony when requested or summoned by the IRS, the

If you answered “Yes” to line 30, you may complete either

IRS may redetermine the tax consequences of your

Schedule A or Schedule B. Generally, however, if you

transactions with the trust and impose appropriate penalties

complete Schedule A in the current year (or did so in the

under section 6677.

prior years), you must continue to complete Schedule A for

Note. If the question on line 29 or 30 is not applicable, skip

all future years, even if you are able to answer “Yes” to line

the question. Do not check the “No” box if the question is not

30 in that future year. (The only exception to this

applicable.

consistency rule is that you may use Schedule B in the year

that a trust terminates, but only if you are able to answer

Line 29. If “Yes,” attach the Foreign Grantor Trust

“Yes” to line 30 in the year of termination.)

Beneficiary Statement (page 4 of Form 3520-A) from the

foreign trust and do not complete the rest of Part III with

Line 32. To the best of your knowledge, state the number

respect to the distribution. If a U.S. beneficiary receives a

of years the trust has been in existence as a foreign trust

complete Foreign Grantor Trust Beneficiary Statement with

and attach an explanation of your basis for this statement.

respect to a distribution during the tax year, the beneficiary

Consider any portion of a year to be a complete year. If this

should treat the distribution for income tax purposes as if it

is the first year that the trust has been a foreign trust, do not

came directly from the owner. For example, if the distribution

complete the rest of Part III (you do not have an

is a gift, the beneficiary should not include the distribution in

accumulation distribution).

gross income.

Line 33. Enter the total amount of distributions that you

In addition to basic identifying information (i.e., name,

received during the 3 preceding tax years (or the number of

address, TIN, etc.) about the foreign trust and its trustee,

years the trust has been a foreign trust, if less than 3). For

this statement must contain these items:

example, if a trust distributed $50 in year 1, $120 in year 2,

and $150 in year 3, the amount reported on line 33 would be

1. The first and last day of the tax year of the foreign

$320 ($50 + $120 + $150).

trust to which this statement applies.

2. An explanation of the facts necessary to establish that

Line 35. Divide line 34 by 3 (or the number of years the

the foreign trust should be treated for U.S. tax purposes as

trust has been a foreign trust if fewer than 3). Consider any

owned by another person. (The explanation should identify

portion of a year to be a complete year. For example, a

the Code section that treats the trust as owned by another

foreign trust created on July 1, 2007, would be treated on a

person.)

2009 calendar year return as having 2 preceding years

3. A statement identifying whether the owner of the trust

(2007 and 2008). In this case, you would calculate the

is an individual, corporation, or partnership.

amount on line 35 by dividing line 34 by 2. Do not disregard

4. A description of property (including cash) distributed

tax years in which no distributions were made. The IRS will

or deemed distributed to the U.S. person during the tax

consider your proof of these prior distributions as adequate

year, and the FMV of the property distributed.

records to demonstrate that any distribution up to the

5. A statement that the trust will permit either the IRS or

amount on line 31 is not an accumulation distribution in the

the U.S. beneficiary to inspect and copy the trust’s

current tax year.

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Instructions For Form 3520 - Annual Return To Report Transactions With Foreign Trusts And Receipt Of Certain Foreign Gifts - 2009 Page 7

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