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Line 36. Enter this amount as ordinary income on your tax

5. Subtract weighted trust accumulation distributions in

return. Report this amount on the appropriate schedule of

2009. (Weighted trust accumulation distributions are the

your tax return (e.g., Schedule E (Form 1040), Part III).

trust accumulation distributions in 2009 multiplied by the

applicable number of years from 2009.)

Note. If there is an amount on line 37, you must also

Using the example above, the trust’s 2010 weighted UNI

complete line 38 and Schedule C — Calculation of Interest

would be $1,150, calculated as follows.

Charge, to determine the amount of any interest charge you

may owe.

2009 weighted UNI . . . . . . . . . . . . . . . . . . . . . . . .

$1,260

Schedule B—Actual Calculation of Trust

UNI at beginning of 2009 . . . . . . . . . . . . . . . . . . . . .

+ 350

Distributions

Trust earnings in 2009 . . . . . . . . . . . . . . . . . . . . . .

+ 100

You may only use Schedule B if:

Trust distributions in 2009 . . . . . . . . . . . . . . . . . . . .

- 200

•

You answered “Yes” to line 30,

•

Weighted trust accumulation distributions in 2009

You attach a copy of the Foreign Nongrantor Trust

($100 X 3.6) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

- 360

Beneficiary Statement to this return, and

•

2010 weighted UNI . . . . . . . . . . . . . . . . . . . . . . . .

$1,150

You have never before used Schedule A for this foreign

trust or this foreign trust terminated during the tax year.

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

Line 40a. Enter on line 40a the amount received by you

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

from the foreign trust that is treated as ordinary income of

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

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

number of years would be 3.6 in 2009 (1,260/350) and 4.6 in

income that is not capital gains. Report this amount on the

2010 (1,150/250).

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

(Form 1040), Part III).

Note. Include as many decimal places as there are digits

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

Lines 42a through 42d. Enter on these lines the

instructions for line 45, include three decimal places).

applicable amounts received by you from the foreign trust

that are treated as capital gain income of the trust in the

Schedule C—Calculation of Interest Charge

current tax year. Report these amounts on the appropriate

schedule of your tax return (e.g., Schedule D (Form 1040)).

Complete Schedule C if you entered an amount on line 37

or line 41a.

Line 45. Enter the foreign trust’s aggregate undistributed

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

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

created in 2003 and has made no distributions prior to 2009.

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

Assume the trust’s ordinary income was $0 in 2008, $60 in

accumulation distribution using lines 1 through 28 of Form

2007, $124 in 2006, $87 in 2005, $54 in 2004, and $25 in

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

2003. Thus, for 2009, the trust’s UNI would be $350. If the

Tax on Accumulation Distribution of Trusts.

trust earned $100 and distributed $200 during 2009 (so that

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

$100 was distributed from accumulated earnings), the trust’s

3520.

2010 aggregate UNI would be $250 ($350 + $100 - $200).

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

Line 46. Enter the foreign trust’s weighted undistributed net

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

period beginning on the date that is the applicable number

accumulated income that has not been distributed, weighted

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

by the years that it has accumulated income. To calculate

and ending on the applicable date. For purposes of making

weighted UNI, multiply the undistributed income from each

this interest calculation, the applicable date is the date that

is mid-year through the tax year for which reporting is made

of the trust’s years by the number of years since that year,

(e.g., in the case of a 2009 calendar year taxpayer, the

and then add each year’s result. Using the example from

applicable date would be June 30, 2009). Alternatively, if

line 45, the trust’s weighted UNI in 2009 would be $1,260,

you received only a single distribution during the tax year

calculated as follows:

that is treated as an accumulation distribution, you may use

No. of years

the date of that distribution as the applicable date.

since that

UNI from

Year

year

each year

Weighted UNI

For portions of the interest accumulation period that are

prior to 1996 (and after 1976), interest accumulates at a

2008

$ 0

simple rate of 6% annually, without compounding. For

2007

120

portions of the interest accumulation period that are after

2006

124

372

1995, interest is compounded daily at the rate imposed on

2005

348

underpayments of tax under section 6621(a)(2). This

2004

270

compounded interest for periods after 1995 is imposed not

2003

150

only on the tax, but also on the total simple interest

TOTAL

$350

$1,260

attributable to pre-1996 periods.

To calculate the trust’s weighted UNI for the following

If you are a 2009 calendar year taxpayer and you use

year (2010), the trust could update this calculation, or the

June 30, 2009, as the applicable date for calculating

weighted UNI shown on line 46 of the 2009 Form 3520

interest, use the table on page 9 to determine the combined

could simply be updated using the following steps:

interest rate and enter it on line 51. If you are not a 2009

1. Begin with the 2009 weighted UNI.

calendar year taxpayer or you choose to use the actual date

2. Add UNI at the beginning of 2009.

of the distribution as the applicable date, calculate the

3. Add trust earnings in 2009.

combined interest rate using the above principles and enter

4. Subtract trust distributions in 2009.

it on line 51.

-8-

Instructions For Form 3520 - Annual Return To Report Transactions With Foreign Trusts And Receipt Of Certain Foreign Gifts - 2009 Page 8

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