Foreign Trust Reporting And Compliance - Part 2

Extract

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Foreign Trust Reporting And Compliance - Part 2

Filing Mechanics: Form 3520 and 3520-A

A. Form 3520

Form 3520 has several uses, which may cause confusion.

Generally, Part 1 covers transfers to a foreign trust by a U.S.

person, including a U.S. citizen or resident alien, a U.S. domestic

partnership, corporation, trust or estate. Part II provides

information on the owner of a foreign trust settled by a U.S.

person. However, Part III is only used for beneficiaries of

nongrantor trusts and should not be completed by U.S. foreign trust

settlors. Part IV is not at all related to trust distributions and

is only used for U.S. persons that receive large gifts from foreign

donors. Note that a trust distribution will not constitute a

foreign gift and should be reported on Part III rather than Part

IV.

Form 3520 is filed separately from the personal income tax

return of the U.S. settlor, transferor or recipient and is due on

the date of such personal income tax return, including extensions.

The 2006 Instructions for Form 3520 indicate that the Form 3520

should be sent to: Internal Revenue Service Center, P.O. Box

409101, Ogden, UT 84409. It is a good practice to attach a copy of

the personal tax return extension to the Form 3520 to avoid notices

concerning late filing penalties.

1. Potential Penalties

There are signific...

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