Reporting for US Beneficiaries and Grantors of Foreign Trusts: Forms 3520 and 3520-A (Currently Unavailable)

Author: John Samtoy

Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2024 to receive credits

The U.S. tax and reporting requirements for foreign trusts are a highly specialized area of U.S. tax law. Navigating these rules can be challenging and complex. In this course you will learn how to identify Form 3520 and Form 3520-A filing requirements, how the U.S. taxes beneficiaries and grantors of foreign trusts, and how to compute and report the different figures that are relevant for Form 3520 reporting including distributable net income (“DNI”) and undistributed net income (“UNI”). The Form 3520, “Annual Return to Report Transactions with Foreign Trusts”, is used by U.S. taxpayers to report contributions to and distributions from foreign trusts. The form also summarizes the U.S. income tax implications of foreign trust distributions that the U.S. taxpayer must report on their own returns. The Form 3520-A, “Annual Information Return of Foreign Trust with a U.S. Owner”, is filed by the U.S. grantor of a foreign trust. The rules for determining whether a U.S. person is a grantor of a foreign trust are modified from the strictly domestic rules. The penalties for a missed filing related to these forms starts at $10,000 and can be high as 35% of the gross amount of a reportable event. It is therefore critical for taxpayers and advisors to file these forms correctly.

Publication Date: May 2021

Designed For
CPAs, enrolled agents, tax preparers, attorneys and advisors who assist their clients with identifying these filings, trust and family office compliance officers.

Topics Covered

• Overview and Background
• Key Terms and Definitions
• Filing Requirements
• Treatment of Distributions
• Completing the Form 3520
• Completing the Form 3520”A
• Penalties and Remediation

Learning Objectives

• Identify when Form 3520 and Form 3520-A are required
• Recognize the rules behind the information that is reported on the foreign trust forms
• Describe the taxable amount of a distribution from a foreign trust
• Identify characteristics of a Part I filer
• Differentiate characteristics of a qualified obligation
• Identify accounting income available for distribution to beneficiaries under provisions of the governing document
• Identify the first source with respect to the treatment of distributions
• Recognize characteristics of Schedule A related to the default method in Part III
• Identify annual filing information of Form 3520 and Form 3520-A
• Describe ministerial
• Identify current year income of the trust computed under U.S. tax principles with certain modifications
• Identify the general due date for completing Form 3520-A

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
None

Advance Preparation
None