Specific Instructions

Period Covered

File the 2013 return for calendar year 2013 and fiscal years that begin in 2013 and end in 2014. For a fiscal year, fill in the tax year in the space at the top of the form.

Item A—Initial Return, Initial Return on Extension, Final Return, Amended Return

Initial return.    If this is the initial return you are filing concerning the foreign trust identified, check the “Initial return” box.

Initial return on extension.   If this is the initial return you are filing concerning the foreign trust identified and you have filed an extension with respect to your income tax return, check the “Initial return (extension filed)” box.

Final return.    If no further returns for transactions with the foreign trust are required, check the “Final return” box.

Example.

If you annually filed Form 3520 and completed Part II because you were the owner of the trust for U.S. income tax purposes and the trust has terminated within the tax year, that year's return would be a final return with respect to that foreign trust.

Amended return.    If this Form 3520 is filed to amend a Form 3520 that you previously filed, check the “Amended return” box.

Identifying Information

Identification numbers.   Use social security numbers or individual taxpayer identification numbers to identify individuals. Use employer identification numbers to identify estates, trusts, partnerships, and corporations.

  
Do not enter a preparer tax identification number (PTIN) in any entry space on Form 3520 other than the entry space for “PTIN” at the bottom of page 6 of the form.

Address.    Include the room, suite, or other unit number after the street address. If the post office does not deliver mail to the street address and the U.S. person has a P.O. box, show the box number instead.

Foreign address.    Do not abbreviate the country name.

Line 1a.   This line identifies the person that is filing Form 3520. If you and your spouse are both making transfers to the same trust and you file joint returns, you may file only one Form 3520. Put the names and taxpayer identification numbers in the same order as they appear on your Form 1040.

Line 1j.   Generally, enter the name of the Service Center where you file your income tax return in the entry space provided on line 1j on page 1 of the form.

   However, if you are an executor filing a Form 3520 with respect to a U.S. decedent, provide both the name of the Service Center where the decedent's final income tax return will be filed, and the name of the Service Center where Form 706 will be filed, if applicable. Please enter the information as follows. First enter the name of the Service Center where the decedent's final income tax return will be filed. Then, if applicable, enter the name of the Service Center where Form 706 is filed, followed by “(estate tax return).

Note.

If your income tax return is filed electronically, enter “e-filed” in lieu of the name of the Service Center.

Line 1k.   If you filed an extension of time to file your income tax return, check the box on line 1k. Also, enter the tax form number of the original tax return that will be filed with the IRS.

Example:

You file Form 4868 to extend the time to file your individual income tax return, Form 1040. Enter “1040” on the entry line.

Line 2b(2).   A reference ID number is required on line 2b(2) only in cases where the foreign trust has no EIN. However, filers are permitted to enter both an EIN on line 2b(1) and a reference ID number on line 2b(2). If applicable, enter the reference ID number (defined below) you have assigned to the foreign trust.

  For Form 3520 purposes, a “reference ID number” with respect to the foreign trust is a number established with respect to the foreign trust by or on behalf of the U.S. person that is engaged in a transaction with such foreign trust with respect to which Form 3520 reporting is required. This number is used to uniquely identify the foreign trust in order to keep track of the trust from tax year to tax year. The reference ID number must meet the requirements set forth below.

Note.

A reference ID number should only be provided with respect to the foreign trust if you are completing Part I, II, or III of the form. The reference ID number is not necessary if you are completing Part IV of the form.

Note.

Because reference ID numbers are established by or on behalf of the U.S. person engaged in a transaction with the foreign trust and required to file Form 3520, there is no need to apply to the IRS to request a reference ID number or for permission to use such number.

Note.

In general, the reference ID number assigned to a foreign trust on Form 3520 has relevance only on Form 3520 (and on any other form that is attached to or associated with Form 3520, including the Form 3520-A in the case of a U.S. owner of the foreign trust) and should not be used with respect to the foreign trust on other IRS forms.

Requirements.   The reference ID number must be alphanumeric (defined below) and no special characters are permitted. The length of a given reference ID number is limited to 50 characters.

  For these purposes, the term “alphanumeric” means the entry can be alphabetical, numeric, or any combination of the two.

  The same reference ID number must be used consistently from tax year to tax year with respect to a given foreign trust. If for any reason a reference ID number falls out of use (for example, the foreign trust is terminated and no longer exists), the reference ID number used for that foreign trust cannot be used again for another foreign trust for purposes of Form 3520 reporting.

  There are some situations that warrant correlation of a new reference ID number with a previous reference ID number when assigning a new reference ID number to a foreign trust.

  For example, in the case of a trust that has received assets from another trust, a Form 3520 filer must use a reference ID number for the receiving trust which correlates the previous reference ID number for the distributing trust with the new reference ID number assigned to the receiving foreign trust.

  You must correlate the reference ID numbers as follows: New reference ID number, Old reference ID number. If there is more than one old reference ID number, you must enter a space between each such number. As indicated above, the length of a given reference ID number is limited to 50 characters and each number must be alphanumeric and no special characters are permitted.

Note.

This correlation requirement applies only to the first year the new reference ID number is used.

Line 4.   If you are the executor of the estate of a U.S. citizen or resident, you must provide information about the decedent on lines 4a through 4e. You must also check the applicable box on line 4f to indicate which of the following applies: the U.S. decedent made a transfer to a foreign trust by reason of death, the U.S. decedent was treated as the owner of a portion of a foreign trust immediately prior to death, or the estate of the U.S. decedent included assets of a foreign trust.

Part I—Transfers by U.S. Persons to a Foreign Trust During the Current Tax Year

Complete Part I for information on a reportable event (defined earlier).

Note.

Although the basic reporting requirements for Form 3520 are contained in section 6048 (and are clarified by Notice 97-34), the reporting requirements have been clarified by the regulations under sections 679 and 684. Accordingly, the regulations under sections 679 and 684 should be referred to for additional clarification for transfers that are required to be reported in Part I of Form 3520.

Line 5a.   Enter the name of the trust creator. If you are the trust creator, enter "Same as line 1a" on line 5a. If you are not the trust creator, enter the name of the person who created or originally settled the foreign trust.

Lines 5b and 5c.   Enter the address and identification number, if any, of the trust creator. See Identifying Information, earlier, for specific information regarding the entering of addresses and identification numbers on Form 3520. If you are the trust creator, enter "Same as lines 1c, 1e, 1f, 1g and 1h" on line 5b, and enter "Same as line 1b" on line 5c.

Lines 6a and 6b.   Enter the applicable two-letter country code from the list at: www.IRS.gov/countrycodes.

Lines 7, 8, and 10.   If you are reporting multiple transfers to a single foreign trust and the answers to lines 7, 8, or 10 are different for various transfers, complete a separate line for each transfer on duplicate copies of the relevant pages of the form.

Line 7a.   If “Yes,” you must comply with the reporting requirements that would apply to a direct transfer to that other person. For example, if that other person is a foreign partnership, you must comply with the reporting requirements for transfers to foreign partnerships. See Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.

Line 8.   If the transfer was a completed gift (see Regulations section 25.2511-2), you may have to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. If the transfer was a bequest, you may have to file Form 706.

Line 9.   See U.S. Beneficiary, earlier.

Line 10.   If you are treated as the owner of any portion of the foreign trust under the rules of sections 671 through 679, answer “Yes” to this question and complete Part II.

Schedule A—Obligations of a Related Trust

Line 11a.   The FMV of an obligation of the trust (or an obligation of another person related to the trust) that you receive in exchange for the transferred property equals zero, unless the obligation meets the requirements of a qualified obligation. See Obligation, Qualified Obligation, Person related to a foreign trust, earlier.

Lines 12 and 26.   If you answered “Yes” to the question on line 11b (line 25, column (e)) with respect to any obligation, you generally must answer “Yes” to the question on line 12 (line 26). By so doing, you agree to extend the period of assessment of any income or transfer tax attributable to the transfer and any consequential income tax changes for each year that the obligation is outstanding to a date 3 years after the maturity date of the obligation. This form will be deemed to be agreed upon and executed by the IRS for purposes of Regulations section 301.6501(c)-1(d).

  If you answer “No” to the question on line 12 (line 26), you generally may not treat an obligation as a qualified obligation on line 11b (line 25, column (e)). The one exception to this is if the maturity date of the obligation does not extend beyond the end of your tax year for which you are reporting and such obligation is paid within that tax year.

Schedule B—Gratuitous Transfers

Complete the applicable portions of Schedule B with respect to all reportable events (defined earlier) that took place during the current tax year.

Line 13   
  • In your column (b) description, indicate whether the property is tangible or intangible.

  • You may aggregate transfers of cash during the year on a single line of line 13.

  • If there is not enough space on the form, please attach a statement.

  • For transfers reported on statements, you must enter “Statement” on one of the lines in column (b), and enter the total amount of transfers reported on the statement on line 13, columns (c), (d), (e), (f), (h), and (i).

Note.

Penalties may be imposed for failure to report all required information. See Penalties, earlier.

Line 13, column (d).   Enter the U.S. adjusted basis of the property transferred.

Line 13, column (e).    Only include gain that is immediately recognized at the time of the transfer.

Note.   For any transfer by a U.S. person to a foreign nongrantor trust after August 4, 1997, the transfer is treated as a sale or exchange and the transferor must recognize as a gain the excess of the FMV of the transferred property over its adjusted basis. Although the gain is not recognized on Form 3520, it must be reported on the appropriate form or schedule of the transferor's income tax return. See 
section 684.

Line 13, column (f).    Generally, if the reported transaction is a sale, you should report the gain on the appropriate form or schedule of your income tax return.

Line 15.   Enter the name, address, whether the person is a U.S. beneficiary (defined earlier), and taxpayer identification number, if any, of all reportable beneficiaries. Include specified beneficiaries, classes of discretionary beneficiaries, and names or classes of any beneficiaries that could be named as additional beneficiaries. If there is not enough space on the form, please attach a statement.

Line 17.   Enter the name, address, and taxpayer identification number, if any, of any person, other than those listed on line 16, that has significant powers over the trust (e.g., “protectors,” “enforcers,” any person that must approve trustee decisions or otherwise direct trustees, any person with a power of appointment, any person with powers to remove or appoint trustees, etc.). Include a description of each person's powers. If there is not enough space, attach a statement.

Line 18.   If you checked “No” on line 3 (or you did not complete lines 3a through 3g) attach:
  • A summary of the terms of the trust that includes a summary of any oral agreements or understandings you have with the trustee, whether or not legally enforceable.

  • A copy of all trust documents (and any revisions), including the trust instrument, any memoranda of wishes prepared by the trustees summarizing the settlor's wishes, any letter of wishes prepared by the settlor summarizing his or her wishes, and any similar documents.

  • A copy of the trust's financial statements, including a balance sheet and an income statement similar to those shown on Form 3520-A. These financial statements must reasonably reflect the trust's accumulated income under U.S. income tax principles. For example, the statements must not treat capital gains as additions to trust corpus.

Schedule C—Qualified Obligations Outstanding in the Current Tax Year

Line 19.    Provide information on the status of outstanding obligations of the related foreign trust (or an obligation of a person related to the foreign trust) that you reported as a qualified obligation in the current tax year. This information is required in order to retain the obligation's status as a qualified obligation. If relevant, attach a statement describing any changes in the terms of the qualified obligation.

  If the obligation fails to retain the status of a qualified obligation, you will be treated as having made a gratuitous transfer to the foreign trust, which must be reported on Schedule B, Part I, in the year the obligation fails to meet the criteria for a qualified obligation. See section III(C)(2) of Notice 97-34.

Part II—U.S. Owner of a Foreign Trust

Complete Part II if you are considered the owner of any assets of a foreign trust under the rules of sections 671 through 679 during the tax year. You are required to enter a taxpayer identification number for such foreign trust on line 2b(1) or line 2b(2) on page 1 of the form.

Note.

You are required to complete Part II even if there have been no transactions involving the trust during the tax year.

Line 20.   Enter information regarding any person other than yourself who is considered the owner of any portion of the trust under the rules of sections 671 through 679. Also, enter in column (e) the specific Code section that causes that person to be considered an owner for U.S. income tax purposes. See the grantor trust rules under sections 671 through 679.

Line 21.   In columns (a) and (b), enter the applicable two-letter code from the list at: www.IRS.gov/countrycodes.

Line 22.   If “Yes,” the copy of the Foreign Grantor Trust Owner Statement (page 3 of Form 3520-A) should show the amount of the foreign trust's income that is attributable to you for U.S. income tax purposes. See section IV of Notice 97-34.

  If “No,” to the best of your ability, complete and attach a substitute Form 3520-A for the foreign trust. Otherwise, you may be liable for a penalty equal to the greater of $10,000 or 5% of the gross value of the portion of trust assets that you are treated as owning, plus additional penalties for continuing failure to file after notice by the IRS. See section 6677. Also see Penalties, earlier.

Line 23.   Enter the FMV of the trust assets that you are treated as owning. Include all assets at FMV as of the end of the tax year. For this purpose, disregard all liabilities. The trust should send you this information in connection with its Form 3520-A. If you did not receive such information (line 9 of the Foreign Grantor Trust Owner Statement) from the trust, complete line 23 to the best of your ability. At a minimum, include the value of all assets that you have transferred to the trust. Also use Form 8082 to notify the IRS that you did not receive a Foreign Grantor Trust Owner Statement. However, filing Form 8082 does not relieve you of any penalties that may be imposed under section 6677. See Penalties, earlier.

Part III—Distributions to a U.S. Person From a Foreign Trust During the Current Tax Year

If you received an amount from a portion of a foreign trust of which you are treated as the owner and you have correctly reported any information required on Part II and the trust has filed a Form 3520-A with the IRS, do not separately disclose distributions again in Part III. If you received an amount from a foreign trust that would require a report under both Parts III and IV (gifts or bequests) of Form 3520, report the amount only in Part III.

Line 24.   Report any cash or other property that you received (actually or constructively, directly or indirectly) from a foreign trust during the current tax year, whether or not taxable, unless the amount is a loan to you from the trust that must be reported on line 25. For example, if you are a partner in a partnership that receives a distribution from a foreign trust, you must report your allocable share of such payment as an indirect distribution from the trust.

Line 24, column (c).

The filer is permitted to enter the basis of the property in the hands of the beneficiary (as determined under section 643(e)(1)), if lower than the FMV of the property, but only if the taxpayer is not required to complete Schedule A (lines 31 through 38) due to lack of documentation. For these purposes, lack of documentation refers to a situation in which the filer checked “No” on line 29 or 30 because (a) the beneficiary did not receive a Foreign Grantor Trust Beneficiary Statement or a Foreign Nongrantor Trust Beneficiary Statement from the trust or (b) such statement did not contain all six of the items specified under the instructions for line 29 or 30, later.

Line 25.   If you, a U.S. beneficiary, or a U.S. person related to you or the U.S. beneficiary, received a loan of cash or marketable securities, directly or indirectly, from a foreign trust, the amount of such loan will be treated as a distribution to you or the U.S. beneficiary, unless the obligation issued by you, the U.S. beneficiary, or the U.S. person related to you or the U.S. beneficiary, in exchange for the loan, is a qualified obligation. For this purpose, a loan to you by an unrelated third party that is guaranteed by a foreign trust is generally treated as a loan from the trust.

Line 25, column (e).

Answer “Yes” if your obligation given in exchange for the loan is a qualified obligation (defined earlier).

Line 25, column (f).

The FMV of an obligation is zero unless it is a qualified obligation. Therefore, in the case of obligations that are not qualified obligations, enter “-0-” in column (f).

Uncompensated use of trust property.

If you, a U.S. beneficiary, or a U.S. person related to you or the U.S. beneficiary, directly or indirectly, received the use of any property of a foreign trust, the FMV of such use will be treated as a distribution to you or the U.S. beneficiary, unless you, the U.S. beneficiary, or the U.S. person related to you or the U.S. beneficiary compensate(s) the trust at FMV for the use of such property within a reasonable period of time. This rule is applicable for use of trust property after March 18, 2010. See section 643(i) for additional information. Report the FMV of the uncompensated use of trust property in column (a) and the date of first uncompensated use in column (b); skip columns (c) through (f), and enter the amount from column (a) in column (g).

Note.

Due to changes to section 679(c) made by the HIRE Act, effective after March 18, 2010, if a foreign trust with a U.S. grantor is not already treated as a grantor trust under the rules of sections 671 through 679, the foreign trust will be treated as a grantor trust if it makes a loan of cash or marketable securities, directly or indirectly, to a U.S. person or allows a U.S. person, directly or indirectly, to use trust property, and the U.S. person does not repay the loan at a market rate of interest or pay the trust the FMV of the use of the property within a reasonable period of time.

Line 26.   See Lines 12 and 26, earlier.

Line 27.   Penalties may be imposed for failure to accurately report all distributions received during the current tax year. See Penalties, earlier.

Line 28.   Provide information on the status of any outstanding obligation to the foreign trust that you reported as a qualified obligation in the current tax year. This information is required in order to retain the obligation's status as a qualified obligation. If relevant, attach a statement describing any changes to the terms of the qualified obligation. If the obligation fails to retain the status of a qualified obligation, you will be treated as having received a distribution from the foreign trust, which must be reported as such on line 25. See section V(A) of Notice 97-34.

Lines 29 and 30.    If any of the six items required for the Foreign Grantor Trust Beneficiary Statement (see Line 29 below) or for the Foreign Nongrantor Trust Beneficiary Statement (see Line 30 below) is missing, you must check “No” on line 29 or line 30, as applicable.

  Also, if you answer “Yes” to line 29 or line 30, and the foreign trust or U.S. agent does not produce records or testimony when requested or summoned by the IRS, the IRS may redetermine the tax consequences of your transactions with the trust and impose appropriate penalties under section 6677.

Note.

If the question on line 29 or 30 is not applicable, check the N/A box.

Line 29.   If “Yes,” attach the Foreign Grantor Trust Beneficiary Statement (page 4 of Form 3520-A) from the foreign trust and do not complete the rest of Part III with respect to the distribution. If a U.S. beneficiary receives a complete Foreign Grantor Trust Beneficiary Statement with respect to a distribution during the tax year, the beneficiary should treat the distribution for income tax purposes as if it came directly from the owner. For example, if the distribution is a gift, the beneficiary should not include the distribution in gross income.

  In addition to basic identifying information (i.e., name, address, TIN, etc.) about the foreign trust and its trustee, this statement must contain these items:
  1. The first and last day of the tax year of the foreign trust to which this statement applies.

  2. An explanation of the facts necessary to establish that the foreign trust should be treated for U.S. tax purposes as owned by another person. (The explanation should identify the Code section that treats the trust as owned by another person.)

  3. A statement identifying whether the owner of the trust is an individual, trust, corporation, or partnership.

  4. A description of property (including cash) distributed or deemed distributed to the U.S. person during the tax year, and the FMV of the property distributed.

  5. A statement that the trust will permit either the IRS or the U.S. beneficiary to inspect and copy the trust's permanent books of account, records, and such other documents that are necessary to establish that the trust should be treated for U.S. tax purposes as owned by another person. This statement is not necessary if the trust has appointed a U.S. agent.

  6. A statement as to whether the foreign trust has appointed a U.S. agent (defined earlier). If the trust has a U.S. agent, include the name, address, and taxpayer identification number of the agent.

Line 30.   If “Yes,” attach the Foreign Nongrantor Trust Beneficiary Statement from the foreign trust. A Foreign Nongrantor Trust Beneficiary Statement must include the following items:
  1. An explanation of the appropriate U.S. tax treatment of any distribution or deemed distribution for U.S. tax purposes, or sufficient information to enable the U.S. beneficiary to establish the appropriate treatment of any distribution or deemed distribution for U.S. tax purposes.

  2. A statement identifying whether any grantor of the trust is a partnership or a foreign corporation. If so, attach an explanation of the relevant facts.

  3. A statement that the trust will permit either the IRS or the U.S. beneficiary to inspect and copy the trust's permanent books of account, records, and such other documents that are necessary to establish the appropriate treatment of any distribution or deemed distribution for U.S. tax purposes. This statement is not necessary if the trust has appointed a U.S. agent.

  4. The Foreign Nongrantor Trust Beneficiary Statement must also include items 1, 4, and 6, as listed in the line 29 instructions above, as well as basic identifying information (e.g., name, address, TIN, etc.) about the foreign trust and its trustee.

  

Schedule A—Default Calculation of Trust Distributions

If you answered “Yes” to line 30, you may complete either Schedule A or Schedule B. Generally, however, if you complete Schedule A in the current year (or did so in the prior years), you must continue to complete Schedule A for all future years, even if you are able to answer “Yes” to line 30 in that future year. (The only exception to this consistency rule is that you may use Schedule B in the year that a trust terminates, but only if you are able to answer “Yes” to line 30 in the year of termination.)

Line 32.   To the best of your knowledge, state the number of years the trust has been in existence as a foreign trust and attach an explanation of your basis for this statement. Consider any portion of a year to be a complete year. If this is the first year that the trust has been a foreign trust, do not complete the rest of Part III (you do not have an accumulation distribution).

Line 33.   Enter the total amount of distributions that you received during the 3 preceding tax years (or the number of years the trust has been a foreign trust, if less than 3). For 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 $320 ($50 + $120 + $150).

Line 35.   Divide line 34 by 3 (or the number of years the trust has been a foreign trust if fewer than 3). Consider any portion of a year to be a complete year. For example, a foreign trust created on July 1, 2011, would be treated on a 2013 calendar year return as having 2 preceding years (2011 and 2012). In this case, you would calculate the amount on line 35 by dividing line 34 by 2. Do not disregard tax years in which no distributions were made. The IRS will consider your proof of these prior distributions as adequate records to demonstrate that any distribution up to the amount on line 31 is not an accumulation distribution in the current tax year.

Line 36.   Enter this amount as ordinary income on your tax return. Report this amount on the appropriate schedule of your tax return (e.g., Schedule E (Form 1040), Part III).

Note.

If there is an amount on line 37, you must also complete line 38 and Schedule C—Calculation of Interest Charge, to determine the amount of any interest charge you may owe.

Schedule B—Actual Calculation of Trust Distributions

You may only use Schedule B if:

  • You answered “Yes” to line 30,

  • You attach a copy of the Foreign Nongrantor Trust Beneficiary Statement to this return, and

  • You have never before used Schedule A for this foreign trust or this foreign trust terminated during the tax year.

Line 40a.   Enter on line 40a the amount received by you from the foreign trust that is treated as ordinary income of the trust 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 (Form 1040), Part III).

Lines 42a through 42d.   Enter on these lines the applicable amounts received by you from the foreign trust that are treated as capital gain income of the trust in the current tax year. Report these amounts on the appropriate schedule of your tax return (e.g., Schedule D (Form 1040)).

Line 45.   Enter the foreign trust's aggregate undistributed net income (UNI). For example, assume that a trust was created in 2007 and has made no distributions prior to 2013. Assume the trust's ordinary income was $0 in 2012, $60 in 2011, $124 in 2010, $87 in 2009, $54 in 2008, and $25 in 2007. Thus, for 2013, the trust's UNI would be $350. If the trust earned $100 and distributed $200 during 2013 (so that $100 was distributed from accumulated earnings), the trust's 2014 aggregate UNI would be $250 ($350 + $100 - $200).

Line 46.   Enter the foreign trust's weighted undistributed net income (weighted UNI). The trust's weighted UNI is its accumulated income that has not been distributed, weighted by the years that it has accumulated income. To calculate weighted UNI, multiply the undistributed income from each of the trust's years by the number of years since that year, and then add each year's result. Using the example from line 45, the trust's weighted UNI in 2013 would be $1,260, calculated as follows:
Year No. of years  
since that year
UNI from  
each year
Weighted UNI
2012 1 $0 $0  
2011 2 60 120  
2010 3 124 372  
2009 4 87 348  
2008 5 54 270  
2007 6 25 150  
TOTAL   $350 $1,260  

  To calculate the trust's weighted UNI for the following year (2014), the trust could update this calculation, or the weighted UNI shown on line 46 of the 2013 Form 3520 could simply be updated using the following steps:
  1. Begin with the 2013 weighted UNI.

  2. Add UNI at the beginning of 2013.

  3. Add trust earnings in 2013.

  4. Subtract trust distributions in 2013.

  5. Subtract weighted trust accumulation distributions in 2013. (Weighted trust accumulation distributions are the trust accumulation distributions in 2013 multiplied by the applicable number of years from 2013.)

  Using the example above, the trust's 2014 weighted UNI would be $1,150, calculated as follows.
2013 weighted UNI $1,260  
UNI at beginning of 2013 + 350  
Trust earnings in 2013 + 100  
Trust distributions in 2013 - 200  
Weighted trust accumulation distributions in 2013 
($100 X 3.6)
 
360
 
2014 weighted UNI $1,150  

Line 47.   Calculate the trust's applicable number of years by dividing line 46 by line 45. This would be the weighted UNI divided by the annual UNI. Using the examples in the instructions for lines 45 and 46, the trust's applicable number of years would be 3.6 in 2013 (1,260/350) and 4.6 in 2014 (1,150/250).

Note.

Include as many decimal places as there are digits in the UNI on line 45 (e.g., using the example in the instructions for line 45, include three decimal places).

Schedule C—Calculation of Interest Charge

Complete Schedule C if you entered an amount on line 37 or line 41a.

Line 49.   Include the amount from line 48 of this form on Form 4970, line 1. Then compute the tax on the total accumulation distribution using lines 1 through 28 of Form 4970. Enter on line 49 the tax from line 28 of Form 4970, Tax on Accumulation Distribution of Trusts.

Note.

Use Form 4970 as a worksheet and attach it to 
Form 3520.

Line 51.   Interest accumulates on the tax (line 49) for the period beginning on the date that is the applicable number of years (as rounded on line 50) prior to the applicable date and ending on the applicable date. For purposes of making this interest calculation, the 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 2013 calendar year taxpayer, the applicable date would be June 30, 2013). Alternatively, if you received only a single distribution during the tax year that is treated as an accumulation distribution, you may use the date of that distribution as the applicable date.

  For portions of the interest accumulation period that are prior to 1996 (and after 1976), interest accumulates at a simple rate of 6% annually, without compounding. For portions of the interest accumulation period that are after 1995, interest is compounded daily at the rate imposed on underpayments of tax under section 6621(a)(2). This compounded interest for periods after 1995 is imposed not only on the tax, but also on the total simple interest attributable to pre-1996 periods.

  If you are a 2013 calendar year taxpayer and you use June 30, 2013, as the applicable date for calculating interest, use the table below to determine the combined interest rate and enter it on line 51. If you are not a 2013 calendar year taxpayer or you choose to use the actual date of the distribution as the applicable date, calculate the combined interest rate using the above principles and enter it on line 51.

Table of Combined Interest Rate Imposed  
on the Total Accumulation Distribution

Look up the applicable number of years of the foreign trust that you entered on line 50. Read across to find the combined interest rate to enter on line 51. Use this table only if you are a 2013 calendar year taxpayer and are using June 30, 2013, as the applicable date.
     
  Applicable number 
of years of trust  
(from line 50)
Combined 
interest rate  
(enter on line 51)
  1 0.0305
  1.5 0.0460
  2 0.0646
  2.5 0.0833
  3 0.1053
  3.5 0.1275
  4 0.1504
  4.5 0.1764
  5 0.2093
  5.5 0.2491
  6 0.3005
  6.5 0.3531
  7 0.4088
  7.5 0.4585
  8 0.5071
  8.5 0.5488
  9 0.5842
  9.5 0.6201
  10 0.6572
  10.5 0.6988
  11 0.7510
  11.5 0.8039
  12 0.8687
  12.5 0.9491
  13 1.0393
  13.5 1.1273
  14 1.2148
  14.5 1.2988
  15 1.3934
  15.5 1.4964
  16 1.6122
  16.5 1.7314
  17 1.8579
  17.5 1.9812
  18 2.0707
  18.5 2.1601
  19 2.2495
  19.5 2.3390
  20 2.4284
  20.5 2.5178
  21 2.6073
  21.5 2.6967
  22 2.7862
  22.5 2.8756
  23 2.9650
  23.5 3.0545
  24 3.1439
  24.5 3.2333
  25 3.3228
  25.5 3.4122
  26 3.5017
  26.5 3.5911
  27 3.6805
  27.5 3.7700
  28 3.8594
  28.5 3.9488
  29 4.0383
  29.5 4.1277
  30 4.2171
  30.5 4.3066
  31 4.3960
  31.5 4.4855
  32 4.5749
  32.5 4.6643
  33 4.7538
  33.5 4.8432
  34 4.9326
  34.5 5.0221
  35 5.1115
  35.5 5.2010
  36.0 5.2904
  All years greater than 36 5.3798
  (Note. Interest charges began in 1977.)

Line 53.   Report this amount as additional tax (ADT) on the appropriate line of your income tax return (e.g., for Form 1040 filers, include this amount as part of the total for line 60 of your 2013 Form 1040; check box c and enter “ADT” to the left of the line 60 entry space).

Part IV—U.S. Recipients of Gifts or Bequests Received During the Current Tax Year From Foreign Persons

Note.

Penalties may be imposed for failure to report gifts that should be reported. See Penalties, earlier.

A gift to a U.S. person does not include any amount paid for qualified tuition or medical payments made on behalf of the U.S. person.

If a foreign trust makes a distribution to a U.S. beneficiary, the beneficiary must report the amount as a distribution in Part III, rather than as a gift in Part IV.

Contributions of property by foreign persons to domestic or foreign trusts that have U.S. beneficiaries are not reportable by those beneficiaries in Part IV unless they are treated as receiving the contribution in the year of the transfer (e.g., if the U.S. beneficiary is treated as an owner of that portion of the trust under section 678, then the contribution must be reported by such U.S. beneficiary in Part IV).

A domestic trust that is not treated as owned by another person is required to report the receipt of a contribution to the trust from a foreign person as a gift in Part IV.

A domestic trust that is treated as owned by a foreign person is not required to report the receipt of a contribution to the trust from a foreign person. However, a U.S. beneficiary should report the receipt of a distribution from a domestic trust that is treated as owned by a foreign person as a gift from a foreign person in Part IV, rather than as a distribution to a U.S. beneficiary in Part III.

Line 54.   To calculate the threshold amount ($100,000), you must aggregate gifts from different foreign nonresident aliens and foreign estates if you know (or have reason to know) that those persons are related to each other (see Related Person, earlier) or one is acting as a nominee or intermediary for the other. For example, if you receive a gift of $75,000 from nonresident alien individual A and a gift of $40,000 from nonresident alien individual B, and you know that A and B are related, you must answer “Yes” and complete columns (a) through (c) for each gift.

  If you answered “Yes” to the question on line 54 and none of the gifts or bequests received exceeds $5,000, do not complete columns (a) through (c) of line 54. Instead, enter in column (b) of the first line: “No gifts or bequests exceed $5,000.

Line 55.   Answer “Yes” if you received aggregate amounts in excess of $15,102 during the current tax year that you treated as gifts from foreign corporations or foreign partnerships (or any foreign persons that you know (or have reason to know) are related to such foreign corporations or foreign partnerships).

  For example, if you, a calendar-year taxpayer during 2013, received $8,000 from foreign corporation X that you treated as a gift, and $10,000 that you received from nonresident alien A that you treated as a gift, and you know that X is wholly owned by A, you must complete columns (a) through (g) for each gift.

Note.

Gifts from foreign corporations or foreign partnerships are subject to recharacterization by the IRS under section 672(f)(4).

Line 56.    If you answered “Yes” to the question on line 56 and the ultimate donor on whose behalf the reporting donor is acting is a foreign corporation or foreign partnership, attach an explanation including the ultimate foreign donor's name, address, identification number, if any, and status as a corporation or partnership.

  If the ultimate donor is a foreign trust, treat the amount received as a distribution from a foreign trust and complete Part III.


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