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.

Initial Return, Final Return, Amended Return

Initial return.   If this is the foreign trust's first return, check the “Initial return” box.

Final return.   If the foreign trust ceases to exist, check the “Final return” box.

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

Part I—General 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-A other than the entry space for “PTIN” at the bottom of page 1 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 1b(2).   A reference ID number is required on line 1b(2) only in cases where no EIN was entered for the foreign trust on line 1b(1). However, filers are permitted to enter both an EIN on line 1b(1) and a reference ID number on line 1b(2). If applicable, enter the reference ID number (defined below) you have assigned to the foreign trust.

  A “reference ID number ” for Form 3520-A purposes is a number established with respect to the foreign trust by or on behalf of the U.S. owner of the foreign trust for which Form 3520-A reporting is required. This number is used to uniquely identify the foreign trust treated as owned by a U.S. person 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.

Because reference ID numbers are established by or on behalf of the U.S. owner of the foreign trust filing Form 3520-A, there is no need to apply to the IRS to request a reference ID number or for permission to use these numbers.

Note.

When a reference ID number is established with respect to a foreign trust on a Form 3520-A, then the U.S. owner(s) of the foreign trust should also use that same reference ID number with respect to such foreign trust on Form 3520. In general, the reference ID number assigned to a foreign trust on Form 3520-A has relevance only on Form 3520-A and Form 3520 (and on any other form that is attached to or associated with Form 3520-A) 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 or spaces 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 the 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-A 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-A filer must use a reference ID number for the receiving trust which correlates the previous reference ID number for the distributed 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 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 2.   If the trust did not appoint a U.S. agent, attach the following documents to Form 3520-A:
  • 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.

Lines 3a through 3g.   If a foreign trust with a U.S. owner does not have a U.S. agent, the IRS may determine the amounts required to be taken into account with respect to the foreign trust by the U.S. owner. See section 6048(b)(2). In order to avoid this, a U.S. owner of a foreign trust should ensure that the foreign trust appoints a U.S. person to act as the foreign trust's limited agent for purposes of applying sections 7602, 7603, and 7604 with respect to a request by the IRS to examine records or produce testimony, or a summons by the IRS for such records or testimony. Any U.S. citizen, resident alien, or domestic corporation (including a U.S. grantor or U.S. beneficiary of a foreign trust) may act as the U.S. agent of the trust.

  In order to authorize a U.S. person to act as an agent under section 6048(b), the trust and the agent must enter into a binding agreement substantially in the format that follows. Attach a copy of the authorization to Form 3520-A.

  
Do not enter a PTIN on the authorization form.

   
 
 

  

Authorization of Agent

Line 5.   Attach a statement that provides the following information concerning the transfer:
  1. Name, U.S. taxpayer identification number (if any), and country of organization or residence of the person to whom the property was transferred.

  2. A general description of the transfer, and any broader transaction of which it forms a part, including a chronology of the transfers involved and an identification of the other parties to the transaction to the extent known.

  3. A description of the property transferred, including the estimated FMV and the adjusted basis of the property.

  4. A description of the consideration received by the trust, including its estimated FMV, and for stock or securities, the class or type, amount, and characteristics of the interest received. If no consideration was received by the trust, indicate whether the trust or a U.S. owner exercises any powers over the entity to which the property was transferred (including a description of such powers), and identify the name, U.S. taxpayer identification number (if any), and country of organization or residence of all beneficial owners of such entity.

  5. To the extent known, a description of any subsequent transfer of the property, including the name, U.S. taxpayer identification number (if any), and country of organization or residence of the person to whom the property was subsequently transferred.

  The statement must also contain a description of the trust ownership structure setting forth the name, U.S. taxpayer identification number (if any), and country of organization of all entities in which the trust has an ownership interest, including an ownership chart showing the trust's position in the chain of ownership and the percentages of ownership.

Note.

The term “person” includes an individual or an entity, whether U.S. or foreign. See the definition of U.S. person earlier. A foreign person is an individual or entity that is not a U.S. person.

Part II—Foreign Trust Income Statement

Include all income from U.S. and non-U.S. sources. This financial statement must reasonably reflect the trust's income under U.S. income tax principles.

Income

Line 1. Interest.   Report all taxable interest income that was received during the tax year. Examples of taxable interest include, but are not limited to, interest from:
  • Accounts (including certificates of deposit and money market accounts) with banks, credit unions, and thrift institutions.

  • Notes, loans, and mortgages.

  • U.S. Treasury bills, notes, and bonds.

  • U.S. savings bonds.

  • Original issue discount.

  • Income received as a regular interest holder of a real estate mortgage investment conduit (REMIC).

  For taxable bonds acquired after 1987, amortizable bond premium is treated as an offset to the interest income instead of as a separate interest deduction. See Pub. 550, Investment Income and Expenses.

Line 2. Dividends.   Report all ordinary dividends received during the tax year.

Note.

Report capital gain distributions on line 5.

Line 4. Income (loss) from partnerships, fiduciaries, etc.   Enter the trust's share of income or (losses) from partnerships, S corporations, estates, other trusts, and REMICs.

  If the trust received a Schedule K-1 from a partnership, S corporation, or other flow-through entity, use the corresponding lines on Form 3520-A to report the interest, dividends, capital gains, etc., from the flow-through entity.

Line 5. Capital gains (losses).   For capital gains or (losses) attributable to a U.S. owner, use Schedule D (corporate or individual, whichever applies) (and Form 8949, Sales and other Dispositions of Capital Assets, if applicable).

Line 6. Ordinary gains (losses).   Enter the ordinary gain or (loss) from the sale or exchange of property other than capital assets and also from involuntary conversions (other than casualty or theft).

Line 7. Other income.   Enter other items of income not included on lines 1 through 6. List the types and amounts on an attached statement if the trust has more than one item.

  Items to be reported on line 7 include any part of a total distribution shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., that is treated as ordinary income. For more information, see the instructions for Form 4972, Tax on Lump-Sum Distributions.

Expenses

Line 9. Interest expense.   Enter the amount of interest (subject to limitations) paid or incurred by the trust on amounts borrowed by the trust, or on debt acquired by the trust, that is not reported elsewhere in Part II.

  If the proceeds of a loan were used for more than one purpose (for example, to purchase a portfolio investment and to acquire an interest in a passive activity), the fiduciary must make an interest allocation according to the rules in Temporary Regulations section 1.163-8T.

  Do not include interest paid on indebtedness incurred or continued to purchase or carry obligations on which the interest is wholly exempt from income tax.

Line 10a. Foreign taxes.   A foreign tax includes only a tax imposed by the authority of a foreign country.

Line 10b. State and local taxes.   Enter any deductible state and local income or real property taxes paid or incurred during the tax year that are not reported elsewhere in Part II.

  Do not deduct on line 10b or on any other line of Part II:
  • Federal income taxes.

  • Estate, inheritance, legacy, succession, and gift taxes.

  • Federal duties and excise taxes.

  • State and local sales taxes. Instead, treat these taxes as part of the cost of the property.

Line 11. Amortization and depreciation (depletion).   A reasonable amount is allowed as a depreciation deduction for the exhaustion, wear, and tear of:
  • Property used in a trade or business or

  • Property held for the production of income.

Line 12. Trustee and advisor fees.   Enter the deductible fees paid or incurred to the fiduciary for administering the trust during the tax year.

Line 13. Charitable contributions.   Generally, any part of the income reported on line 8 that is paid (or treated as paid) during the tax year for a charitable purpose specified in section 170(c) is allowed as a deduction. It is not necessary that the charitable organization be created or organized in the United States.

Line 14. Other expenses.   Enter other items of expense not listed on lines 9 through 13. List the type and amount on an attached statement if the trust has more than one item.

Lines 17b and 17c. Distributions to U.S. owners and beneficiaries.   Separately list the total amount of distributions (including the uncompensated use of trust property) to each U.S. owner and beneficiary. List the full name, identification number, date of distribution, and FMV (dollar amount) for each U.S. owner and beneficiary receiving a distribution. If more space is needed, attach a statement.

  Prepare a separate Foreign Grantor Trust Owner Statement (see below) or Foreign Grantor Trust Beneficiary Statement (see below) for each U.S. owner or for each U.S. beneficiary who receives a distribution from the trust.

Part III—Foreign Trust Balance Sheet

List all assets and liabilities of the trust, including those assets and liabilities attributable to the portion(s) of the trust (if any) not treated as owned by a U.S. person.

The balance sheet should reflect FMV. Include certificates of deposit as cash on line 1.

Line 18. Accumulated trust income.   Include the total amount of trust income accumulated and not distributed.

Foreign Grantor Trust Owner Statement

A copy of this statement (page 3 of Form 3520-A) must be furnished to each U.S. person who is treated as an owner of the foreign trust under the grantor trust rules. The statement must be furnished no later than the 15th day of the 3rd month following the end of the trust's tax year or later, if an extension of time to file is granted. See When and Where To File, earlier.

Identification numbers and addresses.   See the instructions for Part I earlier, for information on entering identification numbers and addresses.

Line 8. Trust documents.    If the trust did not appoint a U.S. agent, list the documents attached to the current year Form 3520-A and those attached to a Form 3520-A filed within the last 3 years. Specify the years the documents were attached. See the instructions for line 2, Part I, for a list of documents the trust is required to attach to Form 3520-A.

Statement of Foreign Trust Income Attributable to U.S. Owner

The amounts on the statement must include the portion of income reported by the foreign trust deemed attributable to the U.S. owner.

The foreign trust may need to furnish to the U.S. owner additional information, including applicable statements, to ensure that the owner accurately reports income and expenses on the owner's U.S. income tax return.

Foreign Grantor Trust Beneficiary Statement

A copy of this statement (page 4 of Form 3520-A) must be furnished to each U.S. beneficiary who receives a distribution (including the uncompensated use of trust property) from the foreign trust during the tax year.

Exception.   Do not complete this statement for a U.S. person for any portion of the trust of which that U.S. person is treated as the owner; instead, complete the Foreign Grantor Trust Owner Statement for that U.S. person (as described above).

The statement must be furnished to the U.S. beneficiary no later than the 15th day of the 3rd month following the end of the trust's tax year or later, if an extension of time to file is granted. See When and Where To File, earlier.

Identification numbers and addresses.   See the instructions for Part I earlier, for information on entering identification numbers and addresses.


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