SOI Tax Stats - 2006 Foreign Trust Metadata
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Accounts payable.—Accounts payable were liabilities on the Form 3520-A end-of-year balance sheet consisting of relatively short-term liabilities not secured by promissory notes.
Accounts receivable.—Accounts receivable were assets on the Form 3520-A end-of-year balance sheet consisting of relatively short-term assets not secured by promissory notes.
Accumulated depreciation.—The amounts shown for accumulated depreciation on the Form 3520-A end-of-year balance sheet represented the portion of depreciable assets written off in the current year and all prior years.
Accumulated trust income (loss).—This was current-year income (loss) generated by investment of trust corpus and previous-years’ trust income.
Accumulation distribution.—A distribution from a foreign trust that exceeds a certain amount for the tax-year—generally the “distributable net income” of the trust in that year. The rules for calculation of “accumulation distributions” for foreign trusts are complex, and outside the scope of this glossary. See Internal Revenue Code sections 665 through 667 for additional information.
Amortization and depreciation expense.—A reasonable amount was allowed as an amortization or depreciation deduction for the exhaustion, wear and tear of: property used in a trade or business, or property used in the production of income.
Beneficiary.—The person who is to receive the benefits (usually income or tangible property) from the trust. A beneficiary may be the person who created the trust. A trust can have multiple beneficiaries.
Cash.—This Form 3520-A end-of-year balance sheet asset item included the amount of actual money or instruments and claims which were usable and acceptable as money, including certificates of deposit.
Charitable contributions.—Any part of income paid or treated as paid for a charitable purpose specified in IRC section 170(c). It is not necessary that the charitable organization be created or organized in the United States.
Contributions, grants and gifts payable.—Were liabilities on the Form 3520-A end-of-year balance sheet.
Contributions to trust corpus.—These were current tax-year transfers of property to the corpus or “body” of the trust. Contributions to trust corpus must be distinguished from current-year accumulations of income (loss) generated by trust corpus.
Corpus.—The property that was held in trust. For tax purposes, this property was distinguishable from accumulations of income (loss) by the trust. Often referred to as the “body” of the trust, the corpus may generate income streams.
Depreciable assets.—Depreciable assets from the Form 3520-A end-of-year balance sheet were the book value of tangible property subject to depreciation (such as buildings and equipment with a useful life of one year or more). In general, depreciable assets were the gross basis amounts before adjustment for accumulated depreciation.
Distributable net income.—Distributable net income (DNI) generally was the net income of a trust before any deduction for distribution to beneficiaries.
Distributions.—Distributions of cash or property made to foreign trust beneficiaries from the trust corpus or income earned by the trust.
Dividends.—Dividends represented distributions from the earnings and profits of companies incorporated throughout the world.
Executor.—A person named in a will by the decedent who has the responsibility to execute the terms of the will.
Foreign taxes paid.—Foreign taxes paid included only taxes imposed by the authority of a foreign country.
Government obligations.—Government obligations were assets reported on the Form 3520-A end-of-year balance sheet.
Grantor.—(Or creator or settlor) is the person who placed property (corpus) in trust. In the case of a revocable trust, the grantor is treated as the owner of the portion of the trust to which his or her power or retained interest applies. As such, the grantor is therefore taxed directly on the income of the portion under his or her control. The grantor must report any income earned from the trust assets on his or her Federal individual income tax return. A grantor may add assets to a trust after it is established in exchange for beneficial interest in it.
Gratuitous transfer.—Gratuitous transfers were transactions in which property are transferred to a foreign trust for less than fair market value, or for no consideration in return.
Interest.—Interest, a component of total income, included interest from 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, or income received as a regular interest holder of a real estate mortgage conduit (REMIC).
Interest expense.—The amount of interest (subject to limitations) paid or incurred by the trust on amounts borrowed by the trust, or on debt acquitted by the trust.
Inventories.—These were assets reported on the Form 3520-A end-of-year balance sheet that represented the trust’s ending inventories as calculated for tax purposes.
Marketable securities.—Marketable securities were assets reported on the Form 3520-A end-of-year balance sheet.
Mortgages and notes payable.—Mortgages and notes payable were liabilities reported on the Form 3520-A end-of-year balance sheet. In the Form 3520-A balance sheet, mortgages and notes payable were not separated by length of time to maturity of the obligation.
Mortgages and notes receivable.—Mortgages and notes receivable were assets reported on the Form 3520-A end-of-year balance sheet. In the Form 3520-A balance sheet, mortgages and notes receivable were not separated by length of time to maturity of the obligation.
Net income (loss).—Net income (loss) was calculated by subtracting interest paid, foreign taxes paid, state and local taxes paid, trustee and advisor fees paid, charitable contributions, preparer fees, and other expenses from total trust income.
Net long-term capital gain (loss).—Net long-term capital gain (loss) was the gain or loss on all property for investment (such as stocks and bonds) held by the trust with a holding period of greater than one year.
Net short-term capital gain (loss).—Net short-term capital gain (loss) was the gain or loss on all property for investment (such as stocks and bonds) held by the trust with a holding period of one year or less.
Non-grantor trust.—A non-grantor trust is one in which the grantor does not retain any control over the trust assets or income, and the grantor is not treated as the owner by the Internal Revenue Code. Generally, the income from a non-grantor trust is taxed to the beneficiaries as it is distributed.
Non-marketable securities.—Non-marketable securities were assets reported on the end-of-year Form 3520-A balance sheet.
Ordinary gain (loss).—Ordinary gain or loss was the gain or loss from sale or exchange of property other than capital assets and also from involuntary conversions (other than casualty or theft).
Other assets.—Other assets included assets not allocable to a specific account listed on the Form 3520-A end-of-year balance sheet.
Other expenses.—Other items of expense not specified under any other expense category.
Other income.—Other income included all other items of income not included in any other category, such as distributions from Form 1099-R, distributions from pensions, annuities, retirement or profit-sharing plans, IRA’s, and insurance contracts.
Other liabilities.—Other liabilities included liabilities not allocable to a specific account listed on the Form 3520-A end-of-year balance sheet.
Other net worth.—This was trust equity not allocable to specific categories of net worth.
Owner.—An owner of a foreign trust is the person that is treated as owning any of the assets of a foreign trust under the grantor trust rules contained in sections 671 through 679 of the Internal Revenue Code.
Partnership income (loss).—Partnership income (loss) was the trust’s share of gain or loss from the partnerships, S corporations, estates, other trusts, and REMICS. Partnership income (loss) might include net short-term or long-term capital gains (losses), payments to the trust for use of capital, and salary or wage payments. If the trust received a Schedule K-1 from a partnership, S corporation, or other flow-through entity, the corresponding lines of the Form 3520-A were used to report any interest, dividends, capital gains, etc., from the flow-through entity.
Real property.—Real property were assets on the Form 3520-A end-of -year balance sheet (including buildings and land).
Rents.—These were the gross amounts received by foreign trusts for the use or occupancy of real property.
State and local taxes paid.—Deductible state and local income or real property taxes paid or incurred. U.S. Federal income taxes, estate, inheritance, legacy, succession, gift, U.S. Federal duties and excise taxes and state and local sales taxes were not included in state and local taxes paid. State and local sales taxes were treated as a part of the cost of property.
Taxable income.—Taxable income was the amount that remains after total expenses were subtracted from total income. Taxable income was restricted to values greater than or equal to zero.
Total assets.—Total assets were the sum of individual asset components reported in the end-of-year balance sheet on Form 3520-A and reflected fair market value. The balance sheet data shown in Tables 3 and 4 are based on un-audited Forms 3520-A. Consequently, the sum of the components may not equal total assets due to taxpayer reporting discrepancies, including the filing of incomplete balance sheets.
Total expenses.—Total expenses were the aggregate sum of all reported expenses, which included amounts for interest paid, foreign taxes paid, state and local taxes paid, amortization and depreciation, trustee and advisor fees, charitable contributions and other expenses.
Total income.—Total expenses was the aggregate sum of all reported income, which included amounts for interest, dividends, rents, partnership net income (loss), net short-term capital gain (loss), net long-term capital gain (loss), ordinary gain (loss), and other income.
Total liabilities.—Total liabilities on the Form 3520-A end-of-year balance sheet included the claims of creditors. Trust equity accounts from the Form 3520-A end-of-year balance sheet were included under “Net Worth.”
Total net worth.—Was the sum of all equity accounts on the Form 3520-A end-of-year balance sheet. These equity accounts were contributions to trust corpus, accumulated trust income and other net worth.
Trustee.—A trustee holds legal title to the assets placed in trust and has the power to manage and control the property. The trustee has a fiduciary duty to exercise these powers for the benefit of the beneficiaries according to the terms of the governing instrument. The discretion allowed the trustee may range from very broad to strictly limited.
Trustee and advisor fees.—Deductible fees paid or incurred to the fiduciary for administering the trust.
Trust instrument.—A legal document that names the parties and establishes the duties and powers of the trustee and the rights of the beneficiaries.
Trust protector.—An optional third party, which is usually responsible for monitoring the trustee’s performance and can replace the trustee under specified conditions.
U.S. person.—The term U.S. person includes individuals, corporations, partnerships, trusts and estates. Individuals include U.S. citizens and residents.
Domain of Study
The statistics for 2006 Foreign Trusts presented on this site were based on all Forms 3520 and 3520-A with tax periods that ended during Calendar Year 2006 filed at the Internal Revenue Service’s Philadelphia and Ogden Submissions Processing Centers. All returns were used for the statistics, consequently the data are not subject to sampling error. However, certain returns filed were unable to be located for the study. In addition, other returns for Calendar Year 2006 were filed too late to be included in the study. Hence, data from missing returns and late-filed returns were not included in the statistics presented.
The data may, however, contain nonsampling errors. For instance, since Forms 3520 and 3520-A are information returns, taxpayer reporting, as originally filed, was occasionally incomplete. Where possible, inconsistencies in the data were resolved to conform to provisions of the Internal Revenue Code. In cases where information reported was not internally consistent, other data on the return were used to resolve errors. For example, in certain cases, U.S. addresses were reported for the “foreign” grantor trust; in such cases, the location of the trustee was used as a proxy for the location of the grantor trust.
Since a foreign trust may have more than one owner and more than one beneficiary, multiple Form 3520 filings may relate to the one Form 3520-A filed. In these cases, an attempt was made to match and verify information between the Forms 3520 and the Form 3520-A. However, certain returns were unavailable for the statistics, and it was not always possible to match the information.
U.S. taxpayers that receive distributions characterized as accumulation distributions file Form 4970 to compute tax on such distributions. The tax amount computed on Form 4970 is then carried over to Form 3520.
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