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 40. Enter 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).
Line 42. Enter the amount received by you from the foreign trust that is treated as capital gain income of that trust in the current tax year. Report this amount 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 1996 and has made no distributions prior to 2002. Assume the trust's ordinary income was $0 in 2001, $60 in 2000, $124 in 1999, $87 in 1998, $54 in 1997, and $25 in 1996. Thus, for 2002, the trust's UNI would be $350. If the trust earned $100 and distributed $200 during 2002 (so that $100 was distributed from accumulated earnings), the trust's 2003 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 2002 would be $1,260, calculated as follows:
| Year
|
No.
of years since that year |
UNI
from each year |
Weighted
UNI |
| 2001 |
1 |
$ 0 |
$ 0 |
| 2000 |
2 |
60 |
120 |
| 1999 |
3 |
124 |
372 |
| 1998 |
4 |
87 |
348 |
| 1997 |
5 |
54 |
270 |
| 1996
|
6 |
25 |
150
|
| TOTAL |
|
$350 |
$1,260 |
To calculate the trust's weighted UNI in 2003, the trust could repeat this calculation, or the weighted UNI shown on line 46 of the 2002 Form 3520 could simply be updated using the following steps:
- Begin with the 2002 weighted UNI.
- Add UNI at the beginning of 2002.
- Add trust earnings in 2002.
- Subtract trust distributions in 2002.
- Subtract weighted trust accumulation distributions in 2002. (Weighted trust accumulation distributions are the trust accumulation distributions in 2002 multiplied by the applicable number of years from 2002.)
Using the examples above, the trust's 2003 weighted UNI would be $1,150, calculated as follows.
| 2002 weighted UNI |
$1,260 |
| UNI at beginning of 2002 |
+ 350 |
| Trust earnings in 2002 |
+ 100 |
| Trust distributions in 2002 |
- 200 |
| Weighted trust accumulation distributions
in 2002 ($100 X 3.6) |
-360 |
| 2003 weighted UNI |
$1,150 |
Line 47. Calculate the trust's applicable number of years by dividing line 46 by line 45. Using the examples in the instructions for lines 45 and 46, the trust's applicable number of years would be 3.6 in 2002 (1,260/350) and 4.6 in 2003 (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 41.
Line 49. Include the amount from line 48 of this form on line 1, Form 4970. 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.
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 2002 calendar year taxpayer, the applicable date would be June 30, 2002). 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 2002 calendar year taxpayer and you use June 30, 2002, as the applicable date for calculating interest, use the table on page 9 to determine the combined interest rate and enter it on line 51. If you are not a 2002 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 2002
calendar year taxpayer and are using June 30, 2002 as
the applicable date. |
| Applicable
number of years of trust (from line 50) |
Combined
interest rate (enter on line 51) |
| 1.0 |
0.0625 |
| 1.5 |
0.1067 |
| 2.0 |
0.1554 |
| 2.5 |
0.2063 |
| 3.0 |
0.2536 |
| 3.5 |
0.2998 |
| 4.0 |
0.3539 |
| 4.5 |
0.4102 |
| 5.0 |
0.4723 |
| 5.5 |
0.5372 |
| 6.0 |
0.6048 |
| 6.5 |
0.6755 |
| 7.0 |
0.7258 |
| 7.5 |
0.7760 |
| 8.0 |
0.8263 |
| 8.5 |
0.8766 |
| 9.0 |
0.9268 |
| 9.5 |
0.9771 |
| 10.0 |
1.0274 |
| 10.5 |
1.0776 |
| 11.0 |
1.1279 |
| 11.5 |
1.1782 |
| 12.0 |
1.2284 |
| 12.5 |
1.2787 |
| 13.0 |
1.3290 |
| 13.5 |
1.3792 |
| 14.0 |
1.4295 |
| 14.5 |
1.4798 |
| 15.0 |
1.5300 |
| 15.5 |
1.5803 |
| 16.0 |
1.6305 |
| 16.5 |
1.6808 |
| 17.0 |
1.7311 |
| 17.5 |
1.7813 |
| 18.0 |
1.8316 |
| 18.5 |
1.8819 |
| 19.0 |
1.9321 |
| 19.5 |
1.9824 |
| 20.0 |
2.0327 |
| 20.5 |
2.0829 |
| 21.0 |
2.1332 |
| 21.5 |
2.1835 |
| 22.0 |
2.2237 |
| 22.5 |
2.2840 |
| 23.0 |
2.3343 |
| 23.5 |
2.3845 |
| 24.0 |
2.4348 |
| 24.5 |
2.4851 |
| 25.0 |
2.5353 |
| All years greater than 25.0 |
2.5856 |
| (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 61 of your 2002 Form 1040) and enter ADT to the left of the line 61 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 item 3 of Penalties on page 2.
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., the beneficiary is an owner of that portion of the trust under section 678).
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. person should report the receipt of a distribution from such a trust as a gift from a foreign person in Part IV.
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 definition of related person on page 4) 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 $11,642 during the current tax year that you treated as gifts from foreign corporations or foreign partnerships (or any 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 2002, received $5,000 from foreign corporation X that you treated as a gift, and $8,000 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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