Instructions for Form 3520-A |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
File the 2006 return for calendar year 2006 and fiscal years that begin in 2006 and end in 2007. For a fiscal year, fill in
the tax year 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
“ Preparer's SSN or
PTIN” at the bottom of page 1 of the form.
Address.
Include the suite, room, 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 2.
If the trust did not appoint a U.S. agent, attach the following documents to Form 3520-A:
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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.
Line 5.
Attach a statement that provides the following information concerning the transfer:
-
Name, U.S. taxpayer identification number (if any), and country of organization or residence of the person to whom the property
was
transferred.
-
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.
-
A description of the property transferred, including the estimated FMV and the adjusted basis of the property.
-
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.
-
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 page 3 for the definition of U.S. person. 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.
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 (losses) attributable to a U.S. owner, use Schedule D (corporate or individual, whichever applies).
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 schedule
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 separate
instructions for
Form 4972, Tax on Lump-Sum Distributions.
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 (e.g., 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:
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 schedule 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 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 schedule.
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. person 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 on page 1.
Identification numbers and addresses.
See the instructions for Part I on page 2 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 schedules, 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 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.
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 on page 1.
Identification numbers and addresses.
See the instructions for Part I on page 2 for information on entering identification numbers and addresses.
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