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IRS Form 3520 - Reporting Ownership or Transactions With Foreign Trusts

IRS Form 3520 is also used to report ownership or transactions with foreign trusts by American taxpayers. Details about when this document needs to be submitted to the federal government can be found below.

Form 3520 is also used by a U.S. Person or the executor of the estate of a U.S. Person to report:

  • Ownership in a foreign trust under the rules of Section 671 through 679 or,
  • Transactions carried out with a foreign trust.,

Failure to file the 3520, or providing incomplete or incorrect information, will result in a penalty of the greater of $10,000 or (a) 35% of the gross value of any property transferred to a foreign trust for failure by a U.S. transferor to report the creation of or transfer to a foreign trust, (b) 35% of the gross value of the distributions received from a foreign trust for failure by a U.S. person to report receipt of the distribution, or (c) 5% of the gross value of the portion of the trust's assets treated as owned by a U.S. person for failure by the U.S. person to report the U.S. owner information.

A reportable event includes:

  1. The creation of a foreign trust by a U.S. person.
  2. The transfer of any money or property, directly or indirectly, to a foreign trust by a U.S. person, including a transfer by reason of death. This includes transfers that are deemed to have occurred under sections 679(a)(4) and (5).
  3. The death of a citizen or resident of the United States if:
    1. The decedent was treated as the owner of any portion of a foreign trust under the rules of sections 671 through 679, or
    2. Any portion of a foreign trust was included in the gross estate of the decedent.

Responsible Party - Responsible party means:

· The grantor in the case of the creation of an inter vivos trust

· The transferor, in the case of a reportable event other than a transfer by reason of death, or

· The executor of the decedent’s estate in any other case (whether or not the executor is a U.S. person). See the instructions for Form 3520 and Code Sec. 6048 for additional information.

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