3520 Instructions for Form 3520

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2017

Instructions for Form 3520

Department of the Treasury
Internal Revenue Service

Annual Return To Report Transactions With Foreign Trusts
and Receipt of Certain Foreign Gifts

DRAFT AS OF
August 30, 2017

Section references are to the Internal Revenue Code
unless otherwise noted.

General Instructions
Future Developments

For the latest information about developments related to
Form 3520 and its instructions, such as legislation
enacted after they were published, go to www.irs.gov/
Form3520.

Purpose of Form

U.S. persons (and executors of estates of U.S.
decedents) file Form 3520 to report:
Certain transactions with foreign trusts,
Ownership of foreign trusts under the rules of sections
671 through 679, and
Receipt of certain large gifts or bequests from certain
foreign persons.
A separate Form 3520 must be filed for transactions
with each foreign trust.

Who Must File

File Form 3520 if any one or more of the following applies.
1. You are the responsible party for reporting a
reportable event that occurred during the current tax year,
or you transferred property (including cash) to a foreign
trust in exchange for an obligation. Responsible party,
reportable event, and qualified obligation are defined
later.
Complete the identifying information on page 1 of the
form and the relevant portions of Part I. See the
instructions for Part I.
2. You are a U.S. person who, during the current tax
year, is treated as the owner of any part of the assets of a
foreign trust under the rules of sections 671 through 679.
Complete the identifying information on page 1 of the
form and Part II. See the instructions for Part II.

Note. You are required to complete Part II even if there
have been no transactions involving the trust during the
tax year.
3. You are a U.S. person who received (directly or
indirectly) a distribution from a foreign grantor or
nongrantor trust (including the uncompensated use of
trust property) during the current tax year or you (or a U.S.
person related to you) received a loan (including an
extension of credit) from a foreign trust that could be
treated as a distribution to a U.S. person.
Complete the identifying information on page 1 of the
form and Part III. See the instructions for Part III.

Aug 25, 2017

4. You are a U.S. person who, during the current tax
year, received either:
a. More than $100,000 from a nonresident alien
individual or a foreign estate (including foreign persons
related to that nonresident alien individual or foreign
estate) that you treated as gifts or bequests; or
b. More than $15,797 from foreign corporations or
foreign partnerships (including foreign persons related to
such foreign corporations or foreign partnerships) that you
treated as gifts.
Complete the identifying information on page 1 of the
form and Part IV. See the instructions for Part IV.
Note. You may also be required to file FinCEN Form 114,
Report of Foreign Bank and Financial Accounts (FBAR).

Exceptions To Filing

Form 3520 does not have to be filed to report the following
transactions.
Transfers to foreign trusts described in sections 402(b),
404(a)(4), or 404A.
Most fair market value (FMV) transfers by a U.S. person
to a foreign trust. However, some FMV transfers must
nevertheless be reported on Form 3520 (e.g., transfers in
exchange for obligations that are treated as qualified
obligations, transfers of appreciated property to a foreign
trust for which the U.S. transferor does not immediately
recognize all of the gain on the property transferred,
transfers involving a U.S. transferor that is related to the
foreign trust). See section III of Notice 97-34, 1997-25
I.R.B. 22.
Transfers to foreign trusts that have a current
determination letter from the IRS recognizing their status
as exempt from income taxation under section 501(c)(3).
Transfers to, ownership of, and distributions from a
Canadian registered retirement savings plan (RRSP), a
Canadian registered retirement income fund (RRIF), or
any other Canadian retirement plan that is within the
meaning of section 3 of Rev. Proc. 2014-55. See Rev.
Proc. 2014-55, 2014-44 I.R.B. 753, available at
www.irs.gov/irb/2014-44_IRB/ar10.html.
Deemed transfers from domestic trusts that become
foreign trusts to the extent the trust is treated as owned by
a foreign person, after application of section 672(f).
Distributions from foreign trusts that are taxable as
compensation for services rendered (within the meaning
of section 672(f)(2)(B) and its regulations), so long as the
recipient reports the distribution as compensation income
on its applicable federal income tax return.
Distributions from foreign trusts to domestic trusts that
have a current determination letter from the IRS
recognizing their status as exempt from income taxation
under section 501(c)(3).

Cat. No. 23068I

Joint Returns

Penalties

Two transferors or grantors of the same foreign trust, or
two U.S. beneficiaries of the same foreign trust, may file a
joint Form 3520, but only if they file a joint income tax
return.

Section 6677. A penalty applies if Form 3520 is not
timely filed or if the information is incomplete or incorrect
(see below for an exception if there is reasonable cause).
Generally, the initial penalty is equal to the greater of
$10,000 or the following (as applicable):
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.
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.
5% of the gross value of the portion of the foreign trust's
assets treated as owned by a U.S. person under the
grantor trust rules (sections 671 through 679) for failure by
the U.S. person to report the U.S. owner information.
Such U.S. person is subject to an additional separate 5%
penalty (or $10,000 if greater), if the foreign trust (a) fails
to file a timely Form 3520-A or (b) does not furnish all of
the information required by section 6048(b) or includes
incorrect information. See section 6677(a) through (c) and
the Instructions for Form 3520-A.
Additional penalties will be imposed if the
noncompliance continues for more than 90 days after the
IRS mails a notice of failure to comply with the required
reporting. For more information, see section 6677.
Reasonable cause. No penalties will be imposed if the
taxpayer can demonstrate that the failure to comply was
due to reasonable cause and not willful neglect.

Additional Reporting Information

DRAFT AS OF
August 30, 2017

For more information on foreign trust reporting, including
abusive foreign trust schemes, go to the IRS website at
IRS.gov.

When and Where To File

In general, Form 3520 is due on the date your income tax
return is due, including extensions. In the case of a Form
3520 filed with respect to a U.S. decedent, Form 3520 is
due on the date that Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return, is due
(including extensions), or would be due if the estate were
required to file a return.
Send Form 3520 to the Internal Revenue Service
Center, P.O. Box 409101, Ogden, UT 84409.
Form 3520 must have all required attachments to be
considered complete.

Note. If a complete Form 3520 is not filed by the due
date, including extensions, the time for assessment of any
tax imposed with respect to any event or period to which
the information required to be reported in Parts I through
III of such Form 3520 relates, will not expire before the
date that is 3 years after the date on which the required
information is reported. See section 6501(c)(8).

Note. The fact that a foreign country would impose
penalties for disclosing the required information is not
reasonable cause. Similarly, reluctance on the part of a
foreign fiduciary or provisions in the trust instrument that
prevent the disclosure of required information is not
reasonable cause. See section 6677(d) for additional
information.

Who Must Sign

If the return is filed by:
An individual or a fiduciary, it must be signed and dated
by that individual or fiduciary;
A partnership, it must be signed and dated by a general
partner or limited liability company member; or
A corporation, it must be signed and dated by the
president, vice president, treasurer, assistant treasurer,
chief accounting officer, or any other corporate officer
(such as a tax officer) who is authorized to sign.

Section 6039F. In the case of a failure to report foreign
gifts described in section 6039F, a penalty equal to 5% of
the amount of such foreign gifts applies for each month for
which the failure to report continues (not to exceed a total
of 25%). No penalty will be imposed if the taxpayer can
demonstrate that the failure to comply was due to
reasonable cause and not willful neglect. See section
6039F for additional information.

The paid preparer must complete the required preparer
information at the bottom of page 6 of Form 3520 and
must be sure to:
Sign the return in the space provided for the preparer's
signature, and
Give a copy of the return to the filer.

Section 6662(j). Penalties may be imposed under
section 6662(j) for undisclosed foreign financial asset
understatements. No penalty will be imposed with respect
to any portion of an underpayment if the taxpayer can
demonstrate that the failure to comply was due to
reasonable cause with respect to such portion of the
underpayment and the taxpayer acted in good faith with
respect to such portion of the underpayment. See section
6662(j) and section 6664(c) for additional information.

Inconsistent Treatment of Items

The U.S. beneficiary and U.S. owner's tax return must be
consistent with the Form 3520-A, Annual Information
Return of Foreign Trust With a U.S. Owner, filed by the
foreign trust unless you report the inconsistency to the
IRS. If you are treating items on your tax return differently
from the way the foreign trust treated them on its return,
file Form 8082, Notice of Inconsistent Treatment or
Administrative Adjustment Request (AAR). See Form
8082 for more details.

Definitions
Distribution

A distribution for section 6048(c) reporting purposes is
any gratuitous transfer of money or other property from a
trust, whether or not the trust is treated as a grantor trust
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under the grantor trust rules of sections 671 through 679,
and without regard to whether the recipient is designated
as a beneficiary by the terms of the trust. A distribution
includes the receipt of trust corpus and the receipt of a gift
or bequest described in section 663(a).

general power of appointment over the transferor trust
exercises that power in favor of another trust, such person
is treated as the grantor of the transferee trust, even if the
grantor of the transferor trust is treated as the owner of the
transferor trust.

A distribution also includes constructive transfers from
a trust. For example, if charges you make on a credit card
are paid by a foreign trust or guaranteed or secured by the
assets of a foreign trust, the amount charged will be
treated as a distribution to you by the foreign trust.
Similarly, if you write checks on a foreign trust's bank
account, the amount will be treated as a distribution. Also,
if you receive a payment from a foreign trust in exchange
for property transferred to the trust or services rendered to
the trust, and the FMV of the payment you received
exceeds the FMV of the property transferred or services
rendered, the excess will be treated as a distribution to
you. See section V of Notice 97-34, 1997-25 I.R.B. 22.
Examples:
1. If you sell stock with an FMV of $100 to a foreign
trust and receive $150 in exchange, you have received a
distribution of $50.
2. If you receive $100 from the trust for services
performed by you for the trust, and the services have an
FMV of $20, you have received a distribution of $80.

Grantor Trust

A grantor trust is any trust to the extent that the assets of
the trust are treated as owned by a person other than the
trust. See the grantor trust rules in sections 671 through
679. A part of the trust may be treated as a grantor trust to
the extent that only a portion of the trust assets are owned
by a person other than the trust.

DRAFT AS OF
August 30, 2017

Note. Under the HIRE Act, effective after March 18,
2010, if a foreign trust directly or indirectly loans cash or
marketable securities to a U.S. person who does not
repay the loan at a market rate of interest, or allows a U.S.
person to use trust property without paying FMV within a
reasonable period of time, the trust will be treated as
having a U.S. beneficiary, and is therefore treated as a
grantor trust under the grantor trust rules.

Gratuitous Transfer

A gratuitous transfer to a foreign trust is any transfer to the
trust other than (a) a transfer for FMV; or (b) a distribution
to the trust with respect to an interest held by the trust (i)
in an entity other than a trust (e.g., a corporation or a
partnership), or (ii) in an investment trust described in
Regulations section 301.7701-4(c), a liquidating trust
described in Regulations section 301.7701-4(d), or an
environmental remediation trust described in Regulations
section 301.7701-4(e).

If you are a grantor or beneficiary of a foreign trust and
you (or a U.S. person related to you) directly or indirectly
received a loan of cash or marketable securities from a
foreign trust, or you (or a U.S. person related to you) used
any property owned by a foreign trust without paying FMV
within a reasonable amount of time, the amount of such
loan or the FMV of the use of trust property will be treated
as a distribution for reporting purposes. For this purpose,
a loan by an unrelated third party that is guaranteed by a
foreign trust is generally treated as a loan from the trust.
See section V(A) of Notice 97-34, 1997-25 I.R.B. 22.

A transfer of property to a trust may be considered a
gratuitous transfer without regard to whether the transfer
is a gift for gift tax purposes. See chapter 12 of Subtitle B
of the Code (i.e., sections 2501 through 2524).
For purposes of this determination, if a U.S. person
contributes property to a trust in exchange for any type of
interest in the trust, such interest in the trust will be
disregarded in determining whether FMV has been
received. In addition, a U.S. person will not be treated as
making a transfer for FMV merely because the transferor
is deemed to recognize gain on the transaction.

Foreign Trust and Domestic Trust

A foreign trust is any trust other than a domestic trust.
A domestic trust is any trust if:
1. A court within the United States is able to exercise
primary supervision over the administration of the trust,
and
2. One or more U.S. persons have the authority to
control all substantial decisions of the trust.

If you transfer property to a foreign trust in exchange for
an obligation of the trust (or an obligation of a person
related to the trust), it will be a gratuitous transfer unless
the obligation is a qualified obligation. Obligation and
qualified obligation are defined later.

Grantor

A grantor includes any person who creates a trust or
directly or indirectly makes a gratuitous transfer of cash or
other property to a trust. A grantor includes any person
treated as the owner of any part of a foreign trust's assets
under sections 671 through 679, excluding section 678.

Gross Reportable Amount

Gross reportable amount is:
The gross value of property involved in the creation of a
foreign trust or the transfer of property to a foreign trust
(including a transfer by reason of death);
The gross value of any portion of a foreign trust treated
as owned by a U.S. person under the rules of sections
671 through 679 or any part of a foreign trust that is
included in the gross estate of a U.S. citizen or resident;
The gross value of the assets in a trust at the time the
trust becomes a foreign trust, if the trust was a domestic
trust to which a U.S. citizen or resident had previously

Note. If a partnership or corporation makes a gratuitous
transfer to a trust, the partners or shareholders are
generally treated as the grantors of the trust, unless the
partnership or corporation made the transfer for a
business purpose of the partnership or corporation.
If a trust makes a gratuitous transfer to another trust,
the grantor of the transferor trust is treated as the grantor
of the transferee trust, except that if a person with a
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3. All payments on the obligation are denominated in
U.S. dollars;
4. The yield to maturity of the obligation is not less
than 100% of the applicable federal rate under section
1274(d) for the day on which the obligation is issued and
not greater than 130% of the applicable federal rate;
5. The U.S. person agrees to extend the period for
assessment of any income or transfer tax attributable to
the transfer and any consequential income tax changes
for each year that the obligation is outstanding, to a date
not earlier than 3 years after the maturity date of the
obligation, unless the maturity date of the obligation does
not extend beyond the end of the U.S. person's tax year
and is paid within such period (this is done on Part I,
Schedule A, line 12, and Part III, line 26, as applicable);
and
6. The U.S. person reports the status of the obligation,
including principal and interest payments, on Part I,
Schedule C, line 19, and Part III, line 28, as applicable, for
each year that the obligation is outstanding.

transferred property, and provided that such U.S. citizen
or resident is alive at the time the trust becomes a foreign
trust (see section 679(a)(5)); or
The gross amount of distributions received from a
foreign trust.

Gross Value

Gross value is the value of property as determined under
section 2512 and its regulations, without regard to any
prohibitions or restrictions on a person's interest in the
property. See section VII of Notice 97-34. Although formal
appraisals are not generally required, you should keep
contemporaneous records of how you arrived at your
good faith estimate.

DRAFT AS OF
August 30, 2017

Guarantee

A guarantee:
Includes any arrangement under which a person,
directly or indirectly, assures, on a conditional or
unconditional basis, the payment of another's obligation;
Encompasses any form of credit support, and includes
a commitment to make a capital contribution to the debtor
or otherwise maintain its financial viability; or
Includes an arrangement reflected in a “comfort letter,”
regardless of whether the arrangement gives rise to a
legally enforceable obligation. If an arrangement is
contingent upon the occurrence of an event, in
determining whether the arrangement is a guarantee, you
must assume that the event has occurred.

Related Person

A related person generally includes any person who is
related to you for purposes of sections 267 and 707(b).
This includes, but is not limited to:
A member of your family—your brothers and sisters,
half-brothers and half-sisters, spouse, ancestors (parents,
grandparents, etc.), lineal descendants (children,
grandchildren, etc.), and the spouses of any of these
persons; or
A corporation in which you, directly or indirectly, own
more than 50% in value of the outstanding stock.

Nongrantor Trust

A nongrantor trust is any trust to the extent that the assets
of the trust are not treated as owned by a person other
than the trust. Thus, a nongrantor trust is treated as a
taxable entity. A trust may be treated as a nongrantor trust
with respect to only a portion of the trust assets. See
Grantor Trust, earlier.

See section 643(i)(2)(B) and the regulations under
sections 267 and 707(b).
Person related to a foreign trust. A person is related to
a foreign trust if such person, without regard to the
transfer at issue, is a grantor of the trust, a beneficiary of
the trust, or is related to any grantor or beneficiary of the
trust. See the definition of related person above.

Obligation

An obligation includes any bond, note, debenture,
certificate, bill receivable, account receivable, note
receivable, open account, or other evidence of
indebtedness, and, to the extent not previously described,
any annuity contract.

Reportable Event

A reportable event includes the following.
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:
The decedent was treated as the owner of any portion
of a foreign trust under the rules of sections 671 through
679, or
Any portion of a foreign trust was included in the gross
estate of the decedent.

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 rules
of sections 671 through 679.

Property

Property means any property, whether tangible or
intangible, including cash.

Qualified Obligation

A qualified obligation, for purposes of this form, is any
obligation only if:
1. The obligation is reduced to writing by an express
written agreement;
2. The term of the obligation does not exceed 5 years
(including options to renew and rollovers);

Responsible Party

Responsible party means:
The grantor in the case of the creation of an inter vivos
trust;
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beneficiary unless the terms of the trust instrument
specifically prohibit any distribution of income or corpus to
a U.S. person at any time, even after the death of the U.S.
transferor or any event terminating the trust, and the trust
cannot be amended or revised to allow such a distribution.
For these purposes, an amount will be treated as
accumulated for the benefit of a U.S. person even if the
U.S. person's interest in the trust is contingent on a future
event and regardless of whether anything is actually
distributed to a U.S. person during that tax year.
Special rule in case of discretion to identify
beneficiaries. For purposes of the general rule
described earlier, if any person has the discretion of
making a distribution from the trust to, or for the benefit of,
any person, the trust will be treated as having a
beneficiary who is a U.S. person unless the terms of the
trust specifically identify the class of persons to whom
such distributions may be made, and none of those
persons are U.S. persons during the tax year.
Certain agreements and understandings treated as
terms of the trust. For purposes of the general rule
described earlier, if any U.S. person who directly or
indirectly transfers property to the trust is directly or
indirectly involved in any agreement or understanding
(whether written, oral, or otherwise) that may result in the
income or corpus of the trust being paid or accumulated to
or for the benefit of a U.S. person, such agreement or
understanding will be treated as a term of the trust.
Certain loans or uncompensated use of trust
property. If a foreign trust is not already treated as
having a U.S. beneficiary under the rules described earlier
and above, the trust will be treated as having a U.S.
beneficiary if, after March 18, 2010, either:
The foreign trust loans cash or marketable securities
directly or indirectly to a U.S. person and the U.S. person
does not repay the loan at a market rate of interest within
a reasonable period of time; or
A U.S. person, directly or indirectly, uses property that
is owned by the foreign trust and does not pay FMV of the
use of such property within a reasonable period of time.

The transferor, in the case of a reportable event
(defined above) 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).

U.S. Agent

A U.S. agent is a U.S. person (defined later) that has a
binding contract with a foreign trust that allows the U.S.
person to act as the trust's authorized U.S. agent in
applying sections 7602, 7603, and 7604 with respect to:
Any request by the IRS to examine records or produce
testimony related to the proper U.S. tax treatment of
amounts distributed, or required to be taken into account
under the rules of sections 671 through 679, with respect
to a foreign trust; or
Any summons by the IRS for such records or testimony.

DRAFT AS OF
August 30, 2017

A U.S. grantor, a U.S. beneficiary, or a domestic
corporation controlled by the grantor or beneficiary may
act as a U.S. agent. However, you may not treat the
foreign trust as having a U.S. agent unless you enter the
name, address, and taxpayer identification number (TIN)
of the U.S. agent on lines 3a through 3g on page 1 of the
form. See Identification numbers, later.
If the person identified as the U.S. agent does not
produce records or testimony when requested or
summoned by the IRS, the IRS may redetermine the tax
consequences of your transactions with the trust and
impose appropriate penalties under section 6677.

The agency relationship must be established by the
time the U.S. person files Form 3520 for the relevant tax
year and must continue as long as the statute of
limitations remains open for the relevant tax year. If the
agent's responsibility as an agent of the trust is terminated
for any reason (e.g., agent's resignation, agent's
liquidation, or agent's death), see section IV(B) of Notice
97-34.
In order to authorize a U.S. person to act as an agent
for purposes of section 6048(b)(2) or for purposes of
section 6048(c)(2)(A), the trust and the agent must enter
into a binding agreement substantially in the format
reflected under AUTHORIZATION OF AGENT in the
Instructions for Form 3520-A, amended as required.
Attach a copy of the authorization to Form 3520.

Presumption that foreign trust has U.S. beneficiary.
For transfers of property after March 18, 2010, if a U.S.
person directly or indirectly transfers property to a foreign
trust (other than a deferred compensation or charitable
trust described in section 6048(a)(3)(B)(ii)), the IRS may
treat such trust as having a U.S. beneficiary for purposes
of applying section 679(d) to such transfer if the IRS
requests information with respect to the transfer and the
U.S. person fails to demonstrate to the satisfaction of the
IRS that no portion of the income or corpus of the trust
may ever be paid to or accumulated for the benefit of a
U.S. person.

U.S. Beneficiary

A U.S. beneficiary generally includes any U.S. person that
could possibly benefit (directly or indirectly) from the trust
(including an amended trust) at any time, whether or not
the person is named in the trust instrument as a
beneficiary and whether or not the person can receive a
distribution from the trust in the current year. In addition, a
U.S. beneficiary includes:
A foreign corporation that is a controlled foreign
corporation (as defined in section 957(a)),
A foreign partnership if a U.S. person is a partner of the
partnership, and
A foreign estate or trust if the estate or trust has a U.S.
beneficiary.

U.S. Person

A U.S. person is:
A citizen or resident alien of the United States (see Pub.
519, U.S. Tax Guide for Aliens, for guidance on
determining resident alien status),
A domestic partnership,
A domestic corporation,
Any estate (other than a foreign estate, within the
meaning of section 7701(a)(31)(A)), and
Any domestic trust (defined earlier).

Foreign trust treated as having a U.S. beneficiary. In
general, a foreign trust will be treated as having a U.S.
-5-

U.S. Transferor

number of Forms 3520 reported on line 1 of Part IV,
Excepted Specified Foreign Financial Assets, of Form
8938. For more information, see the Instructions for Form
8938, generally, and in particular, Duplicative Reporting
and the specific instructions for Part IV, Excepted
Specified Foreign Financial Assets.

A U.S. transferor is any U.S. person who:
1. Creates or settles a foreign trust;
2. Directly or indirectly transfers money or property to
a foreign trust. This includes deemed transfers under
section 679(a)(4) or section 679(a)(5);
3. Makes a sale to a foreign trust if the sale was at
other than arm's-length terms or was to a related foreign
trust, or makes (or guarantees) a loan to a related foreign
trust; or
4. Is the executor of the estate of a U.S. person and:
a. The decedent made a testamentary transfer (a
transfer by reason of death) to a foreign trust;
b. Immediately prior to death, the decedent was
treated as the owner of any portion of a foreign trust under
the rules of sections 671 through 679; or
c. Any portion of a foreign trust's assets were included
in the estate of the decedent.

Identifying Information

DRAFT AS OF
August 30, 2017

Identification numbers. Use social security numbers or
individual taxpayer identification numbers to identify
individuals. Use employer identification numbers (EINs) to
identify estates, trusts, partnerships, and corporations.
Do not enter a preparer tax identification number
(PTIN) in any entry space on Form 3520 other
CAUTION than the entry space for “PTIN” at the bottom of
page 6 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.

Generally, the person defined as the transferor is the
responsible party (defined earlier) who must ensure that
required information be provided or pay appropriate
penalties.

Foreign address. Do not abbreviate the country name.
Line 1a. This line identifies the person that is filing Form
3520. If you and your spouse are both making transfers to
the same trust and you file joint returns, you may file only
one Form 3520. Put the names and taxpayer identification
numbers in the same order as they appear on your Form
1040, U.S. Individual Income Tax Return.

Specific Instructions
Period Covered

File the 2017 return for calendar year 2017 and fiscal
years that begin in 2017 and end in 2018. For a fiscal
year, fill in the tax year in the space at the top of the form.

Line 1j. Generally, enter the name of the Service Center
where you file your income tax return in the entry space
provided on line 1j on page 1 of the form.
However, if you are an executor filing a Form 3520 with
respect to a U.S. decedent, provide both the name of the
Service Center where the decedent's final income tax
return will be filed, and the name of the Service Center
where Form 706 will be filed, if applicable. Please enter
the information as follows. First enter the name of the
Service Center where the decedent's final income tax
return will be filed. Then, if applicable, enter the name of
the Service Center where Form 706 is filed, followed by
“(estate tax return).”

Item A—Initial Return, Initial Return
on Extension, Final Return, Amended
Return
Initial return. If this is the initial return you are filing
concerning the foreign trust identified, check the “Initial
return” box.
Initial return on extension. If this is the initial return you
are filing concerning the foreign trust identified and you
have filed an extension with respect to your income tax
return, check the “Initial return (extension filed)” box.

Note. If your income tax return is filed electronically, enter
“e-filed” in lieu of the name of the Service Center.

Final return. If no further returns for transactions with the
foreign trust are required, check the “Final return” box.

Line 1k. If you filed for an extension of time to file your
income tax return, check the box on line 1k. Also, enter
the tax form number of the original tax return that will be
filed with the IRS.

Example. If you annually filed Form 3520 and
completed Part II because you were the owner of the trust
for U.S. income tax purposes and the trust has terminated
within the tax year, that year's return would be a final
return with respect to that foreign trust.

Example. You file Form 4868, Application for
Automatic Extension of Time To File U.S. Individual
Income Tax Return, to extend the time to file your
individual income tax return, Form 1040. Enter “1040” on
the entry line.

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

Line 2b(2). A reference ID number is required on
line 2b(2) only in cases where the foreign trust has no EIN.
However, filers are permitted to enter both an EIN on
line 2b(1) and a reference ID number on line 2b(2). If
applicable, enter the reference ID number (defined below)
you have assigned to the foreign trust.

Item C—Excepted Specified Foreign
Financial Assets Reported

Check the box in Item C only if the Form 3520 filer also
files Form 8938, Statement of Specified Foreign Financial
Assets, for the tax year and includes this form in the total
-6-

immediately prior to death, or the estate of the U.S.
decedent included assets of a foreign trust.

For Form 3520 purposes, a “reference ID number” with
respect to the foreign trust is a number established with
respect to the foreign trust by or on behalf of the U.S.
person that is engaged in a transaction with such foreign
trust with respect to which Form 3520 reporting is
required. There is no need to apply to the IRS to request a
reference ID number or for permission to use such
number. This number is used to uniquely identify the
foreign trust in order to keep track of the trust from tax
year to tax year only on Form 3520 (and on any other form
that is attached to or associated with Form 3520, including
the Form 3520-A in the case of a U.S. owner of the foreign
trust) and should not be used with respect to the foreign
trust on other IRS forms. The reference ID number must
meet the requirements set forth below.

Part I—Transfers by U.S. Persons to a
Foreign Trust During the Current Tax
Year

Complete Part I for information on a reportable event
(defined earlier).

DRAFT AS OF
August 30, 2017

Note. Although the basic reporting requirements for Form
3520 are contained in section 6048 (and are clarified by
Notice 97-34), the reporting requirements have been
clarified by the regulations under sections 679 and 684.
Accordingly, the regulations under sections 679 and 684
should be referred to for additional clarification for
transfers that are required to be reported in Part I of Form
3520.

Note. A reference ID number should only be provided
with respect to the foreign trust if you are completing Part
I, II, or III of the form. The reference ID number is not
necessary if you are completing Part IV of the form.

Line 5a. Enter the name of the trust creator. If you are the
trust creator, enter "Same as line 1a" on line 5a. If you are
not the trust creator, enter the name of the person who
created or originally settled the foreign trust.

Requirements. The reference ID number must be
alphanumeric (defined below) and no special characters
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 a
given foreign trust. If for any reason a reference ID
number is not being used (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 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 filer must use a
reference ID number for the receiving trust which
correlates the previous reference ID number for the
distributing 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 such
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.

Lines 5b and 5c. Enter the address and identification
number, if any, of the trust creator. See Identifying
Information, earlier, for specific information regarding the
entering of addresses and identification numbers on Form
3520. If you are the trust creator, enter "Same as lines 1c,
1e, 1f, 1g, and 1h" on line 5b, and enter "Same as line 1b"
on line 5c.
Lines 6a and 6b. Enter the applicable two-letter country
code from the list at www.irs.gov/countrycodes.
Lines 7, 8, and 10. If you are reporting multiple transfers
to a single foreign trust and the answers to lines 7, 8, or 10
are different for various transfers, complete a separate
line for each transfer on duplicate copies of the relevant
pages of the form.
Line 7a. If “Yes,” you must comply with the reporting
requirements that would apply to a direct transfer to that
other person. For example, if that other person is a foreign
partnership, you must comply with the reporting
requirements for transfers to foreign partnerships. See
Form 8865, Return of U.S. Persons With Respect to
Certain Foreign Partnerships.
Line 8. If the transfer was a completed gift (see
Regulations section 25.2511-2), you may have to file
Form 709, United States Gift (and Generation-Skipping
Transfer) Tax Return. If the transfer was a bequest, you
may have to file Form 706.
Line 9. See U.S. Beneficiary, earlier.
Line 10. If you are treated as the owner of any portion of
the foreign trust under the rules of sections 671 through
679, answer “Yes” to this question and complete Part II.

Note. This correlation requirement applies only to the first
year the new reference ID number is used.

Schedule A—Obligations of a Related Trust

Lines 4a through 4f. If you are the executor of the estate
of a U.S. citizen or resident, you must provide information
about the decedent on lines 4a through 4e. You must also
check the applicable box on line 4f to indicate which of the
following applies: the U.S. decedent made a transfer to a
foreign trust by reason of death, the U.S. decedent was
treated as the owner of a portion of a foreign trust

Line 11a. The FMV of an obligation of the trust (or an
obligation of another person related to the trust) that you
receive in exchange for the transferred property equals
zero, unless the obligation meets the requirements of a
qualified obligation. See Obligation, Qualified Obligation,
and Person related to a foreign trust, earlier.
-7-

Line 13, column (f). Generally, if the reported
transaction is a sale, you should report the gain on the
appropriate form or schedule of your income tax return.

Lines 12 and 26. If you answered "Yes" to the question
on line 11b (line 25, column (e)) with respect to any
obligation, you generally must answer “Yes” to the
question on line 12 (line 26). By so doing, you agree to
extend the period of assessment of any income or transfer
tax attributable to the transfer and any consequential
income tax changes for each year that the obligation is
outstanding to a date 3 years after the maturity date of the
obligation. You have the right to refuse to extend the
period of assessment. Publication 1035, Extending the
Tax Assessment Period, provides a more detailed
explanation of your rights and the consequences of the
choices you may make. When executed and filed, this
form will be deemed to be agreed upon and executed by
the IRS for purposes of Regulations section
301.6501(c)-1(d).

Line 15. Enter the name, address, whether the person is
a U.S. beneficiary (defined earlier), and taxpayer
identification number, if any, of all reportable beneficiaries.
Include specified beneficiaries, classes of discretionary
beneficiaries, and names or classes of any beneficiaries
that could be named as additional beneficiaries. If there is
not enough space on the form, attach a statement.

DRAFT AS OF
August 30, 2017

Line 17. Enter the name, address, and taxpayer
identification number, if any, of any person, other than
those listed on line 16, that has significant powers over
the trust (e.g., “protectors,” “enforcers,” any person that
must approve trustee decisions or otherwise direct
trustees, any person with a power of appointment, any
person with powers to remove or appoint trustees, etc.).
Include a description of each person's powers. If there is
not enough space, attach a statement.

Note. If you answer “No” to the question on line 12
(line 26), you generally may not treat an obligation as a
qualified obligation on line 11b (line 25, column (e)). The
one exception to this is if the maturity date of the
obligation does not extend beyond the end of your tax
year for which you are reporting and such obligation is
paid within that tax year.

Line 18. If you checked “No” on line 3 (or you did not
complete lines 3a through 3g) attach the following.
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.
A copy of the trust's financial statements, including a
balance sheet and an income statement similar to those
shown on Form 3520-A. These financial statements must
reasonably reflect the trust's accumulated income under
U.S. income tax principles. For example, the statements
must not treat capital gains as additions to trust corpus.

Schedule B—Gratuitous Transfers

Complete the applicable portions of Schedule B with
respect to all reportable events (defined earlier) that took
place during the current tax year.

Line 13.
In your column (b) description, indicate whether the
property is tangible or intangible.
You may aggregate transfers of cash during the year on
a single line of line 13.
If there is not enough space on the form, please attach
a statement.
For transfers reported on statements, you must enter
“Statement” on one of the lines in column (b), and enter
the total amount of transfers reported on the statement on
line 13, columns (c), (d), (e), (f), (h), and (i).

Schedule C—Qualified Obligations Outstanding
in the Current Tax Year
Line 19. Provide information on the status of outstanding
obligations of the related foreign trust (or an obligation of a
person related to the foreign trust) that you reported as a
qualified obligation in the current tax year. This
information is required in order to retain the obligation's
status as a qualified obligation. If relevant, attach a
statement describing any changes in the terms of the
qualified obligation.
If the obligation fails to retain the status of a qualified
obligation, you will be treated as having made a gratuitous
transfer to the foreign trust, which must be reported on
Schedule B, Part I, in the year the obligation fails to meet
the criteria for a qualified obligation. See section III(C)(2)
of Notice 97-34.

Note. Penalties may be imposed for failure to report all
required information. See Penalties, earlier.
Line 13, column (d). Enter the U.S. adjusted basis of the
property transferred.
Line 13, column (e). Only include gain that is
immediately recognized at the time of the transfer.
Note. Any transfer of appreciated assets by a U.S.
person to a foreign nongrantor trust is treated as a sale or
exchange and the transferor must recognize as a gain the
excess of the FMV of the transferred property over its
adjusted basis. This rule applies to a domestic trust that
becomes a foreign trust, provided that the foreign trust is
not a grantor trust. The domestic trust is treated as having
transferred all of its assets to the foreign trust immediately
prior to becoming a foreign trust. Although the gain is not
recognized on Form 3520, it must be reported on the
appropriate form or schedule of the transferor's income
tax return. See section 684. The transfer of assets,
however, is reported on Part I of this Form 3520.

Part II—U.S. Owner of a Foreign Trust

Complete Part II if you are considered the owner of any
assets of a foreign trust under the rules of sections 671
through 679 during the tax year. You are required to enter
a taxpayer identification number for such foreign trust on
line 2b(1) or line 2b(2) on page 1 of the form.

-8-

FMV of the property, but only if the taxpayer is not
required to complete Schedule A (lines 31 through 38)
due to lack of documentation. For these purposes, lack of
documentation refers to a situation in which the filer
checked “No” on line 29 or 30 because (a) the beneficiary
did not receive a Foreign Grantor Trust Beneficiary
Statement or a Foreign Nongrantor Trust Beneficiary
Statement from the trust, or (b) such statement did not
contain all six of the items specified under the instructions
for line 29 or 30, later.

Note. You are required to complete Part II even if there
have been no transactions involving the trust during the
tax year.
Line 20. Enter information regarding any person other
than yourself who is considered the owner of any portion
of the trust under the rules of sections 671 through 679.
Also, enter in column (e) the specific Code section that
causes that person to be considered an owner for U.S.
income tax purposes. See the grantor trust rules under
sections 671 through 679.

DRAFT AS OF
August 30, 2017

Line 25. If you, as a U.S. beneficiary, or a U.S. person
related to you received a loan of cash or marketable
securities, directly or indirectly, from a foreign trust, the
amount of such loan will be treated as a reportable
distribution, whether or not taxable. For this purpose, a
loan to you by an unrelated third party that is guaranteed
by a foreign trust is generally treated as a loan from the
trust.
Line 25, column (e). Answer “Yes” if an obligation
given in exchange for the loan is a qualified obligation
(defined earlier).
Line 25, column (f). The FMV of an obligation is zero
unless it is a qualified obligation. Therefore, in the case of
obligations that are not qualified obligations, enter “-0-” in
column (f).
Uncompensated use of trust property. If you, as a
U.S. beneficiary, or a U.S. person related to you, directly
or indirectly, used any property of a foreign trust, the FMV
of such use will be treated as a reportable distribution
whether or not taxable. Report the FMV of the
uncompensated use of trust property in column (a) and
the date of first uncompensated use in column (b); skip
columns (c) through (f), and enter the amount from
column (a) in column (g).

Line 21. In columns (a) and (b), enter the applicable
two-letter code from the list at www.irs.gov/countrycodes.

Line 22. If “Yes,” the copy of the Foreign Grantor Trust
Owner Statement (page 3 of Form 3520-A) should show
the amount of the foreign trust's income that is attributable
to you for U.S. income tax purposes. See section IV of
Notice 97-34.
If “No,” to the best of your ability, complete and attach a
substitute Form 3520-A for the foreign trust. Otherwise,
you may be liable for a penalty equal to the greater of
$10,000 or 5% of the gross value of the portion of trust
assets that you are treated as owning. You may also be
subject to an additional separate 5% penalty (or $10,000 if
greater), if the foreign trust: (a) fails to file a timely Form
3520-A or (b) does not furnish all of the information
required by section 6048(b) or includes incorrect
information. There are additional penalties for continuing
failure to file after notice by the IRS. See section 6677(a)
through (c). Also see Penalties, earlier.
Line 23. Enter the FMV of the trust assets that you are
treated as owning. Include all assets at FMV as of the end
of the tax year. For this purpose, disregard all liabilities.
The trust should send you this information in connection
with its Form 3520-A. If you did not receive such
information (line 9 of the Foreign Grantor Trust Owner
Statement) from the trust, complete line 23 to the best of
your ability. At a minimum, include the value of all assets
that you have transferred to the trust. Also use Form 8082
to notify the IRS that you did not receive a Foreign Grantor
Trust Owner Statement. However, filing Form 8082 does
not relieve you of any penalties that may be imposed
under section 6677. See Penalties, earlier.

Note. Under the HIRE Act, effective after March 18,
2010, if a foreign trust with a U.S. transferor is not already
treated as a grantor trust under the rules of sections 671
through 679, the foreign trust will be treated as having
acquired a U.S. beneficiary, and will therefore be treated
as a grantor trust, if it makes a loan of cash or marketable
securities, directly or indirectly, to a U.S. person or allows
a U.S. person, directly or indirectly, to use trust property,
and the U.S. person does not repay the loan at a market
rate of interest or pay the trust the FMV of the use of the
property within a reasonable period of time. Accordingly,
the loan or use of trust property will not be treated as a
taxable distribution under section 643(i) but will remain
reportable on Part III of this Form 3520.

Part III—Distributions to a U.S.
Person From a Foreign Trust During
the Current Tax Year

If you received an amount from a foreign trust that would
require a report under both Parts III and IV (gifts or
bequests) of Form 3520, report the amount only in Part III.

Line 26. See Lines 12 and 26, earlier.
Line 27. Penalties may be imposed for failure to
accurately report all distributions received during the
current tax year. See Penalties, earlier.

Line 24. Report any cash or other property that you
received (actually or constructively, directly or indirectly)
from a foreign trust during the current tax year, whether or
not taxable, unless the amount is a loan to you from the
trust that must be reported on line 25. For example, if you
are a partner in a partnership that receives a distribution
from a foreign trust, you must report your allocable share
of such payment as an indirect distribution from the trust.
Line 24, column (c). The filer is permitted to enter the
basis of the property in the hands of the beneficiary (as
determined under section 643(e)(1)), if lower than the

Line 28. Provide information on the status of any
outstanding obligation to the foreign trust that you
reported as a qualified obligation in the current tax year.
This information is required in order to retain the
obligation's status as a qualified obligation. If relevant,
attach a statement describing any changes to the terms of
the qualified obligation. If the obligation fails to retain the
status of a qualified obligation, you will be treated as
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having received a taxable distribution under section 643(i)
from the foreign trust. See section V(A) of Notice 97-34.
Lines 29 and 30. If any of the six items required for the
Foreign Grantor Trust Beneficiary Statement (see Line 29
below) or for the Foreign Nongrantor Trust Beneficiary
Statement (see Line 30 below) is missing, you must check
“No” on line 29 or line 30, as applicable.
Also, if you answer “Yes” to line 29 or line 30, and the
foreign trust or U.S. agent does not produce records or
testimony when requested or summoned by the IRS, the
IRS may redetermine the tax consequences of your
transactions with the trust and impose appropriate
penalties under section 6677.

purposes, or sufficient information to enable the U.S.
beneficiary to establish the appropriate treatment of any
distribution or deemed distribution for U.S. tax purposes.
2. A statement identifying whether any grantor of the
trust is a partnership or a foreign corporation. If so, attach
an explanation of the relevant facts.
3. A statement that the trust will permit either the IRS
or the U.S. beneficiary to inspect and copy the trust's
permanent books of account, records, and such other
documents that are necessary to establish the appropriate
treatment of any distribution or deemed distribution for
U.S. tax purposes. This statement is not necessary if the
trust has appointed a U.S. agent.
4. The Foreign Nongrantor Trust Beneficiary
Statement must also include items (1), (4), and (6), as
listed in the line 29 instructions above, as well as basic
identifying information (e.g., name, address, TIN, etc.)
about the foreign trust and its trustee.

DRAFT AS OF
August 30, 2017

Note. If the question on line 29 or 30 is not applicable,
check the N/A box.

Line 29. If “Yes,” attach the Foreign Grantor Trust
Beneficiary Statement (page 4 of Form 3520-A) from the
foreign trust and do not complete the rest of Part III with
respect to the distribution. If a U.S. beneficiary receives a
complete Foreign Grantor Trust Beneficiary Statement
with respect to a distribution during the tax year, the
beneficiary should treat the distribution for income tax
purposes as if it came directly from the owner. For
example, if the distribution is a gift, the beneficiary should
not include the distribution in gross income.
In addition to basic identifying information (i.e., name,
address, TIN, etc.) about the foreign trust and its trustee,
this statement must contain these items.
1. The first and last day of the tax year of the foreign
trust to which this statement applies.
2. An explanation of the facts necessary to establish
that the foreign trust should be treated for U.S. tax
purposes as owned by another person. (The explanation
should identify the Code section that treats the trust as
owned by another person.)
3. A statement identifying whether the owner of the
trust is an individual, trust, corporation, or partnership.
4. A description of property (including cash)
distributed or deemed distributed to the U.S. person
during the tax year, and the FMV of the property
distributed.
5. A statement that the trust will permit either the IRS
or the U.S. beneficiary to inspect and copy the trust's
permanent books of account, records, and such other
documents that are necessary to establish that the trust
should be treated for U.S. tax purposes as owned by
another person. This statement is not necessary if the
trust has appointed a U.S. agent.
6. A statement as to whether the foreign trust has
appointed a U.S. agent (defined earlier). If the trust has a
U.S. agent, include the name, address, and taxpayer
identification number of the agent.

Line 30. If “Yes,” attach the Foreign Nongrantor Trust
Beneficiary Statement from the foreign trust. A Foreign
Nongrantor Trust Beneficiary Statement must include the
following items.
1. An explanation of the appropriate U.S. tax treatment
of any distribution or deemed distribution for U.S. tax

Schedule A—Default Calculation of Trust
Distributions

If you answered “Yes” to line 30, you may complete either
Schedule A or Schedule B. Generally, however, if you
complete Schedule A in the current year (or did so in the
prior years), you must continue to complete Schedule A
for all future years, even if you are able to answer “Yes” to
line 30 in that future year. (The only exception to this
consistency rule is that you may use Schedule B in the
year that a trust terminates, but only if you are able to
answer “Yes” to line 30 in the year of termination.)
Line 32. To the best of your knowledge, state the number
of years the trust has been in existence as a foreign trust
and attach an explanation of your basis for this statement.
Consider any portion of a year to be a complete year. If
this is the first year that the trust has been a foreign trust,
do not complete the rest of Part III (you do not have an
accumulation distribution).
Line 33. Enter the total amount of distributions that you
received during the 3 preceding tax years (or the number
of years the trust has been a foreign trust, if less than 3).
For example, if a trust distributed $50 in year 1, $120 in
year 2, and $150 in year 3, the amount reported on line 33
would be $320 ($50 + $120 + $150).
Line 35. Divide line 34 by 3 (or the number of years the
trust has been a foreign trust if fewer than 3). Consider
any portion of a year to be a complete year. For example,
a foreign trust created on July 1, 2015, would be treated
on a 2017 calendar year return as having 2 preceding
years (2015 and 2016). In this case, you would calculate
the amount on line 35 by dividing line 34 by 2. Do not
disregard tax years in which no distributions were made.
The IRS will consider your proof of these prior
distributions as adequate records to demonstrate that any
distribution up to the amount on line 31 is not an
accumulation distribution in the current tax year.
Line 36. Enter this amount as ordinary income on your
tax return. Report this amount on the appropriate
schedule of your tax return (e.g., Schedule E (Form 1040),
Part III).
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Note. If there is an amount on line 37, you must also
complete line 38 and Schedule C—Calculation of Interest
Charge to determine the amount of any interest charge
you may owe.

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.

1. Begin with the 2017 weighted UNI.
2. Add UNI at the beginning of 2017.
3. Add trust earnings in 2017.
4. Subtract trust distributions in 2017.
5. Subtract weighted trust accumulation distributions
in 2017. (Weighted trust accumulation distributions are
the trust accumulation distributions in 2017 multiplied by
the applicable number of years from 2017.)

DRAFT AS OF
August 30, 2017

Using the example above, the trust's 2018 weighted
UNI would be $1,150, calculated as follows.

Line 40a. Enter on line 40a 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).

Lines 42a through 42d. Enter on these lines the
applicable amounts received by you from the foreign trust
that are treated as capital gain income of the trust in the
current tax year. Report these amounts 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 2011 and has made no distributions prior to
2017. Assume the trust's ordinary income was $0 in 2016,
$60 in 2015, $124 in 2014, $87 in 2013, $54 in 2012, and
$25 in 2011. Thus, for 2017, the trust's UNI would be
$350. If the trust earned $100 and distributed $200 during
2017 (so that $100 was distributed from accumulated
earnings), the trust's 2018 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 2017
would be $1,260, calculated as follows.

Year
2016
2015
2014
2013
2012
2011
TOTAL

No. of
years
since that
year
1
2
3
4
5
6

UNI from
each year

Weighted UNI

$ 0
60
124
87
54
25

$ 0
120
372
348
270
150

$350

$1,260

To calculate the trust's weighted UNI for the following
year (2018), the trust could update this calculation, or the
weighted UNI shown on line 46 of the 2017 Form 3520
could simply be updated using the following steps.

2017 weighted UNI . . . . . . . . . . . . . . . . . . . . .

$1,260

UNI at beginning of 2017 . . . . . . . . . . . . . . . . .

+ 350

Trust earnings in 2017 . . . . . . . . . . . . . . . . . . .

+ 100

Trust distributions in 2017

. . . . . . . . . . . . . . . .

− 200

Weighted trust accumulation distributions in 2017
($100 X 3.6) . . . . . . . . . . . . . . . . . . . . . . .

– 360

2018 weighted UNI . . . . . . . . . . . . . . . . . . . . .

$1,150

Line 47. Calculate the trust's applicable number of years
by dividing line 46 by line 45. This would be the weighted
UNI divided by the annual UNI. Using the examples in the
instructions for lines 45 and 46, the trust's applicable
number of years would be 3.6 in 2017 (1,260/350) and 4.6
in 2018 (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 41a.
Line 49. Include the amount from line 48 of this form on
line 1 of Form 4970, Tax on Accumulation Distribution of
Trusts. 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 2017
calendar-year taxpayer, the applicable date would be
June 30, 2017). 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
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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 2017 calendar-year taxpayer and you use
June 30, 2017, as the applicable date for calculating
interest, use the table below to determine the combined
interest rate and enter it on line 51. If you are not a 2017
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 2017 calendar-year
taxpayer and are using June 30, 2017, as the applicable date.

DRAFT AS OF
August 30, 2017

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Applicable number
of years of trust
(from line 50)

Combined
interest rate
(enter on line 51)

1 . .
1.5 .
2 . .
2.5 .
3 . .
3.5 .
4 . .
4.5 .
5 . .
5.5 .
6 . .
6.5 .
7 . .
7.5 .
8 . .
8.5 .
9 . .
9.5 .
10 .
10.5
11 .
11.5
12 .
12.5
13 .
13.5
14 .
14.5
15 .
15.5
16 .
16.5
17 .
17.5
18 .
18.5
19 .
19.5
20 .
20.5
21 .
21.5
22 .
22.5
23 .
23.5
24 .
24.5
25 .
25.5
26 .

0.0408
0.0590
0.0752
0.0913
0.1079
0.1245
0.1416
0.1588
0.1764
0.1940
0.2153
0.2366
0.2618
0.2870
0.3133
0.3429
0.3805
0.4259
0.4845
0.5446
0.6082
0.6650
0.7204
0.7680
0.8085
0.8494
0.8918
0.9393
0.9989
1.0592
1.1332
1.2250
1.3279
1.4284
1.5284
1.6242
1.7322
1.8497
1.9820
2.1181
2.2624
2.4032
2.5053
2.6074
2.7095
2.8116
2.9137
3.0158
3.1179
3.2200
3.3221

. . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
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. . . . . . . . . . . . . . . . . . . . .
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. . . . . . . . . . . . . . . . . . . . .
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. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
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. . . . . . . . . . . . . . . . . . . . .
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. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .

26.5 . . . . . . . . . . . . . . . . . . . . .
27 . . . . . . . . . . . . . . . . . . . . . .
27.5 . . . . . . . . . . . . . . . . . . . . .
28 . . . . . . . . . . . . . . . . . . . . . .
28.5 . . . . . . . . . . . . . . . . . . . . .
29 . . . . . . . . . . . . . . . . . . . . . .
29.5 . . . . . . . . . . . . . . . . . . . . .
30 . . . . . . . . . . . . . . . . . . . . . .
30.5 . . . . . . . . . . . . . . . . . . . . .
31 . . . . . . . . . . . . . . . . . . . . . .
31.5 . . . . . . . . . . . . . . . . . . . . .
32 . . . . . . . . . . . . . . . . . . . . . .
32.5 . . . . . . . . . . . . . . . . . . . . .
33 . . . . . . . . . . . . . . . . . . . . . .
33.5 . . . . . . . . . . . . . . . . . . . . .
34 . . . . . . . . . . . . . . . . . . . . . .
34.5 . . . . . . . . . . . . . . . . . . . . .
35 . . . . . . . . . . . . . . . . . . . . . .
35.5 . . . . . . . . . . . . . . . . . . . . .
36 . . . . . . . . . . . . . . . . . . . . . .
36.5 . . . . . . . . . . . . . . . . . . . . .
37 . . . . . . . . . . . . . . . . . . . . . .
37.5 . . . . . . . . . . . . . . . . . . . . .
38 . . . . . . . . . . . . . . . . . . . . . .
38.5 . . . . . . . . . . . . . . . . . . . . .
39 . . . . . . . . . . . . . . . . . . . . . .
39.5 . . . . . . . . . . . . . . . . . . . . .
40 . . . . . . . . . . . . . . . . . . . . . .
40+ . . . . . . . . . . . . . . . . . . . . .
(Note. Interest charges began in 1977.)

3.4242
3.5263
3.6284
3.7305
3.8326
3.9347
4.0368
4.1388
4.2409
4.3430
4.4451
4.5472
4.6493
4.7514
4.8535
4.9556
5.0577
5.1598
5.2619
5.3640
5.4661
5.5682
5.6703
5.7724
5.8745
5.9766
6.0787
6.1808
6.2829

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. beneficiary should report the receipt of a distribution
from a domestic trust that is treated as owned by a foreign
person as a gift from a foreign person in Part IV, rather
than as a distribution to a U.S. beneficiary in Part III.
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 Related Person, earlier) 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.”

DRAFT AS OF
August 30, 2017

Line 53. Report this amount as additional tax (ADT) on
the appropriate line of your income tax return (for
example, for Form 1040 filers, include this amount as part
of the total for line 62 of your 2017 Form 1040; check box
c and enter “ADT” to the left of the line 62 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 Penalties, earlier.
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., if the U.S. beneficiary is treated as an owner
of that portion of the trust under section 678, then the
contribution must be reported by such U.S. beneficiary in
Part IV).
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.

Line 55. Answer “Yes” if you received aggregate
amounts in excess of $15,797 during the current tax year
that you treated as gifts from foreign corporations or
foreign partnerships (or any foreign 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
2017, received $8,000 from foreign corporation X that you
treated as a gift, and $10,000 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.
Privacy Act and Paperwork Reduction Act Notice.
We ask for the information on this form to carry out the
Internal Revenue laws of the United States. You are
required to give us the information. We need it to ensure
that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
Our authority to ask for information is sections 6001,
6011, and 6012(a) and their regulations, which require
you to file a return or statement with us for any tax for
which you are liable. Your response is mandatory under
these sections. Section 6109 requires you to provide your
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identification number. You must fill in all parts of the tax
form that apply to you.
You are not required to provide the information
requested on a form that is subject to the Paperwork
Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its
instructions must be retained as long as their contents
may become material in the administration of any Internal
Revenue law. Generally, tax returns and return
information are confidential, as required by section 6103.
However, section 6103 allows or requires the Internal
Revenue Service to disclose or give the information
shown on your tax return to others as described in the
Code. For example, we may disclose your tax information
to the Department of Justice to enforce the tax laws, both
civil and criminal, and to cities, states, the District of
Columbia, and U.S. commonwealths or possessions to
carry out their tax laws. We may also disclose this
information to other countries under a tax treaty, to federal
and state agencies to enforce federal nontax criminal
laws, or to federal law enforcement and intelligence
agencies to combat terrorism. Failure to provide this
information, or providing false information, may subject
you to fines or penalties.
Please keep this notice with your records. It may help
you if we ask you for other information. If you have any
questions about the rules for filing and giving information,
please call or visit any Internal Revenue Service office.

The time needed to complete and file this form and
related schedules will vary depending on individual
circumstances. The estimated burden for individual
taxpayers filing this form is approved under OMB control
number 1545-0074 and is included in the estimates
shown in the instructions for their individual income tax
return. The estimated burden for all other taxpayers who
file this form is shown below.

DRAFT AS OF
August 30, 2017
Recordkeeping . . . . . . . . . . . . . . . . . . . . . .

42 hr., 34 min.

Learning about the law or the form . . . . . . . .

4 hr., 50 min.

Preparing the form . . . . . . . . . . . . . . . . . . .

6 hr., 40 min.

Sending the form to the IRS . . . . . . . . . . . . .

16 min.

If you have comments concerning the accuracy of
these time estimates or suggestions for making this form
simpler, we would be happy to hear from you. You can
send us comments from IRS.gov/FormComments. Or you
can send your comments to: Internal Revenue Service,
Tax Forms and Publications Division, 1111 Constitution
Ave. NW, IR-6526, Washington, DC 20224. Do not send
the tax form to this office. Instead, see When and Where
To File, earlier.

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