3520 Instructions for Form 3520

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2021

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
October 12, 2021

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

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 IRS.gov/Form3520.

Reminders

Exemption from information reporting under section 6048.
Rev. Proc. 2020-17 exempts from foreign trust information
reporting certain eligible individuals’ transactions. See
Exceptions To Filing, later.

General Instructions
Purpose of Form

U.S. persons (and executors of estates of U.S. decedents) file
Form 3520 with the IRS 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 apply.
1. You are the responsible party for reporting a reportable
event that occurred during the current tax year, or you are a U.S.
person who transferred property (including cash) to a related
foreign trust (or a person related to the trust) in exchange for an
obligation or you hold a qualified obligation from that trust that is
currently outstanding. For definitions, see Responsible Party,
Reportable Event, Qualified Obligation, and Person related to a
foreign trust, 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. U.S. person and
owner are defined later.
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. You
may also be required to complete a substitute Form 3520-A,
Annual Information Return of Foreign Trust With a U.S. Owner,
and attach it to your Form 3520. See Penalties, later.
3. You are a U.S. person (including a U.S. owner) or an
executor of the estate of a U.S. person who received (directly or
indirectly) a distribution from a foreign trust during the current tax
year; or you are a U.S. person who is a U.S. owner or beneficiary
Sep 14, 2021

of a foreign trust and in the current tax year you or a U.S. person
related to you received (1) a loan of cash or marketable
securities (including an extension of credit) directly or indirectly
from such foreign trust, or (2) the uncompensated use of trust
property; or you are a U.S. person who is a U.S. owner or
beneficiary of a foreign trust and in the current tax year such
foreign trust holds an outstanding qualified obligation of yours or
a U.S. person related to you. For definitions, see U.S. Person,
Owner, Distribution, U.S. Beneficiary, and Related Person, later.
Complete the identifying information on page 1 of the form
and Part III. In the case of a U.S. person that is an estate, check
“Executor” on line B on page 1. See the instructions for Part III.
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 the section 6039F threshold amount from
foreign corporations or foreign partnerships (including foreign
persons related to such foreign corporations or foreign
partnerships) that you treated as gifts. The threshold amount
from Rev. Proc. 2020-45 is available at IRS.gov/newsroom/irsprovides-tax-inflation-adjustments-for-tax-year-2021.
Complete the identifying information on page 1 of the form
and Part IV. See the instructions for Part IV.
Note. You may be required to file Financial Crimes Enforcement
Network (FinCEN) Form 114, Report of Foreign Bank and
Financial Accounts (FBAR). In addition, you may be required to
file Form 8938, Statement of Specified Foreign Financial Assets.
For more information, go to IRS.gov/FBAR.

Exceptions To Filing

Form 3520 does not have to be filed to report the following
transactions.
• Transfers to foreign trusts described in section 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 (for example, 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, and 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, available at IRS.gov/pub/irs-irbs/
irb97-25.pdf.
• 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 IRS.gov/pub/irs-drop/rp-14-55.pdf.

Cat. No. 23068I

• Certain eligible individuals’ transfers to, ownership of, and
distributions from certain tax-favored foreign retirement trusts
and certain tax-favored foreign nonretirement savings trusts, as
described in section 5 of Rev. Proc. 2020-17. For more
information about whether you are an eligible individual, and
whether your foreign trust qualifies for an exemption from foreign
trust information reporting, see Rev. Proc. 2020-17, 2020-12
I.R.B. 539, available at IRS.gov/pub/irs-drop/rp-20-17.pdf.
• 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).

Example 3. In the case of a calendar-year filer, the
extension period will end on October 15. If the taxpayer is a
calendar-year partnership, and the partnership’s Form 1065 is
due March 15, the 6-month extension is based on the due date
of Form 3520, not the due date of the partnership’s income tax
return. Therefore, the calendar-year partnership’s extension
would be until October 15 (based on a 6-month extension of the
Form 3520 due date of April 15) and not September 15 (based
on a 6-month extension of the Form 1065 due date of March 15).

DRAFT AS OF
October 12, 2021

Note. No additional form is required to get a 6-month extension
for filing Form 3520. The extension for filing Form 3520 is
automatically granted to those persons who get an extension to
file their income tax return, even though the extension for the
income tax return may be a different date than the extension for
filing Form 3520.
U.S. decedent extension to file. In the case of a Form 3520
filed with respect to a U.S. decedent, an extension is based on
the due date of the decedent’s final individual income tax return
(for example, Form 1040), and not the due date of the estate tax
return (Form 706). Therefore, a Form 3520 filed with respect to a
calendar year would be due on April 15, and would qualify for a
6-month extension if the executor requested an extension for
filing the decedent’s final income tax return.

Joint Returns

If you and your spouse are filing a joint income tax return for tax
year 2021, and you are both transferors, grantors, or
beneficiaries of the same foreign trust, then you may file a joint
Form 3520. If you and your spouse are filing a joint Form 3520,
check the box on line 1i on page 1.

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).

Additional Reporting Information

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

When To File

Where To File

In general, a U.S. person's Form 3520 is due on the 15th day of
the 4th month following the end of such person's tax year for
income tax purposes, which, for individuals, is April 15.

Send Form 3520 to the following address.
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409

If the due date falls on a Saturday, Sunday, or legal holiday,
the date is delayed until the next business day.
If, however, on the due date of your income tax return, you
are a U.S. citizen or resident who qualifies for one of the
following conditions, then your Form 3520 is due on the 15th day
of the 6th month (June 15) following the end of your tax year for
income tax purposes. You must include a statement on the Form
3520 showing that you are a U.S. citizen or resident who meets
one of these conditions.
• You live outside of the United States and Puerto Rico and
your place of business or post of duty is outside the United
States and Puerto Rico.
• You are in the military or naval service on duty outside the
United States and Puerto Rico.

Form 3520 must have all required attachments to be
considered complete.

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.

Example 1. For a calendar-year taxpayer filing Form 3520,
the due date for Form 3520 is April 15. Furthermore, even if the
calendar-year taxpayer’s income tax return due date is not April
15, the due date for Form 3520 is still April 15.

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.

Example 2. If the taxpayer is a calendar-year partnership,
and the partnership’s Form 1065 is due March 15, the due date
for the partnership’s Form 3520 is now April 15.
U.S. decedent. In the case of a Form 3520 filed with respect to
a U.S. decedent, the due date to file a Form 3520 is the 15th day
of the 4th month following the end of the decedent's last tax year
for income tax purposes (April 15). If the U.S. person's estate is
also required to file a Form 3520, the estate will have to file by
the 15th day of the 4th month following the end of the estate's
tax year for income tax purposes, just like any other U.S. person.

Inconsistent Treatment of Items

The U.S. beneficiary’s and U.S. owner's tax returns must be
consistent with the Form 3520-A 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.

Extension of time to file Form 3520. The extension period is
a 6-month period after the due date for Form 3520, meaning the
15th day of the 10th month after the end of the filer’s tax year.
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Instructions for Form 3520 (2021)

Penalties

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 and section 6664(c) for additional information.

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 in Part I.
• 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 in Part III.
• 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), if the foreign trust (a) fails to
file a timely Form 3520-A and furnish the required annual
statements to its U.S. owners and U.S. beneficiaries, or (b) does
not furnish all of the information required by section 6048(b) or
includes incorrect information. If a foreign trust fails to file Form
3520-A, the U.S. owner must complete and attach a substitute
Form 3520-A to the U.S. owner’s Form 3520 by the due date of
the U.S. owner’s Form 3520 (and not the due date for the Form
3520-A, which is otherwise due by the 15th day of the 3rd month
after the end of the trust’s tax year) in order to avoid being
subject to the penalty for the foreign trust’s failure to timely file
Form 3520-A. For example, a substitute Form 3520-A that, to the
best of the U.S. owner’s ability, is completed and attached to the
U.S. owner’s Form 3520 by the due date for the Form 3520
(such as April 15 for U.S. owners who are individuals), is
considered to be timely filed. See section 6677(a) through (c)
and the instructions for Part II of this form and 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. If the IRS can
determine the gross reportable amount (defined later), then the
penalties will be reduced as necessary to assure that the
aggregate amount of such penalties does not exceed the gross
reportable amount. 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.

Definitions
Distribution

DRAFT AS OF
October 12, 2021

A distribution received directly or indirectly from a foreign trust
for section 6048(c) reporting purposes is any gratuitous transfer
of money or other property from a foreign trust, whether or not a
portion of such trust is treated as a grantor trust 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).
A distribution also includes constructive transfers from a
foreign 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.
Example 4. 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.
Example 5. 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.
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.

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.

Foreign Trust and Domestic Trust

A foreign trust is any trust other than a domestic trust.

Section 6039F. In the case of a failure to timely report foreign
gifts described in section 6039F, the IRS may determine the
income tax consequences of the receipt of such gift, and 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.

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.

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.

Section 6662(j). If a U.S. owner of a foreign trust is subject to a
penalty imposed under section 6662 for an underpayment of tax
required to be shown on a return, then such penalty may be
increased under section 6662(j) for any portion of an
underpayment which is attributable to any transaction involving
any asset with respect to which information was required to be
provided on Form 3520-A. For more information about
undisclosed foreign financial asset understatements, see section
6662(j). No penalty will be imposed with respect to any portion of
an underpayment if the taxpayer can demonstrate that the failure
Instructions for Form 3520 (2021)

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.
-3-

• 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 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.

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 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.

Grantor Trust

DRAFT AS OF
October 12, 2021

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.

Gross Value or Amount

For purposes of determining the gross reportable amount, the
gross value or gross amount of property 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.

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.

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.

Reporting by U.S. owners receiving distributions from foreign grantor trust. If a U.S. owner (defined later) receives
(directly or indirectly) a distribution from a foreign trust of which
the U.S. person is treated as the owner, the U.S. owner must
only complete lines 24 and 27 in Part III.

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 (for example, 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). A gratuitous
transfer includes any indirect transfer that is structured with a
principal purpose of avoiding the application of section 679 or
6048.

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
under the grantor trust rules in sections 671 through 679. 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.

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
(that is, sections 2501 through 2524).

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.

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.

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.

If you transfer property to a related 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. Any transfer in exchange for an obligation
(whether or not a qualified obligation) must be reported under
section 6048(a). For definitions, see Obligation and Qualified
Obligation, later. See section III.B of Notice 97-34, and the
regulations under sections 679 and 684 for additional
information.

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);

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);
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Instructions for Form 3520 (2021)

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.

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.

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 Taxpayer identification numbers
(TINs), later.

DRAFT AS OF
October 12, 2021

If a foreign trust with a U.S. owner does not have a U.S.
agent, the IRS may redetermine the amounts required to be
taken into account with respect to the foreign trust by the U.S.
owner. See section 6048(b)(2).
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 (for example, agent's
resignation, agent's liquidation, or agent's death), see
section IV.B of Notice 97-34.

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.

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.

U.S. Beneficiary

See section 643(i)(2)(B) and the regulations under sections
267 and 707(b).

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
designated 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. See section II of Notice 97-34 and the regulations
under section 679 for additional information.

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.

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.

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

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 (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
Instructions for Form 3520 (2021)

-5-

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, 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.

Specific Instructions
Period Covered

File the 2021 return for calendar year 2021 and fiscal years that
begin in 2021 and end in 2022. For a fiscal year, fill in the tax
year in the space at the top of the form.

Item A—Initial Return, Final Return,
Amended Return

DRAFT AS OF
October 12, 2021

Initial return. If this is the initial return you are filing concerning
the foreign trust identified, check the “Initial return” box.
Final return. If no further returns for transactions with the
foreign trust are required, check the “Final return” box.

Example 6. 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.

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.

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

Item C—Excepted Specified Foreign
Financial Assets Reported

Check the box in item C only if the Form 3520 filer also files
Form 8938 for the tax year and includes this form in the total
number of Forms 3520 reported on line 15 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.

U.S. Person

A U.S. person is:
• A citizen or resident alien of the United States, including dual
residents who claim the benefits under an income tax treaty (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).

Identifying Information
Taxpayer identification numbers (TINs). Use social security
numbers (SSNs) or individual taxpayer identification numbers
(ITINs) to identify individuals. Use employer identification
numbers (EINs) to identify estates, trusts, partnerships, and
corporations. Don’t use an SSN in place of an EIN.

U.S. Transferor

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.

Applying for an EIN. If the foreign trust does not have an EIN,
the trustee or the U.S. owner may apply for one online at
IRS.gov/EIN. If the principal business was created or organized
outside of the United States or U.S. territories, you may also
apply for an EIN by calling 267-941-1099 (toll call).

!

CAUTION

Do not enter a preparer tax identification number (PTIN)
in any entry space on Form 3520 other 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.
Foreign address. Do not abbreviate the country name.
Lines 1a and 1i. Line 1a identifies the person that is filing Form
3520. If you and your spouse are filing a joint Form 3520, put
your names and TINs in the same order as they appear on your
Form 1040, U.S. Individual Income Tax Return, or Form
1040-SR, U.S. Tax Return for Seniors, and check the box on
line 1i.

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.

Line 1j. If an automatic 2-month extension applies for your tax
return because you meet one of the following conditions, check
the box and attach a statement to the Form 3520 showing that
-6-

Instructions for Form 3520 (2021)

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.

you are a U.S. citizen or resident who meets one of these
conditions.
• You live outside of the United States and Puerto Rico and
your place of business or post of duty is outside the United
States and Puerto Rico.
• You are in the military or naval service on duty outside the
United States and Puerto Rico.

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, U.S.
Estate Tax Return.

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.

DRAFT AS OF
October 12, 2021
Line 9. See U.S. Beneficiary, earlier.

Example 7. 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.

Schedule A—Obligations of a Related Trust

Complete the applicable portions of Schedule A with respect to
all transfers to a related foreign trust in exchange for an
obligation of the trust or a person related to the trust that took
place during the current tax year.

Line 2b. Enter the EIN of the foreign trust. Do not enter an SSN
or ITIN. Only EINs should be used to identify the foreign trust.

Line 11. For additional information, see Obligation, Qualified
Obligation, and Person related to a foreign trust, earlier.

Line 3. If the foreign trust did not appoint a U.S. agent who can
provide the IRS with all relevant trust information, check “No”
and you are required to complete lines 15 through 18.

Line 12. If you answered "Yes" to the question on line 11b with
respect to any obligation, you must generally answer “Yes” to the
question on line 12. 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. Pub. 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).

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

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

Note. If you answer “No” to the question on line 12, you
generally may not treat an obligation as a qualified obligation on
line 11b. 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.

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

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.

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 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.

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, 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).

Lines 5b and 5c. Enter the address and TIN, if any, of the trust
creator. See Identifying Information, earlier, for specific
information regarding the entering of addresses and TINs 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 IRS.gov/CountryCodes.

Note. Penalties may be imposed for failure to report all required
information. See Penalties, earlier.

Lines 7 and 8. If you are reporting multiple transfers to a single
foreign trust and the answers to line 7 or 8 are different for
various transfers, complete a separate line for each transfer on
duplicate copies of the relevant pages of the form.

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.

Lines 7a and 7b. Check “Yes” if you are treated as a U.S.
owner of any portion of the foreign trust under the grantor trust
rules (sections 671 through 679) and complete line 7b and Part II
of this form. In addition, if another person is treated as an owner
of the transferred assets, you must comply with the reporting
requirements that would apply to a direct transfer to that other
Instructions for Form 3520 (2021)

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 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
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Part II—U.S. Owner of a Foreign Trust

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.

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 an EIN for such foreign
trust on line 2b on page 1 of the form.
Note. You are required to complete Part II even if there have
been no transactions involving the trust during the tax year. You
may also need to complete Part III if you receive a distribution
from the foreign trust. See the instructions for Part III.

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.

DRAFT AS OF
October 12, 2021

Lines 15 through 18. If you checked “No” on line 3,
acknowledging that the foreign trust did not appoint a U.S. agent
who can provide the IRS with all relevant trust information,
complete lines 15 through 18.

Line 20. Enter information regarding any person, including
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 you or any
other person (as applicable) to be considered an owner for U.S.
income tax purposes. See the grantor trust rules under sections
671 through 679.

Line 15. Enter the name; address; whether the person is a U.S.
beneficiary (defined earlier); and TIN, 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.

Lines 21a and 21b. Enter the applicable two-letter code from
the list at IRS.gov/CountryCodes.
Line 22. If “Yes,” the copy of the Foreign Grantor Trust Owner
Statement (pages 3 and 4 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 to your Form 3520
by the due date of your Form 3520 (and not the due date for the
Form 3520-A). 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. 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 17. Enter the name; address; and TIN, if any, of any
person, other than those listed on line 16, that has significant
powers over the trust (for example, “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.
Line 18. Attach a copy of the following documents. If these
documents have been previously attached to a Form 3520-A or
Form 3520 filed within the previous 3 years, attach only relevant
updates.
• 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.
• A copy of the trust’s organizational chart, including ownership
structure and percentage of ownership.

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.

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

Schedule C—Qualified Obligations Outstanding
in the Current Tax Year

If you received an amount from a portion of a foreign trust of
which you are treated as the owner, complete lines 24 and 27 in
Part III. 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 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 of this 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.

Line 24. Report any cash or the FMV of 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 or constitutes
uncompensated use of trust property, both of which 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 FMV of the property,
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Instructions for Form 3520 (2021)

the tax consequences of your transactions with the trust and
impose appropriate penalties under section 6677. See section
6048(c)(2)(A).

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 of the
items specified under the instructions for line 29 or 30, later.

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 5 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 (that is, 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 TIN of the agent.

DRAFT AS OF
October 12, 2021

Line 25. If you or a U.S. person related to you received a loan of
cash or marketable securities, directly or indirectly, from a
related foreign trust, or the uncompensated use of trust property
(defined later), the amount of such loan or the FMV of the use of
trust property 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 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 use of trust property in column (a) and the date of first use in
column (b), skip columns (c) through (e), report the amount paid
for such use in column (f), and enter the amount treated as a
taxable distribution from the trust in column (g) by subtracting
column (f) from column (a). See section 643(i) for more
information.
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.

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 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 earlier, as well as basic identifying information (for
example, name, address, TIN, etc.) about the foreign trust and
its trustee.

Line 26. See Line 12, earlier, except that “line 25, column (e)”
should replace “line 11b,” and “line 26” should replace “line 12.”
Line 27. Penalties may be imposed for failure to accurately
report all distributions received during the current tax year. See
Penalties, earlier.
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 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 items required for the Foreign
Grantor Trust Beneficiary Statement (see Line 29, later) or for
the Foreign Nongrantor Trust Beneficiary Statement (see
Line 30, later) 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
Instructions for Form 3520 (2021)

-9-

Schedule A—Default Calculation of Trust
Distributions

2019, $60 in 2018, $124 in 2017, $87 in 2016, $54 in 2015, and
$25 in 2014. For 2020, the trust's UNI would be $350. If the trust
earned $100 and distributed $200 during 2020 (so that $100
was distributed from accumulated earnings), the trust's 2021
aggregate UNI would be $250 ($350 + $100 − $200).

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 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 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.

DRAFT AS OF
October 12, 2021

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).

Example 11. Using Example 10 from line 45, the trust's
weighted UNI in 2020 would be $1,260, calculated as follows.

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 fewer than 3 years).

Example 8. 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 3.0 (or the number of years the trust
has been a foreign trust if fewer than 3 years). Consider any
portion of a year to be a complete year. 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.

Year

No. of
years
since that
year

2019
2018
2017
2016
2015
2014

1
2
3
4
5
6

TOTAL

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 2021, the trust could
update this calculation, or the weighted UNI shown on line 46 of
the 2020 Form 3520 could simply be updated using the following
steps.
1. Begin with the 2020 weighted UNI.
2. Add UNI at the beginning of 2020.
3. Add trust earnings in 2020.
4. Subtract trust distributions in 2020.
5. Subtract weighted trust accumulation distributions in
2020. (Weighted trust accumulation distributions are the trust
accumulation distributions in 2020 multiplied by the applicable
number of years from 2020.)

Example 9. A foreign trust created on July 1, 2019, would be
treated on a 2021 calendar year return as having 2 preceding
years (2019 and 2020). In this case, you would calculate the
amount on line 35 by dividing line 34 by 2.0.
Line 36. Enter this amount as ordinary income on your tax
return. Report this amount on the appropriate schedule of your
tax return (for example, Schedule E (Form 1040), Part III).
Line 37. 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.

Example 12. Using Example 11 above, the trust's 2021
weighted UNI would be $1,150, calculated as follows.

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 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 (for example, Schedule E (Form 1040), Part III).

2020 weighted UNI . . . . . . . . . . . . . . . . . . . . .

$1,260

UNI at beginning of 2020 . . . . . . . . . . . . . . . . .

+ 350

Trust earnings in 2020 . . . . . . . . . . . . . . . . . . .

+ 100

Trust distributions in 2020

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

− 200

Weighted trust accumulation distributions in 2020
($100 X 3.6) . . . . . . . . . . . . . . . . . . . . . . .

– 360

2021 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.

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
(for example, Schedule D (Form 1040)).

Example 13. Using the examples in the instructions for lines
45 and 46, the trust's applicable number of years would be 3.6
(1,260/350) in 2020 and 4.6 (1,150/250) in 2021.

Line 45. Enter the foreign trust's aggregate undistributed net
income (UNI).

Note. Include as many decimal places as there are digits in the
UNI on line 45 (for example, using Example 10 in the instructions
for line 45, include three decimal places).

Example 10. A trust was created in 2014 and has made no
distributions prior to 2020. The trust's ordinary income was $0 in
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Instructions for Form 3520 (2021)

Schedule C—Calculation of Interest Charge

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.

Complete Schedule C if you entered an amount on line 37 or
line 41a.

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 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. person in Part III.

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.

DRAFT AS OF
October 12, 2021

Note. Use Form 4970 as a worksheet and attach it to
Form 3520.

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.

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 (for example, in
the case of a 2021 calendar-year taxpayer, the applicable date
would be June 30, 2021). 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 2021 calendar-year taxpayer and you use June
30, 2021, as the applicable date for calculating interest, use the
table found on IRS.gov/CombinedInterestRate to determine the
combined interest rate and enter it on line 51. If you are not a
2021 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.

Example 15. 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 the section 6039F threshold amount 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). The threshold amount from Rev. Proc.
2020-45 is available at IRS.gov/newsroom/irs-provides-taxinflation-adjustments-for-tax-year-2021.
Example 16. If you, a calendar-year taxpayer during 2021,
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.

Line 53. Report this amount as additional tax (ADT) on the
appropriate line of your income tax return.

Note. Gifts from foreign corporations or foreign partnerships are
subject to recharacterization by the IRS under section 672(f)(4).

Example 14. For Form 1040 filers, include this amount as
part of the total for line 17z on Schedule 2 (Form 1040).

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; TIN, 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.

Part IV—U.S. Recipients of Gifts or
Bequests Received During the
Current Tax Year From Foreign
Persons

Note. If you fail to timely report foreign gifts that should be
reported under section 6039F, the IRS may determine the
income tax consequences of the receipt of such gift and
penalties may be imposed. 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.

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 TIN. You must fill in all parts of the
tax form that apply to you.

If a foreign trust makes a distribution to a U.S. person, the
U.S. person 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 (for example, 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).
Instructions for Form 3520 (2021)

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
-11-

Internal Revenue law. Generally, tax returns and return
information are confidential, as required by section 6103.
However, section 6103 allows or requires the IRS 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.

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.
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.

DRAFT AS OF
October 12, 2021

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 Where To
File, earlier.

Keep this notice with your records. It may help you if we ask
you for other information.

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

-12-

Instructions for Form 3520 (2021)