Form 3520 (2014) Tax Year Checklist
Purpose and Scope
Form 3520 reports transactions involving foreign trusts and large foreign gifts during the 2014 calendar year. You must file this form to report transfers to foreign trusts, ownership interests in foreign trusts, distributions received from foreign trusts, and gifts or bequests from foreign persons that exceed statutory reporting thresholds.
The form consolidates multiple international reporting obligations into a single annual filing requirement. Executors must report transfers made by reason of death and any grantor trust ownership that existed immediately before the decedent's death.
Filer Status and Basic Requirements
Mark the appropriate box to identify your filer status as Individual, Partnership, Corporation, Trust, or Executor. Convert all foreign currency amounts to U.S. dollars using the applicable exchange rates for the transaction dates or year-end values as required by the instructions.
Prepare all documentation in English and maintain supporting records for amounts reported on the form. Complete all parts of Form 3520 that apply to your reporting situation within a single filing, unless you are reporting activities involving multiple separate foreign trusts.
Determining Applicable Parts
Form 3520 contains four distinct parts that address different reporting obligations:
- Part I applies to transferors who moved property to a foreign trust during 2014.
- Part II applies to U.S. persons who owned any portion of a foreign trust on any date during 2014.
- Part III applies to U.S. persons who received distributions from a foreign trust during 2014.
- Part IV applies to recipients of gifts or bequests from foreign persons exceeding statutory thresholds.
You must complete every part that applies to your transactions during the 2014 tax year. Each part contains specific schedules and line items designed to capture the required reporting information for that category of foreign trust activity.
Part I: Transfers to Foreign Trusts
Complete Part I if you transferred property to a foreign trust during 2014. Report the name of the person who created the trust, the country code where the trust was created, and the country code of the jurisdiction whose laws govern the trust.
The form requires separate country code entries for the jurisdiction of creation and the jurisdiction of governing law, using the standard country code format specified in the instructions. Address whether you received qualified obligations in exchange for your 2014 transfers.
Qualified Obligations and Transfer Schedules
A qualified obligation must meet specific requirements, including a written agreement, a fixed term, an adequate interest rate, and other conditions detailed in the instructions. Report the principal amount, interest payment terms, maximum term, and yield to maturity for each qualified obligation using the designated columns on Schedule A.
Complete Schedule A for transfers involving qualified obligations or Schedule B for gratuitous transfers without adequate consideration. For gratuitous transfers, report the fair market value of property transferred, your adjusted basis in the property, any property you received in return, and gain recognized at the time of transfer according to applicable transfer tax rules rather than income tax provisions.
U.S. Agent Appointment and Documentation Requirements
The foreign trust must appoint a U.S. agent authorized to accept service of process and produce trust documents upon request. When no U.S. agent exists, or you did not ensure appointment of such an agent, you must attach complete trust documentation to Form 3520.
Required documents include the trust instrument, all written and oral agreements, letters of wishes, financial statements, and any amendments or modifications. The form provides checkboxes to identify which document categories you are attaching and whether those documents were previously submitted to the Internal Revenue Service in an earlier filing.
Part II: U.S. Ownership of Foreign Trusts
Complete Part II if you owned any portion of a foreign trust during any part of 2014. Report the gross value of your ownership interest as of December 31, 2014, on the designated line.
You must obtain and attach a Foreign Grantor Trust Owner Statement from the foreign trust, which the trust prepares on Form 3520-A or an equivalent format meeting the specified requirements. When the foreign trust fails to provide the required owner statement or does not file Form 3520-A, you must prepare and attach a substitute statement containing the information that would have appeared on the trust's filing.
Substitute Statement Requirements and Penalties
This substitute preparation obligation exists regardless of whether the trust cooperates with your reporting requirements. Failure to attach the required owner statement or complete substitute triggers penalty provisions under the applicable penalty sections of the Internal Revenue Code.
Part III: Distributions from Foreign Trusts
Complete Part III for distributions you received from a foreign trust during 2014. Calculate whether your distributions exceed the threshold requiring detailed reporting by applying the average distribution test described in the instructions.
The calculation requires you to determine the number of years the trust maintained foreign status, counting only those years when the trust qualified as a foreign trust under the applicable definitions. Distinguish between distributions accompanied by Foreign Grantor Trust Beneficiary Statements and those accompanied by Foreign Nongrantor Trust Beneficiary Statements.
Statement Types and Reporting Pathways
When you receive a statement identifying the distribution as coming from a grantor trust, attach that statement and follow the grantor trust reporting pathway. When you receive a statement identifying the distribution as coming from a nongrantor trust, attach that statement and complete the applicable schedule according to the distribution characteristics.
Part IV: Large Foreign Gifts and Bequests
Part IV captures gifts and bequests from foreign persons exceeding specific dollar thresholds:
- Report gifts or bequests exceeding $100,000 received from nonresident alien individuals or foreign estates during 2014
- Report gifts exceeding $14,878 received from foreign corporations or foreign partnerships during 2014
The $100,000 threshold applies to the aggregate value of gifts and bequests from foreign individuals and estates. The $14,878 threshold for foreign corporation and partnership gifts represents the inflation-adjusted reporting threshold under the applicable Internal Revenue Code section for the 2014 tax year.
Individual Gift Reporting Requirements
Report each gift over $5,000 from a foreign individual separately on the designated lines. Report the full amount of each gift from a foreign corporation or partnership, regardless of the individual gift size.
Signature and Preparer Information
Sign Form 3520 under penalties of perjury and enter your title and the date you signed the document. The signature certifies that you examined the form and accompanying schedules and statements, and declares that the information is true, correct, and complete to the best of your knowledge and belief.
Include the paid preparer's Preparer Tax Identification Number, the preparer's firm Employer Identification Number, and the firm's complete address when a paid preparer completes the form on your behalf.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
