Form 3520 (2019) Filing Checklist
Purpose
Form 3520 reports transfers to foreign trusts, ownership of foreign trusts, distributions received from foreign trusts, and gifts or bequests from foreign persons. For 2019, the inflation-adjusted threshold for reporting gifts from foreign corporations or partnerships is $16,388, while gifts exceeding $100,000 from nonresident aliens trigger Part IV reporting.
Filing Steps
Step 1: Identify Your Filer Category and Complete the Form Header
Determine whether you file as an Individual, Partnership, Corporation, Trust, or Executor. Check the appropriate box indicating Initial return, Initial return (extension filed), Final return, or Amended return. Remember that a separate Form 3520 must be filed for each foreign trust; do not combine multiple trusts on a single form.
Step 2: Complete Part I for Transfers to a Foreign Trust
If you directly or indirectly transferred money or property to a foreign trust during 2019, complete Part I. For qualified obligations, attach copies of the loan documents entered into during 2019. If the foreign trust appointed a U.S. agent (line 3), you may skip lines 15–18. If no agent exists, you must provide beneficiary names, trustee information, and trust documents.
Step 3: Report Gratuitous Transfers in Schedule B
If you transferred property to a foreign trust and received less than fair market value or no consideration, complete Schedule B columns (a) through (i) for each transfer. Report the excess of fair market value over consideration received. Attach sale or loan documents unless previously filed within the prior three years, in which case, attach only updates.
Step 4: Address Qualified Obligations and Assessment Period Extension
For qualified obligations reported on line 11b or line 25, answer line 12 or line 26 regarding whether you agree to extend the assessment period to a date not earlier than three years after the obligation matures. You may refuse this extension or limit it to specific issues. Refusing the extension disqualifies the obligation as qualified.
Step 5: Complete Part II as a U.S. Owner of a Foreign Trust
If you are a U.S. owner of a foreign trust at any time in 2019, complete Part II. Identify all foreign trust owners, the countries of creation and governing law, and the date of creation. If the foreign trust did not file Form 3520-A for 2019, attach a substitute Form 3520-A completed to the best of your ability. The instructions specify penalties for failing to complete and attach a substitute.
Step 6: Report Distributions Received in Part III
For each distribution received during 2019, record the date, property description, and fair market value on line 24. Lines 31–37 determine whether distributions are ordinary income (line 36) or accumulation distributions (line 37). For nongrantor trusts, line 33 requires entering total distributions from the three preceding tax years. Line 34 multiplies line 33 by 1.25. Line 35 calculates the average distribution by dividing line 34 by three (or the number of years if fewer than three).
Step 7: Complete Required Schedules for Distribution Reporting
If you received a Foreign Grantor Trust Beneficiary Statement (line 29), attach it and skip Schedule A. If you received a Foreign Nongrantor Trust Beneficiary Statement (line 30), attach it and complete either Schedule A or Schedule B per instructions. For accumulation distributions (line 37 or line 41a greater than zero), complete Schedule C and Form 4970 to calculate the interest charge. Enter the combined interest rate on line 51 and the resulting tax on line 53.
Step 8: Report Gifts from Nonresident Aliens and Foreign Estates
If you received more than $100,000 in gifts or bequests from a nonresident alien or foreign estate during 2019, complete line 54 for each gift or bequest exceeding $5,000. Provide the date, description, and fair market value. Aggregate gifts from related donors when determining if the $100,000 threshold is met.
Step 9: Report Gifts from Foreign Corporations and Partnerships
If you received more than $16,388 in gifts from a foreign corporation or partnership during 2019, complete line 55 with the donor name, address, and identification number. Report each gift in columns (a) through (g), including the date, description, fair market value, and whether the donor is a corporation or partnership. The $16,388 threshold is the inflation-adjusted amount for 2019.
Step 10: Review Filing Deadlines and Extensions
Form 3520 is due on the 15th day of the fourth month following the end of your tax year (April 15 for calendar year filers). If you file for an income tax return extension, Form 3520 is due by the 15th day of the tenth month (October 15). U.S. citizens or residents living outside the United States have until June 15 to file without an extension if they meet specific criteria.
Step 11: Verify All Required Attachments
Ensure all required documents are attached, including loan documents for qualified obligations, trust instruments if no U.S. agent was appointed, beneficiary statements, substitute Form 3520-A if applicable, and Form 4970 for accumulation distributions. If these documents were previously attached to a Form 3520 filed within the prior three years, attach only relevant updates.
Step 12: Sign and Submit the Form
The appropriate person must sign Form 3520: individuals and fiduciaries sign personally, while partnership returns require a signature from a general partner or LLC member, and corporate returns require a signature from an authorized officer. If using a paid preparer, ensure they complete the preparer information section at the bottom of page 6. Mail the completed form with all attachments to the Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409.
Key 2019 Requirements
Inflation-Adjusted Thresholds for Part IV
The 2019 Form 3520 Part IV establishes that gifts or bequests exceeding $100,000 from nonresident aliens or foreign estates must be reported on line 54 for amounts over $5,000. Gifts exceeding $16,388 from foreign corporations or partnerships must be reported on line 55. The $16,388 threshold represents the inflation-adjusted amount for 2019, as specified in Section 6039F.
Three-Year Lookback Distribution Calculation
Lines 33–35 require accumulation distribution testing using distributions from the three preceding tax years, or fewer if the trust has existed less than three years. Line 33 captures total distributions from prior years. Line 34 multiplies that amount by 1.25. Line 35 divides line 34 by three to determine the average distribution. This calculation affects whether distributions are treated as ordinary income or accumulation distributions.
Qualified Obligation Assessment Period Extension
Lines 12 and 26 require explicit agreement to extend the period of assessment to a date not earlier than three years after the obligation matures. You have the right to refuse this extension or limit it to mutually agreed-upon issues or time periods. Refusing to extend the assessment period disqualifies the obligation as qualified and eliminates preferential treatment under the 2019 reporting requirements.
Substitute Form 3520-A Requirement
Line 22 notes that if a foreign trust did not file Form 3520-A for 2019, you must attach a substitute Form 3520-A completed to the best of your ability. The 2019 instructions explicitly reference penalties for U.S. owners who fail to complete and attach a substitute. The initial penalty is the greater of $10,000 or five percent of the gross value of the portion of trust assets treated as owned by the U.S. person.
Important Reminders
Form 3520 is an information return that is due, even if no tax is owed. Penalties for late filing, incomplete information, or failure to file can be substantial, ranging from $10,000 to a percentage of the gross reportable amount. The fact that a foreign country would impose penalties for disclosing required information does not constitute reasonable cause for failure to file. If a complete Form 3520 is not filed by the due date, including extensions, the assessment period for related taxes remains open until three years after the required information is reported.
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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.
