Form 3520-A (2016): Foreign Trust Filing Requirements Checklist

Form 3520-A (2016) Checklist

Purpose of Form 3520-A

Form 3520-A serves as the annual information return for foreign trusts with at least one U.S. owner under IRC Section 6048(b). The 2016 version requires trustees to report trust asset positions at both year-start and year-end, classify distributions by recipient type (U.S. owner versus U.S. beneficiary), and attach separate owner and beneficiary statements detailing trust income allocation and property transfers. All documentation must appear in English, and all amounts must be denominated in U.S. dollars.

Filing Requirements and Core Procedures

Verify Trust Status and Return Designation

You must indicate whether the return represents an initial filing, final filing, or amended filing. The form includes a checkbox for excepted specified foreign financial assets when a U.S. person treated as the owner files Form 8938 and reports the Form 3520-A in Part IV of that form.

U.S. Agent Appointment or Document Attachment

The trust must either appoint a U.S. agent or attach complete trust documentation. Without a U.S. agent, you must attach copies of all trust documents, including the trust instrument, written and oral agreements, memoranda of wishes, and variances. If these documents were previously filed within the prior three years, you may note the year of filing and attach only relevant updates.

General Information Section

Complete Part I General Information with all required identification fields. Line 1b(2) requires a Reference ID number only when no EIN appears on line 1b(1), though filers may enter both an EIN and a Reference ID number. The Reference ID number serves as a unique identifier established by or on behalf of the U.S. owner to track the trust across tax years.

Income and Financial Reporting

Part II Income Statement Components

You must compile and enter all income line items from trust books and records maintained in the trust's functional currency:

• Interest income includes all taxable interest from accounts, notes, loans, mortgages, Treasury obligations, savings bonds, original issue discount, and income from REMIC interests.
• Dividends encompass all ordinary dividends received during the tax year, with capital gain distributions reported separately on line 5.
• Complete documentation is required for rents, royalties, partnership income, fiduciary income, capital gains (separated into short-term and long-term), and ordinary gains.
• Other income not included in lines 1 through 6 must be listed with types and amounts on an attached statement.

Expense Documentation

The form requires separate reporting of all trust expenses in Part II lines 9 through 14:

1. Interest expense paid or incurred on amounts borrowed by the trust must be reported (subject to limitations).
2. Foreign taxes require attached statements showing the jurisdiction and type.
3. State and local income or real property taxes not reported elsewhere must be included.
4. The form requires amortization, depreciation, and depletion for property used in trade or business or held for production of income.
5. Trustee and advisor fees paid or incurred to the fiduciary for administering the trust must be reported.
6. Charitable contributions for purposes specified in IRC Section 170(c) require separate reporting.
7. Other expenses must be listed with type and amount on attached statements.

Balance Sheet and Asset Valuation

Part III Foreign Trust Balance Sheet

You must complete the balance sheet with fair market value amounts at both the beginning and end of the tax year. All asset categories require reporting, including cash, receivables, securities (government obligations, marketable securities, and nonmarketable securities), real property, and depletable assets.

Line 8b requires accumulated depreciation to be netted against depreciable assets. Liabilities include accounts payable, contributions payable, mortgages, notes payable, and other liabilities requiring attached statements. Line 18 reports accumulated trust income, which must reconcile to Part II net income on line 16.

Owner and Beneficiary Statements

Foreign Grantor Trust Owner Statement Preparation

You must prepare a separate Owner Statement (page 3) for each U.S. person treated as an owner under IRC Sections 671 through 679. Each statement requires an attached explanation of the facts and law establishing grantor trust status, identifies the owner's Service Center filing location, and reports the gross value of the owned portion. The statement distributes income line items separately for interest, dividends, capital gains, and expenses, with the trust potentially needing to furnish additional information to ensure accurate owner reporting.

Foreign Grantor Trust Beneficiary Statement Requirements

A separate Beneficiary Statement (page 4) must be prepared for each U.S. beneficiary receiving distributions during the tax year. Each statement describes all property distributed or treated as distributed, identifies whether the trust appointed a U.S. agent, and confirms the beneficiary's agreement to allow IRS inspection of trust books when no agent exists. The statement designates the trust owner type as Individual, Partnership, or Corporation.

Distribution Reconciliation and Documentation

Part II, line 17, distributions must reconcile to individual owner and beneficiary distributions. You must separately list the total amount of distributions (including uncompensated use of trust property) to each U.S. owner on line 17b and to each U.S. beneficiary on line 17c.

Each listing requires the full name, identification number, date of distribution, and fair market value dollar amount for the recipient. Lines 17b(iv) and 17c(iv) must sum to equal the line 17a fair market value total.

Filing Procedures and Compliance

Submission Requirements

You must transmit one copy of Form 3520-A and all required statements to the IRS at the Ogden Service Center by the 15th day of the 3rd month after the trust's tax year end. Every U.S. owner must receive a copy of their Owner Statement to attach to their Form 3520 filing. U.S. beneficiaries must receive a copy of their Beneficiary Statement to attach to their income tax return.

Documentation Standards

All documentation must appear in English with U.S. dollar amounts. The trustee or authorized representative must sign and date the return under penalties of perjury. Foreign-language documents require English translation, and non-English attachments are not acceptable.

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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.