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Screen 3520-2 - Foreign Trust Transfers, Distributions and Gifts (1040)
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Part I - Schedules A, B, and C
Transfer property to related foreign trust in exchange for obligation of the trust?
If you choose
2 No
, the application does not complete the remainder of Form 3520, Schedule A.Any qualified obligations received?
If you choose
2 No
, the application does not complete the remainder of Form 3520, Schedule A.Transfers to trust where less than FMV or no consideration received
Use this statement to enter information regarding gratuitous transfers to complete Form 3520, Schedule B. The information that follows describes some of the fields that appear in the attached statement.
- Excess FMV: The application automatically calculates the difference between the FMV of the property transferred and the sum of the adjusted basis and gain recognized.
- Description of Property Transferred: Enter a description of the property transferred. Indicate whether the property is tangible or intangible.
- Description of Property Received: Enter a description of the property received. Indicate whether the property is tangible or intangible.
- Gratuitous Transfers: The application automatically calculates the difference between the FMV of the property transferred and the FMV of the property received.
Sale document
This information will only be reported on Form 3520 if indicated that a gratuitous transfer was made.
Loan document
This information will only be reported on Form 3520 if indicated that a gratuitous transfer was made.
Subsequent variances to original sale or loan documents
This information will only be reported on Form 3520 if indicated that a gratuitous transfer was made.
Description of any changes in terms of qualified obligation
The application prints the description in a statement attached to Form 3520.
note
If the obligation fails to retain the status of a qualified obligation, a gratuitous transfer to the foreign will be deemed to have occurred, which must be reported on Part I, Schedule B during the tax year in which the obligation fails to meet the criteria for a qualified obligation.
Part II - U.S. Owner of Foreign Trust
Did foreign trust file Form 3520-A?
If you choose
2 No
, a substitute Form 3520-A for the foreign trust must be attached to Form 3520 to avoid potential penalties. The application automatically prints Form 3520-A. Enter the information for Form 3520-A on the 3520-3 screen.Part III - Distributions to U.S. Person From Foreign Trust
Qualified obligations outstanding held by foreign trust in current tax year
The application marks Form 3520, line 28 “Yes” when there is data entry in this statement.
Description of any changes in terms of qualified obligation
If the obligation fails to retain the status of a qualified obligation, a distribution from the foreign trust will be deemed to have occurred, which must be reported as a loan from a related foreign trust.
Foreign Grantor Trust Beneficiary Statement received?
Enter
1
in this field if a Foreign Grantor Trust Beneficiary Statement (page 4 of Form 3520-A) was received from the foreign trust with respect to a distribution. If so, the statement must be attached to Form 3520.Enter
2
in this field if a Foreign Grantor Trust Beneficiary Statement was not received from the foreign trust with respect to a distribution. If so, Schedule A will be used with respect to the distribution, as well as Schedule C, if applicable.Leave this field blank if receiving a Foreign Grantor Trust Beneficiary Statement is not applicable.
Foreign Nongrantor Trust Beneficiary Statement received?
Enter
1
in this field if a Foreign Nongrantor Trust Beneficiary Statement was received from the foreign trust with respect to a distribution. If so, the statement must be attached to Form 3520, and Schedule A or B must be completed with respect to the distribution, as well as Schedule C, if applicable. The Use actual calculation of trust distributions? field is used to determine whether Schedule A or B is used.Enter
2
in this field if a Foreign Nongrantor Trust Beneficiary Statement was not received from the foreign trust with respect to a distribution. If so, Schedule A must be completed with respect to the distribution, as well as Schedule C, if applicable.Leave this field blank if receiving a Foreign Nongrantor Trust Beneficiary Statement is not applicable.
Use actual calculation of trust distributions?
Enter
1
in this field to calculate Part III, Schedule B – Actual Calculation of Trust Distributions.Enter
2
in this field to calculate Part III, Schedule A – Default Calculation of Trust Distributions.note
Schedule B can only be completed if a Foreign Nongrantor Trust Beneficiary Statement is received from the foreign trust, subsequently attached to Form 3520, and Schedule A has not been used for this foreign trust previously or this foreign trust terminated during the year.
Part III - Schedules A, B, and C
Explanation of basis for number of years trust has been foreign trust
The application prints the description in a statement attached to Form 3520.
Actual calculation of trust distributions
Use this statement to enter the information required for Part III, Schedule B. Only the first line of data entry in the attached statement is displayed on the form. The information that follows describes some of the fields that appear in the attached statement.
- Aggregate Undistributed N/I: Enter the foreign trust’s aggregate undistributed net income, which is equal to the foreign trust’s total distributions subtracted from its total ordinary income over the years of the trust’s existence.
- Weighted Undistributed N/I: Enter the foreign trust’s weighted undistributed net income. Multiply the undistributed income from each of the trust’s years by the number of years since that year, then add each year’s result.
Tax on total accumulation distribution from Form 4970
Enter the amount of accumulation distribution from either Schedule A or B on Form 4970 to compute the tax on total accumulation distribution. Enter the tax on total accumulation distribution calculated on Form 4970 in this field, and use Form 4970 as an attachment to Form 3520. Form 4970 can be found in the Noncalculating Folder in the application.
Applicable date
Leave this field blank if using the standard applicable date of mid-year through the tax year.
Enter in this field the applicable date if using an alternative to mid-year through the tax year.
note
If using an alternative applicable date, a combined interest rate must be entered on the next field to calculate the interest charge. If not using an alternative applicable date, the application automatically calculates the interest charge from the standard applicable date.
Combined interest rate imposed on total accumulation distribution (Force)
Enter in this field the combined interest rate imposed on the total accumulation distribution, if using an alternative applicable date. If the combined interest rate to be used is 5 percent, enter 5.0000 in this field.
note
To enable this field, enter an applicable date in the field Applicable date, alternative to the standard applicable date of mid-year through the tax year.
Part IV - U.S. Recipients of Gifts From Foreign Persons
Gifts or bequests received from nonresident alien or foreign estate in excess of $5,000
If greater than $100,000 of property was received during the tax year from a nonresident alien or foreign estate that was treated as a gift or bequest, use the following statement to enter the date, description, and fair market value of such property.
note
Gifts and bequests from nonresident aliens or foreign estates with a fair market value of less than $5,000 are not displayed on Form 3520.
Gifts received from foreign corporation or foreign partnership
Use this statement to enter the date, name of donor, address of donor, identification number (if any) of donor, donor’s status as either a corporation or partnership, description, and fair market value of all gifts received from a foreign corporation or foreign partnership if greater than $16,388 was received during the tax year.
Foreign donor acting as nominee or intermediary for any other person
Enter a description including the ultimate foreign donor’s name, address, identification number, if any, and status as a corporation or partnership. The application prints the description in a statement attached to Form 3520.
note
If the ultimate donor is a foreign trust, treat the amount received as a distribution from a foreign trust and complete Part III.