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Question

What are the filing requirements for Forms 3520 and 3520-A for an individual?

Answer

For an individual, the filing requirements for Form 3520 include any of the following:

• A reportable event occurs during the current year and the individual is the party responsible for reporting the event, such as the transfer of any assets to a foreign trust by a U.S. person, including a transfer by reason of death
• The individual is a U.S. person treated as the owner of any part of the assets of a foreign trust
• The individual is a U.S. person who received a distribution from a foreign trust or a related foreign trust held an outstanding qualified obligation issued by the individual
• The individual received greater than $100,000 of gifts or bequests from a nonresident alien or a foreign estate, or greater than $15,671 of gifts from foreign corporations or foreign partnerships

An individual does not have a true filing requirement for Form 3520-A, which is to be filed by a foreign trust with a U.S. owner. However, if the foreign trust fails to file Form 3520-A, then the U.S. owner must attach a substitute Form 3520-A for the foreign trust to Form 3520 in order to avoid a penalty equal to the greater of $10,000 or 5 percent of the gross value of trust assets owned, in addition to failure to file penalties. Thus, when Form 3520, Part II, Line 22 is answered ‘No’, the tax application automatically includes Form 3520-A as an attachment to Form 3520.

Related topic: Form 3520 - Foreign Trust Transactions FAQs (1040)

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