Form 3520 – Substituting the Foreign Grantor Trust Beneficiary Statement

Beneficiaries of Foreign Grantor Trusts will generally receive a Foreign Grantor Trust Beneficiary Statement detailing information for the tax year related to that trust.  Question 29 of Part III of Form 3520 Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts asks whether a Foreign Grantor Trust Beneficiary Statement was received.  If yes, it must be attached to Form 3520, if no, then Schedule A (and possibly Schedule C) of Part III of the form must be completed as well.

In addition to completing the requisite schedules when no Foreign Grantor Trust Beneficiary Statement is attached, you must also include a statement with as much of the following information as is able to be obtained:

  • Basic identifying information (i.e. name, address, TIN, etc.) of the foreign trust and its trustee.
  • The first and last day of the tax year of the foreign trust.
  • An explanation of the facts necessary to establish that the foreign trust should be treated for U.S. tax purposes as owned by another person.  This explanation should identify the Internal Revenue Code section that treats the trust as owned by another person.
  • A statement identifying whether the owner of the trust is an individual, trust, corporation, or partnership.
  • A description of property (including cash) distributed or deemed to be distributed to the U.S. person during the tax year, and the fair market value of the property distributed.
  • A statement that the trust will permit either the Internal Revenue Service or the U.S. beneficiary to inspect and copy the trust’s permanent books of account, records, and such other documents that are necessary to establish that the trust should be treated for U.S. tax purposes as owned by another person.  This statement is not necessary if the trust has appointed a U.S. agent.
  • A statement as to whether the foreign trust has appointed a U.S. agent.  If the trust has a U.S. agent, include the name, address, and taxpayer identification number of the agent.