Thank you for using Just AnswerYou are correct in your understanding. The Form 3520 needs to be filed with the tax return of the receiver in the year of the gift with the tax return for that year. If the gift was received in 2011, the 2011 tax return due in April 2012 needs to include the Form 3520.
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Does she need to check off the initial or final box on the first page of form 3520. The address to file the 3520 is different than the address of the 1040? Which address do you file this forms? Are you sure they are to be filed together; nothing in the instructions indicates for them to be accompanying each other?
File Form 3520 separately from the income tax return. The due date for filing Form 3520 is the same as the due date for filing the annual income tax return, including extensions. You file an annual Form 3520 for all reportable foreign gifts and bequests you receive during the taxable year.
You need not mark any of the boxes as they refer to a trust and filing of the 3520. If you are using a software or program that demands an entry then use Final.