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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10104
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have a question concerning Forms 3520 & 3520a. I have a

Customer Question

I have a question concerning Forms 3520 & 3520a. I have a friend who has lived in Australia since 1986. She has two children who were born there. All three have spent all their time in Australia since 1986. All are dual citizens.
In 2008 her father died. An irrevocable Education Trust was created for her two children. The two children were the only beneficiaries. The principle was to pay for their higher education, which it did. My friend was the trustee. She distributed the funds. She had authority to move the funds to other income earning accounts. The taxable earnings the trust made during the tax year were distributed to my friend as compensation for administering the trust. These were reported to her on the Australian equivalent of a K-1.
Is she considered the owner of the trust?
Submitted: 4 months ago.
Category: Tax
Expert:  Lane replied 4 months ago.

Yes, for purposees of 3520(a) AND 3520, here, she is the owner of the trust and has those reporting responsibilities.

Expert:  Lane replied 4 months ago.

A Form 3520-A reporting information on Foreign Trust activities is required to be filed by the 15th day of the third month following the end of the trust’s tax year. As a result, Form 3520-A for a foreign trust with a tax year ending December 31, 2014 is due on March 15, 2015.

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Each U.S. person treated as an owner of the Foreign Trust is responsible for ensuring that the foreign trust files the Form 3520-A and that the trust annually furnishes copies of the Foreign Grantor Trust Owner Statement and the Foreign Grantor Trust Beneficiary Statement to the U.S. owners and U.S. beneficiaries.

Expert:  Lane replied 4 months ago.

The bot***** *****ne is that she has this reporting responsibility.

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here's an excellent overview by Kenneth Rubenstein:

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Additional Reporting Requirements – Owners
In addition to the reporting requirements imposed on “responsible parties”, IRC § 6048(b) imposes upon an “owner” of any portion of a foreign trust the responsibility of insuring that:

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  1. the trust files a return for each year which sets forth a full and complete accounting of all trust activities and operations for the year, the name of the U.S. agent for the trust, and such other information as the Secretary prescribes; and
  2. the trust furnishes such information as the Secretary requires to each U.S. person who is treated as an owner of any portion of the trust or who receives (directly or indirectly) any distribution from the trust.

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A Trustee may use Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Onwer, to satisfy the trust’s reporting requirements. For your convenience, a copy of Form 3520-A is attached to this memorandum 7.. Form 3520-A reports to the IRS the taxable income of the trust and allocation of that income among the trust’s U.S. owners. If the trustee fails to file Form 3520-A, the responsibility will rest with the U.S. owner.

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The owner can avoid many of these reporting requirements by insuring that there is a U.S. agent appointed and authorized to act pursuant to IRC § 6048(b). Once appointed and authorized to act, the agent can insure that all reporting requirements are met and any IRS inquiries can be made directly to him or her. The owner may serve as the U.S. agent of the trust.

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