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Related to my previous question are the US beneficiaries of…

Good afternoon, related to my...
Good afternoon, related to my previous question are the US beneficiaries of an offshore/ foreign trust obliged to report to the IRS that they are beneficiaries even when the trust had not distributed anything, not incomes, not earning, not capital? Is there any penalty for having not reported it?
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10/2/2017
Tax.appeal.168
Tax.appeal.168, Tax Accountant
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Hello. Thank you for choosing this Q&A service for assistance. My name is Angela. I will be assisting you.

Q1: are the US beneficiaries of an offshore/ foreign trust obliged to report to the IRS that they are beneficiaries even when the trust had not distributed anything, not incomes, not earning, not capital?

A1: My understanding of the following information is that if there have been no distributions from the trust, nothing needs to be reported. SEE BELOW:

--------------------------------

Income Tax Consequences

REFERENCE SOURCE:

https://www.irs.gov/businesses/international-businesses/foreign-trust-reporting-requirements

If the above information clarifies matters for you, I ask that you please take the time to scroll to the top of the page and select 3 or more stars to positively rate my response so that I can receive credit for assisting you. A 5 star rating is greatly appreciated.

  • U.S. owner of a foreign trust - In general, the U.S. owner of a foreign trust is taxed on the income of that trust.
    A U.S. person is treated as the owner of a foreign trust under the grantor trust rules of Internal Revenue Code sections 671-679, which includes someone who transfers assets to a foreign trust which has a U.S. beneficiary of any portion of the trust. *Each U.S. owner should receive a Foreign Grantor Trust Owner Statement (Form 3520-A, page 3), which includes information about the foreign trust income they must report.

  • U.S. beneficiary of a foreign trust – In general, the U.S. beneficiary of a foreign trust will report their share of foreign trust income to the extent it is not reported by the transferors to the trust under the grantor trust rules. The U.S. beneficiary should receive a Foreign Grantor Trust Beneficiary Statement (Form 3520-A, or a Foreign Non Grantor Trust Beneficiary Statement which includes information about the taxability of distributions they have received and foreign trust income they must report.

  • U.S. transferor of assets to a non grantor foreign trust - Internal Revenue Code section 684 requires the recognition of gain on certain transfers of appreciated assets to a foreign trust. See the Instructions for Form 3520-A for additional information.

  •  

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Customer reply replied 9 months ago
Sorry for my late replay. In this case, a non-us person/ non-resident allien formed an irreversible trust, donating her Titles in the stock marker to the trust, putting as bebeficiaries her children and her; one of her children is US Citizen, another a Green card holder and the last one a non-resident allien. Your answer also applies to above set up?

Hello again.

Based on the information provided in the reference source, and as there have not been any distributions from the trust, neither beneficiary is required to report to the IRS that he or she is a beneficiary. The reference source link provides information that may be beneficial for you to know.

A positive rating is appreciated. Thank you in advance.

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