Foreign Trust and Form 3520

[susieq]

An individual called this week asking about getting his return done by our firm this year. He has dual citizenship - US and England. Has been here for some time working for a business client for about 10 years. He inherited money from his step father during 2007 - $140,000.

He knew about Form 3520 - I have never completed one of these. Any help would be appreciated.

[Koss]

Form 3520

Okay, Susieq, I'm gonna take a crack at this one...

I had never heard of this form, either. Back in 2006, I took a course with a firm called ZeroCPE, but it only promised to cover "22 pecent of everything you need to know about trusts," so I guess this particular form was part of the other 78 percent.

Or maybe I just wasn't paying attention when they covered the chapter on "deceased wealthy in-laws in other countries."

[LMAO]

Looking through the form and the instructions, it appears that your client only has to complete the first few lines of page 1, and then a couple lines on Part IV.

The inheritance is not taxable.

The other parts of this form appear to be designed, among other things, to identify and track sophisticated money-laundering schemes that involve layered entities, and unsophisticated tax protestors who buy trust packages online and then set up foreign bank accounts for them. Kind of like gun control. People who don't plan to pay tax on their income aren't going to fill out this form.

But when I have the time, I'm going to find the code section that triggers the reporting requirement for your client. 'Cause it seems pretty invasive. If I inherit eight million dollars from my father in-law in Boston, it's none of the government's business, but if I inherit 100K from someone in England, I have to report a nontaxable transaction? Why don't they just open up my mail and scan it before delivering it to me? [LMAO]

Hmmm... I suppose if I inherit a bazillion dollars from a US citizen who was domiciled in Boston, then the distribution of the money would somehow be reported, but not by me. It would be probably be reported on a 1041 or a 709, filed by the executor or trustee. But if the estate or trust itself is in England, beyond the jurisdiction of US federal law... then it may not have a reporting requirement.

Maybe I'm just in a particularly militant anti-government mood this evening after reading an article in USA Today that reported that some FBI surveillance services were terminated prematurely, causing loss of evidence, because the FBI didn't pay the phone bills, and the phone companies shut off the lines that were supporting the surveillance.

I'll bet there are a few supporters of Osama bin Laden here in the US who are required to file Form 3520... LOL

Burton M. Koss
koss@usakoss.net