SAMPLE LETTER: TO SEND TO THE ACCOUNTANT Re: Oscar ...

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Page 2 formed, we will send you a copy of the signed trust document and the certificate of formation for the LLC. So, we will now summarize the pertinent returns here, but we welcome your comments as to additional filing requirements. We also enclose a copy of IRS Notice 97-34 for your convenience, since this Notice contains information regarding the reporting requirements for foreign trusts. As you read the remainder of this letter, please make careful note of the varying “due dates” of the forms. They are not all due on the same date (that would be too easy). 1. Form 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts). Oscar Offshore must file Form 3520 because he is a U.S. person who is treated as the owner of the assets of a foreign trust (the Offshore Family Trust) under the grantor trust rules. Form 3520 must also be filed by any U.S. person who receives, directly or indirectly, a distribution from a foreign trust. IRC §6048 states that the first Form 3520 is due ninety (90) days after the foreign trust is formed or became a foreign trust. However, by regulation the Secretary has provided an April 15 th filing date (for trusts having a calendar tax year, as is the case here). See Treas. Reg. 404.6048-1(c)(1). See also Notice 97-34 (Section VIII-A) which seemed to remove the 90 day filing requirement because the Notice states that penalties under IRC §6677 will “generally” be avoided if Form 3520 is filed as an attachment to the taxpayer’s income tax return by the due date of that return, including extensions. In addition to attaching Form 3520 to Oscar Offshore’s income tax return, a copy of Form 3520 must also be filed with the Internal Revenue Service Center, Philadelphia PA 19255. 2. Form 3520-A (Annual Information Return of Foreign Trust with U.S. Owner) is filed with the Internal Revenue Service Center, Philadelphia PA 19255 by March 15 th each year. See Notice 97-34 (Section VIII-A) which states that penalties under IRC §6677 will “generally” be avoided if Form 3520-A is filed by the fifteen day of the third month following the end of the trust’s taxable year (or later if pursuant to an extension of time to file submitted on Form 2758). As noted above, the Offshore Family Trust’s taxable year ends
Page 3 December 31 st . Note, importantly, that it is the trustee of the Offshore Family Trust that must sign Form 3520-A, although Oscar Offshore, as the grantor of the trust, is held responsible by the IRS to insure this return is filed in a timely manner and to insure that the U.S. owners and beneficiaries of the Offshore Family Trust are provided their annual statements (Foreign Grantor Trust Owner Statement and Foreign Grantor Trust Beneficiary Statement). It is very important to complete Form 3520-A in sufficient time to permit it to be sent to the offshore trustee (assume next day service is NOT available for foreign jurisdictions), reviewed and signed by the trustee, and returned to you. It is our suggestion that you do NOT rely on the trustee mailing Form 3520-A directly to the IRS. The contact information for the offshore trustee is as follows: [Add contact information]. A copy of page 3 of Form 3520-A should be attached to Oscar Offshore’s Form 1040. Note, further, that in years where a distribution is made from the trust that a copy of page 4 of Form 3520-A is given to the beneficiary who received the distribution and that beneficiary would attach it to his tax return as well as to Form 3520. Finally, the foreign trust must have a U.S. agent. Here, Oscar Offshore has indicated a desire to appoint you as the U.S. agent. Please let us know if this is a problem. If the appointed U.S. agent is unable to serve, the foreign trustee must notify the IRS within 90 days by filing an amended Form 3520-A with the Philadelphia Service Center setting forth notice of termination and the name, address, and TIN of the new U.S. agent. Enclosed is the document that should be signed by the trustee appointing you as the U.S. agent. You should personalize it as needed an submit a copy of it to the trustee with the first Form 3520-A. 3. Form 1041 (U.S. Income Tax Return for Estates and Trusts) is a complicated story. The instructions to Form 1041 state that a foreign trust should file a Form 1040NR, the return filed by nonresident aliens. But the instructions to Form 1040NR state that Form 1040NR must be modified to comply with the Internal Revenue Code provisions that apply to trusts, and refers the taxpayer back to Form 1041. You seem to have two acceptable choices. First,
Page 1: ALEXANDER A. BOVE, JR. Also admitte

SAMPLE LETTER: TO SEND TO THE ACCOUNTANT Re: Oscar ...

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