US Owner of a Foreign Trust Act as a Trust Agent

US Owner of a Foreign Trust Act as a Trust Agent

Can a US Owner of a Foreign Trust Act as a Trust Agent

Can a US Owner of a Foreign Trust Act as an Agent: There are many different types of foreign trusts. Depending on the country, the participant may have a type of “Self-Managed” foreign trust that may kick-in the Form 3520 reporting requirements. One common example is an Australian SMSF (Self-Managed Superannuation Fund). The fund is essentially controlled by the Owner/Beneficiary of the trust, with certain designation requirements for who can act as a trustee. Technically, the SMSF is considered a foreign trust. This may result in significant trust reporting, subject to a potential exception under Rev. Proc. 2020-17

When the trust is owned by a U.S. Person, there are significant reporting requirements.

If there is no U.S. Agent, then certain documents must be reported to the IRS with the initial 3520/3520-A reporting requirements.

It would be best to have to avoid providing these documents to the IRS, but some people do not want to enter into a formal contract with the trust.

The question is, can the trust owner act as the U.S. Agent without a binding contract?

The general consensus is, yes.

Form 3520 U.S. Agent General Rule

Here is the general rule from the Form 3520 Instructions:

“A U.S. agent is a U.S. person (defined later) that has a binding contract with a foreign trust that allows the U.S. person to act as the trust’s authorized U.S. agent in applying sections 7602, 7603, and 7604 with respect to:

• Any request by the IRS to examine records or produce testimony related to the proper U.S. tax treatment of amounts distributed, or required to be taken into account under the rules of sections 671 through 679, with respect to a foreign trust; or

• Any summons by the IRS for such records or testimony.

U.S. Agent Exception

Here is the clarification provided by the subsequent paragraph from Form 3520 Instructions:

“A U.S. grantor, a U.S. beneficiary, or a domestic corporation controlled by the grantor or beneficiary may act as a U.S. agent.

“However, you may not treat the foreign trust as having a U.S. agent unless you enter the name, address, and taxpayer identification number (TIN) of the U.S. agent on lines 3a through 3g on page 1 of the form.”

Essentially, the second section above clarifies the first section.

In other words, there is no limitation identified in section 1 above, as to who can act as a U.S. agent.

Therefore, the second section would seem to clarify that if the person is a U.S. grantor, a U.S. beneficiary, or a domestic corporation, they should qualify without a separate binding agreement.

International Reporting Forms are Hard

International reporting forms are not for the faint of heart.

The are many, many exceptions, exclusions and limitations to the rules to be aware of before reporting.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.

Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.

*Please beware of copycat tax and law firms misleading the public about their credentials and experience.

Less than 1% of Tax Attorneys Nationwide Are Certified Specialists

Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.

Recent Golding & Golding Case Highlights

  • We represented a client in an 8-figure disclosure that spanned 7 countries.
  • We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
  • We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
  • We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
  • We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.

How to Hire Experienced Offshore Counsel?

Generally, experienced attorneys in this field will have the following credentials/experience:

  • Board Certified Tax Law Specialist credential
  • Master’s of Tax Law (LL.M.)
  • 20-years experience as a practicing attorney
  • Extensive litigation, high-stakes audit and trial experience
  • Dually Licensed as an EA (Enrolled Agent) or CPA

Interested in Learning More about Golding & Golding?

No matter where in the world you reside, our international tax team can get you IRS offshore compliant. 

Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.

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