IRS Sees Increasing Foreign Investment by U.S. Taxpayers

The Internal Revenue Service has published 2010 statistics on foreign trusts indicating an increasing interest in foreign investment by U.S. taxpayers, and the impact of changes made in 1996 to information reporting requirements.

The number of Form 3520 returns reporting foreign trust transactions and certain foreign gifts increased from 7,956 in 2006 to 16,242 in 2010, the IRS pointed out, while the number of Form 3520-A foreign “grantor” trust returns rose from 3,819 to 7,051. U.S. “persons” transferred nearly $1.5 billion in assets to foreign trusts in 2010.

There are two returns—Form 3520, "Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts," and Form 3520-A, "Annual Information Return of Foreign Trust With a U.S. Owner"—used to report information about foreign trusts and gifts. Form 3520 must be filed by U.S. persons to report transfers to and distributions from foreign trusts, as well as the receipt of certain foreign gifts. Form 3520-A must be filed annually by all foreign trusts with at least one U.S. owner. Each Form 3520-A represents one unique foreign grantor trust, and provides beneficiary, income statement and balance sheet information.

In addition, 7,051 foreign grantor trusts reported total assets of $35.3 billion, distributions of $4.0 billion, and net income (loss) of $1.1 billion during this same period.

In transactions generally separate from foreign trust activity, U.S. persons received gifts or bequests of $7.3 billion from nonresident aliens, foreign estates, foreign corporations and foreign partnerships during 2010.