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GARY S. WOLFE
A PROFESSIONAL LAW CORPORATION
Under the 2010 HIRE Act, the U.S. government imposed a new
reporting obligation on the U.S. owners (of foreign grantor trusts) so
the IRS could obtain information about the foreign grantor trust, if the
trustee was not cooperative and refused to file the annual Form 3520-
A tax return for the Trust. Since the U.S. grantor has neither the legal
authority nor the ability to force foreign trustees to file the Form 3520-
A, the 2010 HIRE Act makes the grantor responsible to submit
information to the IRS with respect to the Trust.
New Law
Under the “Act”, if the value of the aggregate “foreign gifts”
received by a U.S. person during any tax year exceeds $10,000, the
U.S. person must report each foreign gift to the IRS. A “foreign gift” is
any amount received from a non-U.S. person which the recipient
treats as a gift or bequest. The term “foreign gift” does not include
qualified tuition or medical payments made on behalf of a U.S. person
or any distribution properly disclosed on a return.
Effective Date
Small Business Job Protection Act of 1996, Sec. 1905. IRC §6939F.
Prior to the Act, any U.S. person who created a foreign trust or
transferred money or property to a foreign trust was required to report
that event to the IRS without regard to whether the trust was a
grantor or a nongrantor trust. Such persons were required to report,
Foreign Grantor Trusts - 2010 HIRE Act
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New Law
connection with the reportable event, and (2) the identity of the trust
and each trustee and beneficiary of the trust.
Effective Date
Small Business Job Protection Act of 1996, Sec. 1901. IRC §§6048,
6677.
1. $10,000, or
With the new minimum amount, the IRS will be able to impose
a $10,000 penalty even when there is not enough information to
determine the gross reportable amount.
If the failure to report persists for more than 90 days after the
IRS has mailed notice of such failure to the person required to pay
such penalty, an additional penalty is imposed that is equal to
$10,000 for each 30 day period during which such failure continues
after the 90-day period expires.