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June 13, 2014 - Phil Hodgen

Maximum account value determination for trust beneficiaries for FinCen Form 114

A U.S. beneficiary of a foreign nongrantor trust may be required to report the beneficial interest on the dreaded FBAR form — FinCen Form 114. This blog post is designed to help you figure out the “maximum account value” that you put on Form 114 if you have to file it.

Filing FinCen Form 114

A U.S. person must tell the U.S. government about foreign financial assets on FinCen Form 114. This is the dreaded FBAR and I assume that readers of this blog know about the form. I also assume that readers have an opinion about the form, too. 🙂

The legal authority for this is found at 31 U.S.C.... continue reading

Tax and Trusts
November 8, 2013 - Phil Hodgen

Distributions from foreign grantor trusts and U.S. paperwork

This is a Form 3520 “research in a box” blog post for you, BP. Because you asked. And because you subscribed to the Jell-O Shots newsletter mailing list. 🙂

References
  • Forms: 3520, 3520-A
  • Entity: Foreign Grantor Trust
  • Code Sections: 6048, 6677
  • Administrivia: Notice 97-34, if you care.
Facts

A foreign grantor trust exists, created by a nonresident alien.

The trust makes a distribution of $30,000 to a U.S. person who is not the grantor. We know–because the trustee told us–that $5,000 of this distribution is from current income of the trust, and $25,000 is from capital.

Happily, the trustee has given the U.S.... continue reading

Tax and Trusts
September 5, 2013 - Phil Hodgen

Is an ISA a foreign trust?

Yesterday and today I have had an interesting email exchange with three tax practitioners about Individual Savings Accounts from the U.K. I will call this type of account an ISA (pronounced “Ice-uh”), because that’s how I say it out loud. I won’t identify them by name unless they want to be identified. (Email me and I’ll give you credit for inspiring this post.)

I stated the title of this blog post as a question, fully cognizant of Betteridge’s Law of Headlines.

Disclaimer

The emails flying back and forth told me: (1) my 2011 post on the topic is DFW ((There is a swear word in that acronym, and the “W” stands for WRONG)); and (2) I should tell the world what I think is the correct answer.... continue reading

Americans Living Abroad Tax and Trusts
June 13, 2013 - Phil Hodgen

Step up in basis for nonresident’s assets in irrevocable trust

What “basis” is

One of the continuing mysteries of life involves the concept of “basis”. Think of basis as your acquisition cost. This is essential in calculating your capital gain tax after selling an asset. Capital gain is the difference between the sale price and your acquisition cost. The higher your basis — or acquisition cost — for an asset, the lower your capital gain (and therefore capital gain tax) will be.

Here is an example:

A person bought a piece of land 20 years ago for $100,000, and now it is worth $1,000,000. If that person sells the real estate today, the capital gain would be $900,000 ($1,000,000 received from sale minus $100,000 acquisition cost).

... continue reading
Nonresidents with US Activities Tax and Trusts
December 21, 2011 - Phil Hodgen

Calculate tax on distributions from foreign trusts using the default method

[Written on December 20, 2011.]

Warning Shots, Pre-Emptive Strikes, and Other Cautions to Internet Scholars

You’d be a damn fool to rely on this as legal advice. I’ve been wrong many times before, and this might be wrong, too. Go hire some smart tax lawyer or tax accountant to figure out what’s going on with your situation. You might be surprised to find you have a foreign trust when you thought you had a domestic trust. Or indeed, the reverse might be true. This subject is hideously complex and what follows is about as deep as stick figures scrawled in the sand with your finger.... continue reading

Tax and Trusts