QUESTION: What forms are required when setting up a foreign trust and
which forms are needed after the trust is established? Also what forms
are needed to set up a foreign limited liability or corporation owned
by the trust and which forms have to be filed thereafter? Are there
any special forms required for a Panama Private Interest Foundation?
REPLY: I've noticed that different lawyers seem to require different
forms. The following are the ones that I encourage my clients to file.
Form SS-4 Taxpayer I.D. number (You have to call the IRS at the number
in the instructions.)
Form 56 - Notice Concerning Fiduciary Relationship
On or before March 15th, Form 3520-A must be filed or an extension must
be requested with Form 7004. Until the IRS revises their instructions
or until they create a new form for foreign trusts, it's my opinion
that Form 1041 (summary) and 1040-NR (summary) need to be filed with
the Form 3520-A but some advisors would not file either or both of
these. Form 3520 is due with your income tax return, including any
extensions of time to file.
If you (or your trust) form a foreign LLC or IBC or corporation and
want to treat that entity as a disregarded entity (one owner) or
partnership (multiple owners), you first need to secure a tax ID
number by calling the IRS at the number in the instructions to the
Form SS-4. Then you should file Form 8832 within 75 days of forming
and funding the LLC/IBC/Corp. (Caution: If you form a foreign
corporation and want to treat it as a disregarded entity or foreign
partnership, you need to check the back of the instructions to Form
8832 to be sure the entity is eligible to make the election.)
Then either Form 8858 (single owner) or Form 8865 (multiple owners)
would need to be filed with your U.S. income tax return.
If you or your trust choose to form a foreign corporation, IBC or
limited liability company without making an election to treat the
entity as either a disregarded entity or foreign partnership, then you
would need to file a Form 5471 and Form 926 with your U.S. income tax
return. If the foreign corporation engages in business in the U.S., it
may need to file a Form 1120-F (or an extension on Form 7004) on or
before March 15th. (In some cases, a foreign corporation with U.S.
source income doesn't need to file until June 15th.)
As for a Panama Foundation, the required forms will depend on whether
the foundation resembles a trust or a corporation. For a more detailed
explanation of my views on these foundations see
functions as a trust, then the forms for a foreign trust would be
required. If it functions as a corporation, then the forms for a
foreign corporation should be used.
If a tax filing date falls on a weekend or national holiday, then the
actual due date is delayed to the next Monday or the work-day after
Other forms might be required depending on the kind of investments you
make, or the kind of business you operate and whether you live and
work outside the U.S. for a full year, etc., etc. For an extensive
list of forms that may be required for diverse international
transactions see www.offshorepress.com/AICPA/ I originally created
this part of my web site for other CPAs, but it's not restricted in
any way and is open to the public.
The comments in this memorandum are not intended to constitute an
opinion regarding any specific tax issues because additional tax
issues may exist that could affect the tax treatment of the tax issues
addressed in this memo. This memorandum does not consider or reach a
conclusion with respect to those additional issues and was not written
and cannot be used for the purpose of avoiding penalties under code
section 6662(d). For further details see