Tax reporting liquidating trust
If "Yes," you must comply with the reporting requirements that would apply to a direct transfer to that other person. Persons With Respect to Certain Foreign Partnerships.
If a person enters into an arrangement or engages in a practice, the primary purpose of which can reasonably be considered to be to avoid an obligation under this Part, the person is subject to the obligation as if the person had not entered into the arrangement or engaged in the practice.
A distribution also includes constructive transfers from a trust. If you are a grantor or beneficiary of a foreign trust and you (or a U. person related to you) directly or indirectly received a loan of cash or marketable securities from a foreign trust, or you (or a U. person related to you) used any property owned by a foreign trust without paying FMV within a reasonable amount of time, the amount of such loan or the FMV of the use of trust property will be treated as a distribution for reporting purposes. If a partnership or corporation makes a gratuitous transfer to a trust, the partners or shareholders are generally treated as the grantors of the trust, unless the partnership or corporation made the transfer for a business purpose of the partnership or corporation. However, you may not treat the foreign trust as having a U. agent unless you enter the name, address, and taxpayer identification number (TIN) of the U. agent on lines 3a through 3g on page 1 of the form. If the agent's responsibility as an agent of the trust is terminated for any reason (for example, agent's resignation, agent's liquidation, or agent's death), see section IV(B) of Notice 97-34. If applicable, enter the reference ID number (defined below) you have assigned to the foreign trust.
For example, if charges you make on a credit card are paid by a foreign trust or guaranteed or secured by the assets of a foreign trust, the amount charged will be treated as a distribution to you by the foreign trust. For this purpose, a loan by an unrelated third party that is guaranteed by a foreign trust is generally treated as a loan from the trust. If a trust makes a gratuitous transfer to another trust, the grantor of the transferor trust is treated as the grantor of the transferee trust, except that if a person with a general power of appointment over the transferor trust exercises that power in favor of another trust, such person is treated as the grantor of the transferee trust, even if the grantor of the transferor trust is treated as the owner of the transferor trust. A gratuitous transfer to a foreign trust is any transfer to the trust other than (a) a transfer for FMV; or (b) a distribution to the trust with respect to an interest held by the trust (i) in an entity other than a trust (for example, a corporation or a partnership), or (ii) in an investment trust described in Regulations section 301.7701-4(c), a liquidating trust described in Regulations section 301.7701-4(d), or an environmental remediation trust described in Regulations section 301.7701-4(e). person will not be treated as making a transfer for FMV merely because the transferor is deemed to recognize gain on the transaction. beneficiary, or a domestic corporation controlled by the grantor or beneficiary may act as a U. For Form 3520 purposes, a "reference ID number" with respect to the foreign trust is a number established with respect to the foreign trust by or on behalf of the U. person that is engaged in a transaction with such foreign trust with respect to which Form 3520 reporting is required.
Thus, a nongrantor trust is treated as a taxable entity. The reference ID number is not necessary if you are completing Part IV of the form.
A trust may be treated as a nongrantor trust with respect to only a portion of the trust assets. The same reference ID number must be used consistently from tax year to tax year with respect to a given foreign trust.