Internal Revenue Code:Sec. 6048. Information with respect to certain foreign trusts

From TaxAlmanac

Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle F - Procedure and Administration
       CHAPTER 61 - INFORMATION AND RETURNS
        Subchapter A - Returns and Records
         PART III - INFORMATION RETURNS
          Subpart B - Information Concerning Transactions With Other Persons
        

Statute

    Sec. 6048. Information with respect to certain foreign trusts
 
    (a) Notice of certain events
      (1) General rule
        On or before the 90th day (or such later day as the Secretary
      may prescribe) after any reportable event, the responsible party
      shall provide written notice of such event to the Secretary in
      accordance with paragraph (2).
      (2) Contents of notice
        The notice required by paragraph (1) shall contain such
      information as the Secretary may prescribe, including -
          (A) the amount of money or other property (if any)
        transferred to the trust in connection with the reportable
        event, and
          (B) the identity of the trust and of each trustee and
        beneficiary (or class of beneficiaries) of the trust.
      (3) Reportable event
        For purposes of this subsection -
        (A) In general
          The term ''reportable event'' means -
            (i) the creation of any foreign trust by a United States
          person,
            (ii) the transfer of any money or property (directly or
          indirectly) to a foreign trust by a United States person,
          including a transfer by reason of death, and
            (iii) the death of a citizen or resident of the United
          States if -
              (I) the decedent was treated as the owner of any portion
            of a foreign trust under the rules of subpart E of part I
            of subchapter J of chapter 1, or
              (II) any portion of a foreign trust was included in the
            gross estate of the decedent.
        (B) Exceptions
          (i) Fair market value sales
            Subparagraph (A)(ii) shall not apply to any transfer of
          property to a trust in exchange for consideration of at least
          the fair market value of the transferred property.  For
          purposes of the preceding sentence, consideration other than
          cash shall be taken into account at its fair market value and
          the rules of section 679(a)(3) shall apply.
          (ii) Deferred compensation and charitable trusts
            Subparagraph (A) shall not apply with respect to a trust
          which is -
              (I) described in section 402(b), 404(a)(4), or 404A, or
              (II) determined by the Secretary to be described in
            section 501(c)(3).
      (4) Responsible party
        For purposes of this subsection, the term ''responsible party''
      means -
          (A) the grantor in the case of the creation of an inter vivos
        trust,
          (B) the transferor in the case of a reportable event
        described in paragraph (3)(A)(ii) other than a transfer by
        reason of death, and
          (C) the executor of the decedent's estate in any other case.
    (b) United States owner of foreign trust
      (1) In general
        If, at any time during any taxable year of a United States
      person, such person is treated as the owner of any portion of a
      foreign trust under the rules of subpart E of part I of
      subchapter J of chapter 1, such person shall be responsible to
      ensure that -
          (A) such trust makes a return for such year which sets forth
        a full and complete accounting of all trust activities and
        operations for the year, the name of the United States agent
        for such trust, and such other information as the Secretary may
        prescribe, and
          (B) such trust furnishes such information as the Secretary
        may prescribe to each United States person (i) who is treated
        as the owner of any portion of such trust or (ii) who receives
        (directly or indirectly) any distribution from the trust.
      (2) Trusts not having United States agent
        (A) In general
          If the rules of this paragraph apply to any foreign trust,
        the determination of amounts required to be taken into account
        with respect to such trust by a United States person under the
        rules of subpart E of part I of subchapter J of chapter 1 shall
        be determined by the Secretary.
        (B) United States agent required
          The rules of this paragraph shall apply to any foreign trust
        to which paragraph (1) applies unless such trust agrees (in
        such manner, subject to such conditions, and at such time as
        the Secretary shall prescribe) to authorize a United States
        person to act as such trust's limited agent solely for purposes
        of applying sections 7602, 7603, and 7604 with respect to -
            (i) any request by the Secretary to examine records or
          produce testimony related to the proper treatment of amounts
          required to be taken into account under the rules referred to
          in subparagraph (A), or
            (ii) any summons by the Secretary for such records or
          testimony.
        The appearance of persons or production of records by reason of
        a United States person being such an agent shall not subject
        such persons or records to legal process for any purpose other
        than determining the correct treatment under this title of the
        amounts required to be taken into account under the rules
        referred to in subparagraph (A). A foreign trust which appoints
        an agent described in this subparagraph shall not be considered
        to have an office or a permanent establishment in the United
        States, or to be engaged in a trade or business in the United
        States, solely because of the activities of such agent pursuant
        to this subsection.
        (C) Other rules to apply
          Rules similar to the rules of paragraphs (2) and (4) of
        section 6038A(e) shall apply for purposes of this paragraph.
    (c) Reporting by United States beneficiaries of foreign trusts
      (1) In general
        If any United States person receives (directly or indirectly)
      during any taxable year of such person any distribution from a
      foreign trust, such person shall make a return with respect to
      such trust for such year which includes -
          (A) the name of such trust,
          (B) the aggregate amount of the distributions so received
        from such trust during such taxable year, and
          (C) such other information as the Secretary may prescribe.
      (2) Inclusion in income if records not provided
        (A) In general
          If adequate records are not provided to the Secretary to
        determine the proper treatment of any distribution from a
        foreign trust, such distribution shall be treated as an
        accumulation distribution includible in the gross income of the
        distributee under chapter 1. To the extent provided in
        regulations, the preceding sentence shall not apply if the
        foreign trust elects to be subject to rules similar to the
        rules of subsection (b)(2)(B).
        (B) Application of accumulation distribution rules
          For purposes of applying section 668 in a case to which
        subparagraph (A) applies, the applicable number of years for
        purposes of section 668(a) shall be 1/2 of the number of years
        the trust has been in existence.
    (d) Special rules
      (1) Determination of whether United States person makes transfer
          or receives distribution
        For purposes of this section, in determining whether a United
      States person makes a transfer to, or receives a distribution
      from, a foreign trust, the fact that a portion of such trust is
      treated as owned by another person under the rules of subpart E
      of part I of subchapter J of chapter 1 shall be disregarded.
      (2) Domestic trusts with foreign activities
        To the extent provided in regulations, a trust which is a
      United States person shall be treated as a foreign trust for
      purposes of this section and section 6677 if such trust has
      substantial activities, or holds substantial property, outside
      the United States.
      (3) Time and manner of filing information
        Any notice or return required under this section shall be made
      at such time and in such manner as the Secretary shall prescribe.
      (4) Modification of return requirements
        The Secretary is authorized to suspend or modify any
      requirement of this section if the Secretary determines that the
      United States has no significant tax interest in obtaining the
      required information.
      (5) United States person's return must be consistent with trust
          return or Secretary notified of inconsistency
        Rules similar to the rules of section 6034A(c) shall apply to
      items reported by a trust under subsection (b)(1)(B) and to
      United States persons referred to in such subsection.
 

Sources

    (Added Pub. L. 87-834, Sec. 7(f), Oct. 16, 1962, 76 Stat. 987;
    amended Pub. L. 94-455, title X, Sec. 1013(d)(1), (e)(3), (4),
    title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1616, 1834;
    Pub. L. 97-248, title III, Sec. 341(b), Sept. 3, 1982, 96 Stat.
    635; Pub. L. 104-188, title I, Sec. 1901(a), Aug. 20, 1996, 110
    Stat. 1904; Pub. L. 105-34, title X, Sec. 1027(b), title XVI, Sec.
    1601(i)(1), Aug. 5, 1997, 111 Stat. 926, 1092.)
 

Miscellaneous

                                 AMENDMENTS
      1997 - Subsec. (b). Pub. L. 105-34, Sec. 1601(i)(1), substituted
    ''owner'' for ''grantor'' in heading.
      Subsec. (d)(5). Pub. L. 105-34, Sec. 1027(b), added par. (5).
      1996 - Pub. L. 104-188 amended section generally, substituting
    provisions calling for improved information reporting on foreign
    trusts for provisions calling for the filing of returns as to
    foreign trusts, prescribing the form and contents of such returns,
    and requiring annual returns for foreign trusts with one or more
    United States beneficiaries.
      1982 - Subsec. (a). Pub. L. 97-248 inserted ''(or on or before
    such later day as the Secretary may by regulations prescribe)''
    after ''the 90th day''.
      1976 - Pub. L. 94-455, Sec. 1013(e)(4), struck out ''creation of
    or transfer to'' after ''Returns as to'' in section catchline.
      Subsec. (b). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ''or
    his delegate'' after ''Secretary''.
      Subsecs. (c), (d). Pub. L. 94-455, Sec. 1013(d)(1), (e)(3), added
    subsec. (c), redesignated former subsec. (c) as (d), and in subsec.
    (d) struck out cross reference to section 643(d) for definition of
    ''foreign trust created by a United States person''.
                      EFFECTIVE DATE OF 1997 AMENDMENT
      Amendment by section 1027(b) of Pub. L. 105-34 applicable to
    returns of beneficiaries and owners filed after Aug. 5, 1997, see
    section 1027(c) of Pub. L. 105-34, set out as a note under section
    6034A of this title.
      Amendment by section 1601(i)(1) of Pub. L. 105-34 effective as if
    included in the provisions of the Small Business Job Protection Act
    of 1996, Pub. L. 104-188, to which it relates, see section 1601(j)
    of Pub. L. 105-34, set out as a note under section 23 of this
    title.
                      EFFECTIVE DATE OF 1996 AMENDMENT
      Section 1901(d) of Pub. L. 104-188 provided that:
      ''(1) Reportable events. - To the extent related to subsection
    (a) of section 6048 of the Internal Revenue Code of 1986, as
    amended by this section, the amendments made by this section
    (amending this section and sections 6677 and 6724 of this title)
    shall apply to reportable events (as defined in such section 6048)
    occurring after the date of the enactment of this Act (Aug. 20,
    1996).
      ''(2) Grantor trust reporting. - To the extent related to
    subsection (b) of such section 6048, the amendments made by this
    section shall apply to taxable years of United States persons
    beginning after December 31, 1995.
      ''(3) Reporting by united states beneficiaries. - To the extent
    related to subsection (c) of such section 6048, the amendments made
    by this section shall apply to distributions received after the
    date of the enactment of this Act.''
                      EFFECTIVE DATE OF 1982 AMENDMENT
      Amendment by Pub. L. 97-248 applicable to returns filed after
    Sept. 3, 1982, see section 341(c) of Pub. L. 97-248, set out as a
    note under section 6046 of this title.
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 679, 6039F, 6501, 6677,
    6724 of this title.