Retirement tax questions

i didn't say it wasn't a foreign trust but that it wasn't a gift but a distribution. To examine whether this distribution is a gift or not, one needs a narrow definition of the word gift. Your pension plan could be considered a trust if you do not have the authority to exercise control over it. But the question is if your distribution is considered a gift? My interpretation of a gift is receiving something that i didn't earned but was given to me out of the goodness of a donor's heart.  In the context of the 3520, it could be different. Let's examine the instructions more in detail. 

In reading the instructions on page 3, it says "a distribution received directly or indirectly from a foreign trust for section 6048(c) reporting purposes is any gratuitous transfer of money or other property from a foreign trust". The key word is gratuitous, which means free money in simplest terms or money that was gifted to you that you didn't earned.

Now further down in the instructions, it states If a foreign trust makes a distribution to a U.S. person, the U.S. person must report the amount as a distribution in Part III, rather than as a gift in Part IV. Contributions of property by foreign persons to domestic or foreign trusts that have U.S. beneficiaries are not reportable by those beneficiaries in Part IV unless they are treated as receiving the contribution in the year of the transfer (for example, if the U.S. beneficiary is treated as an owner of that portion of the trust under section 678, then the contribution must be reported by such U.S. beneficiary in Part IV). Since, this this a distribution, then it must be reported in Part 111.  This will distinguish the distribution from a gift. 

I apologize, I missed this in my earlier analysis.  I looked at your question strictly as a gift and missed this as i read over the instructions.  Sorry for not catching this earlier but I do appreciate that you wrote back prompting me to do additional research.  let me know if this helps.

@eddyB