Foreign pension on form 3520

[eddyB]

I am a US citizen, and have lived in the USA since 1989. This year I started getting monthly payments from a Dutch pension (not Dutch social security regulated by the US-NL tax treaty). I have worked for a Dutch company while I lived in the Netherlands 1983-1989, and they put money away for my old age. I am not the owner of the plan (I think my former employer is), just the beneficiary. I have reported the distribution as Miscellaneous income on my 1040. The distribution is way less than $50,000 so I do not have to file 8839, but do I have to file a 3520 or 3520A? I have no idea what the value of the pension trust is, My former employer only informs me how much I am getting each month. Neither me nor my former employer have been making contributions to the plan since 1989

[DaveF1006]

No you do not need to file a Form 3520 or 3520A because this is not considered a gift from a foreign person or trust. it's a distribution from a pension plan that was administered by a former employer. You reported this correctly as miscellaneous income. 

[eddyB]

Thanks Dave,

I was getting pretty anxious because of the high penalties. In the instructions for 3520 under "who must file", paragraph 3 it states: a "US person who received, directly or indirectly, a distribution from a foreign trust".

I always thought that my employer administered pension plan was in fact a foreign trust, but you stated that it is not.

Ed

[DaveF1006]

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