Dianne Mehany Analyzes Reasonable Cause Defenses to 3520 Penalties at ABA Fall Tax Meeting

When a U.S. person establishes or receives a distribution from a foreign trust, or when a U.S. trust or U.S. individual receives a gift from a foreign donor, a Form 3520 must be filed, with non-compliance, unless due to reasonable cause, subject to large monetary penalties. Panelists will review possible defenses to Form 3520 penalties, such as case law exempting transactions reconstructed for substantive U.S. tax law as deemed gifts, reliance on professional tax preparers, and the constitutional prohibition on excessive fines. Related topics, such as the current IRS Delinquent International Information Return Submission Procedures for Forms 3520, and the Comments of the International Tax Planning Committee of the ABA Probate and Trust Division to the IRS on Form 3520 Penalties, will also be covered.