Updated October 18, 2026. Quick answer: Parts II and III of Form 3520-A are the foreign trust’s financial statements: an income statement of the year’s income, expenses and distributions, and a balance sheet of assets, liabilities and net worth at the start and end of the year. They are prepared from the trust’s books and records and filed with the rest of Form 3520-A.
What this part is for
Part II opens with the rule: “Enter totals from books and records of foreign trust.” The instructions add: “Include all income from U.S. and non-U.S. sources.” “This financial statement must reasonably reflect the trust’s income under U.S. income tax principles.”
Part III is the balance sheet: “List all assets and liabilities of the trust, including those assets and liabilities attributable to the portion(s) of the trust (if any) not treated as owned by a U.S. person.” The form as a whole is introduced on Form 3520-A, and the owner’s return that these statements support is in the Form 3520 guide.
The lines, one by one
Part II, the Foreign Trust Income Statement. Captions only; the form’s amount column is not reproduced here.
| Line | What the form says |
|---|---|
| Heading | “Enter totals from books and records of foreign trust.” |
| 1 | “Interest” |
| 2 | “Dividends” |
| 3 | “Gross rents and royalties” |
| 4 | “Income (loss) from partnerships and fiduciaries” |
| 5a and 5b | Net short-term “capital gain (loss)” and net long-term “capital gain (loss)” |
| 6 | “Ordinary gains (losses)” |
| 7 | “Other income (attach statement)” |
| 8 | “Total income (add lines 1 through 7)” |
| 9 | “Interest expense” |
| 10a and 10b | “Foreign taxes (attach statement)”; “State and local taxes” |
| 11 | “Amortization and depreciation (depletion)” |
| 12 | “Trustee and advisor fees” |
| 13 | “Charitable contributions” |
| 14 | “Other expenses (attach statement)” |
| 15 | “Total expenses (add lines 9 through 14)” |
| 16 | “Net income (loss) (subtract line 15 from line 8)” |
| 17a | “Enter the fair market value (FMV) of total distributions (directly or indirectly) from the trust to all persons, whether U.S. or foreign. Attach statement.” |
| 17b | “Distributions to U.S. owners:” |
| 17c | “Distributions to U.S. beneficiaries:” |
Part III, the Foreign Trust Balance Sheet, has columns for the beginning and the end of the tax year. Captions only.
| Line | What the form says |
|---|---|
| Columns | “Beginning of Tax Year End of Tax Year” |
| 1 | “Include certificates of deposit as cash on line 1.” |
| 2 and 3 | “Accounts receivable”; “Mortgages and notes receivable” |
| 4 to 7 | “Inventories”; “Government obligations”; “Other marketable securities”; “Other nonmarketable securities” |
| 8a, 8b | “Depreciable (depletable) assets”; “Less: accumulated depreciation (depletion)” |
| 9 and 10 | “Real property”; “Other assets (attach statement)” |
| 11 | “Total assets (add lines 1 through 7 and 8b through 10)” |
| 12 to 15 | “Accounts payable”; “Contributions, gifts, grants, etc., payable”; “Mortgages and notes payable”; “Other liabilities (attach statement)” |
| 16 | “Total liabilities (add lines 12 through 15)” |
| 17 to 19 | “Contributions to trust corpus”; “Accumulated trust income”; “Other (attach statement)” |
| 20 | “Total net worth (add lines 17 through 19)” |
| 21 | “Total liabilities and net worth (add lines 16 and 20)” |
Where the number comes from
The instructions explain several Part II lines. Dividends: “Report all ordinary dividends received during the tax year.” “Report capital gain distributions on Line 5.” Line 4: “Enter the trust’s share of income or (losses) from partnerships, S corporations, estates, other trusts, and REMICs.” Line 5: “For capital gains or (losses) attributable to a U.S. owner, use Schedule D (corporate or individual, whichever applies) and Form 8949”.
Line 6: “Enter the ordinary gain or (loss) from the sale or exchange of property other than capital assets and also from involuntary conversions (other than casualty or theft).” Line 7: “Enter other items of income not included on lines 1 through 6.” Line 10a: “A foreign tax includes only a tax imposed by the authority of a foreign country.” Line 10b: “Enter any deductible state and local income or real property taxes paid or incurred during the tax year that are not reported elsewhere in Part II.”
Line 12: “Enter the deductible fees paid or incurred to the fiduciary for administering the trust during the tax year.” Line 13: “It is not necessary that the charitable organization be created or organized in the United States.” Line 14: “Enter other items of expense not listed on lines 9 through 13.”
For Part III the instructions say “The balance sheet should reflect FMV” and “For purposes of completing Part III, it is not necessary or required to reconcile any differences between the book and tax basis of assets and liabilities.” Line 18: “Include the total amount of trust income accumulated and not distributed.”
Where it goes next
Line 17 feeds the owner and beneficiary statements: “Separately list the total amount of distributions (including the uncompensated use of trust property) to each U.S. owner and U.S. beneficiary.” “Prepare a separate Foreign Grantor Trust Owner Statement (see below) or Foreign Grantor Trust Beneficiary Statement (see below) for each U.S. owner or for each U.S. beneficiary who receives a distribution from the trust.” Line 17a also needs a statement: “Attach a statement that provides the following information concerning the transfer.” “The statement must also contain a description of the trust ownership structure setting forth the name, U.S. TIN (if any), and country of organization of all entities in which the trust has an ownership interest, including an ownership chart showing the trust’s position in the chain of ownership and the percentages of ownership.”
When no Form 3520-A is available, the owner’s Form 3520 asks for similar statements: “including a balance sheet and an income statement similar to those shown on Form 3520-A.” “For example, the statements must not treat capital gains as additions to trust corpus.” Distributions to a U.S. person are reported in Part III of that return; see Form 3520 Part III, Schedule B line 8 on foreign trust distributions and Form 1040.
Numbers elsewhere in the Form 3520-A package
| Where | What the IRS prints |
|---|---|
| Penalty if the form is late or incomplete | “greater of $10,000 or 5% of the gross value, defined later, of the portion of the trust’s assets treated as owned by the U.S. person” |
| Amended form | “must make sure the foreign trust files an amended Form 3520-A with the IRS within 90 days” |
| Authorization of agent | “The Authorization of Agent form should be attached every 3 years unless there has been a change” |
Parts II and III themselves are statements of the trust’s own books, so the figures that appear in the IRS text are these time limits and the penalty rule.
Edition and line numbers
This page reads Form 3520-A (Rev. December 2023) and the Instructions for Form 3520-A (Rev. December 2025), which the IRS says to use with the December 2023 revision of the form; these are the current files irs.gov served on 2026-10-18. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Preparing statements on a basis that ignores U.S. rules. The instructions say “This financial statement must reasonably reflect the trust’s income under U.S. income tax principles.”
- Leaving out the part of the trust you do not own. The instructions say “including those assets and liabilities attributable to the portion(s) of the trust (if any) not treated as owned by a U.S. person.”
- Listing distributions in one lump. The instructions say “Separately list the total amount of distributions (including the uncompensated use of trust property) to each U.S. owner and U.S. beneficiary.”
Related: Form 3520, Schedule B line 8 on foreign trust distributions, and Form 1040.
Sources
- Form 3520-A (Rev. December 2023), Annual Information Return of Foreign Trust With a U.S. Owner: https://www.irs.gov/pub/irs-pdf/f3520a.pdf
- Instructions for Form 3520-A (Rev. December 2025): https://www.irs.gov/pub/irs-pdf/i3520a.pdf
- Instructions for Form 3520 (Rev. December 2025): https://www.irs.gov/pub/irs-pdf/i3520.pdf
- IRS: About Form 3520: https://www.irs.gov/forms-pubs/about-form-3520
- IRS: About Form 3520-A: https://www.irs.gov/forms-pubs/about-form-3520-a
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.