A District Court Determines that a Sole Beneficiary of a Foreign Trust is Subject to Only a 5 Percent Penalty for the Untimely Filing of IRS Form 3520 and Not the Usual 35 Percent Penalty
By Anthony Diosdi In a claim for refund action, the estate of Joseph Wilson (“Wilson”) sought the return of penalties assessed under Section 6048(b). See Wilson and Est. of Joseph A. Wilson v. United States, Dkt. No. 2:19-cv-05037 (E.D.N.Y. Nov. 18, 2019). Wilson established an overseas trust in 2003. Wilson named himself the grantor of the trust and was its sole owner and beneficiary. The singular purpose of the trust was to “place assets beyond the reach of his then wife, who he had reason to believe was preparing to file a divorce against him.” (Which she ultimately did do). Wilson funded the trust worth approximately $9 million in U.S. Treasury bills, accruing annual interest approximately 5 percent.From the 2003 through 2007 calendar years, Wison filed “various income tax and…