How to Utilize Section 6751 to Successfully Challenge IRS 3520 Penalties
By Anthony Diosdi Under Internal Revenue Code Section 6677(a), if any United States Person beneficiary receives (directly or indirectly) a distribution from a foreign trust, that person is required to disclose the aggregate distribution received on an Internal Revenue Service (“IRS”) Form 3520. A foreign gift, bequest, or inheritance that exceeds $100,000 must also be disclosed on a Form 3520. The IRS may assess an annual penalty equal to 35 percent of the gross value of the foreign trust not disclosed. In the cases where foreign gifts are not timely disclosed on a Form 3520, the IRS may assess a penalty under Internal Revenue Code Section 6039F equal to 25 percent of the value of a foreign gift. The problem is a significant number of individuals who had a 3520…