Form 1040NR for Foreign Trusts: Income Tax Reporting for Foreign Non-Grantor Trusts

Special DNI Calculations for Foreign Trusts, Tax on Trust Accumulations, and Coordinating With Other Foreign Reporting Requirements

Recording of a 110-minute CPE webinar with Q&A

Conducted on Wednesday, July 19, 2017

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax advisers and compliance professionals with a thorough and practical guide for reporting foreign trusts with U.S. owners or other U.S. nexus on Form 1040NR. The panel will detail the events and transactions that require reporting, discuss filing obligations for owners and beneficiaries of foreign non-grantor trusts, review the form in depth, and help participants navigate seemingly contradictory form instructions.


A complex challenge for U.S. tax advisers is navigating the tax reporting requirements involved when a foreign trust has a U.S. owner or U.S. tax nexus. Filing obligations vary depending on the residence and character of the foreign trust, and tax advisers must be able to identify the type and residence of a trust to ensure full compliance with U.S. tax rules and avoid costly penalties.

While U.S. beneficiaries of foreign trusts must file Form 3520 to report trust distributions or other foreign gifts, foreign trusts with U.S. nexus must also file an income tax return to report the trust’s U.S.-sourced FDAP income and income effectively connected with a U.S. trade or business (ECI). Unlike domestic trusts, a foreign non-grantor trust that does not meet either the “control test” or the “court test” is treated as a nonresident individual. These trusts must file Form 1040NR and modify the filing to conform to trust accounting rules.

Because foreign trusts are often structured differently than U.S. domestic trusts, tax advisers must determine the character of the foreign entity to ascertain its proper U.S. tax treatment. U.S. tax treatment of foreign trusts have several significant distinctions from taxation of domestic trusts: DNI calculation rules are different for foreign trusts, and U.S. tax rules require calculation of income determined to be accumulated in the trust. This can trigger severe tax consequences on undistributed trust income for the trust.

Listen as our experienced panel provides a thorough and practical guide to the rules for determining when a foreign trust needs to file a 1040NR return and the adjustments necessary to accurately report foreign trust income.



  1. Residence and classification rules for foreign trusts
    1. “Control test”
    2. “Court test”
    3. Grantor vs. non-grantor trusts and U.S. tax reporting rules for FDAP and ECI
    4. Reporting foreign non-grantor trusts on Form 1040NR
  2. Differences in DNI calculations between domestic and foreign trusts
  3. Trust accumulation calculations and tax impact on undistributed income
  4. Adjustments to Form 1040NR to conform to trust accounting rules
  5. Coordinating Form 1040NR with other foreign information reporting requirements
    1. Withholding obligations and Form W-8BEN
    2. Form 3520 for distributions
    3. FATCA reporting


The panel will discuss these and other important topics:

  • What foreign trusts must be reported on Form 1040NR Income Tax Return?
  • What are the differences in DNI calculations between foreign and domestic trusts?
  • What are the modifications needed on Form 1040NR to report foreign trust FDAP income and ECI?


Brister, Jack
Jack R. Brister, TEP

International Wealth Tax Advisors

Mr. Brister specializes in U.S. tax planning and compliance for non-U.S. families with international wealth and asset...  |  Read More

Lucy S. Lee
Lucy S. Lee

Akin Gump Strauss Hauer & Feld

Ms. Lee focuses her practice on international tax and estate planning for individuals and families. She represents high...  |  Read More

Lipoff, Lawrence
Lawrence M. Lipoff, CPA, TEP, CEBS

With more than 30 years of experience, Mr. Lipoff specializes in the delivery of domestic and international private...  |  Read More

Nina Krauthamer
Nina Krauthamer

Ruchelman PLLC

Ms. Krauthamer focuses her practice on federal, state and international tax matters involving high net worth...  |  Read More

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