Source: https://www.federalregister.gov/documents/2011/12/19/2011-32263/reporting-of-specified-foreign-financial-assets
Timestamp: 2020-02-24 20:43:18
Document Index: 420529973

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Federal Register :: Reporting of Specified Foreign Financial Assets
78553-78566 (14 pages)
https://www.federalregister.gov/d/2011-32263 https://www.federalregister.gov/d/2011-32263
This PDF is the current document as it appeared on Public Inspection on 12/14/2011 at 4:15 pm.
Applicability Dates: For dates of applicability, see §§ 1.6038D-1T(b), 1.6038D-2T(e), 1.6038D-3T(e), 1.6038D-4T(b), 1.6038D-5T(g), 1.6038D-7T(d), and 1.6038D-8T(g).
An individual who fails to disclose the information required to be reported Start Printed Page 78554by section 6038D(c) is subject to a $10,000 penalty under section 6038D(d)(1). Section 6038D(d)(2) provides that if the failure to comply continues for more than 90 days after the day on which the Secretary mails notice of the failure to the individual, the individual must pay an additional penalty of $10,000 for each 30-day period (or fraction thereof) during which the failure to disclose continues after the expiration of the 90-day period. This continuation penalty is not to exceed $50,000 with respect to any such failure.
Section 6038D is effective for taxable years beginning after March 18, 2010 (the date of enactment of the HIRE Act). Notice 2011-55, 2011-29 IRB 53 (July 18, 2011), provides that an individual that has a taxable year that begins after March 18, 2010, and is required to attach a statement of specified foreign financial assets to an annual return to be filed prior to the issuance of Form 8938, “Statement of Specified Foreign Financial Assets,” is to satisfy his or her obligation under section 6038D for such taxable year by attaching Form 8938 for such taxable year to his or her next annual return required to be filed after the issuance of Form 8938. See § 601.601(d)(2)(ii)(b) of this chapter.
Section 1.6038D-1T sets forth the definitions of certain terms for purposes of section 6038D and the regulations. Section 1.6038D-2T provides rules for determining if a specified individual (as defined in § 1.6038D-1T(a)(2)) or a specified domestic entity (collectively referred to as a specified person) must file a Form 8938 with the specified person's annual return (as defined in § 1.6038D-1T(a)(11)).
The Form 8938 reporting period is the taxable year for a specified individual who is a U.S. citizen, a resident alien, or a bona fide resident of a U.S. territory for the entire taxable year. The Form 8938 reporting period for a specified domestic entity is the entity's taxable year. The Form 8938 reporting period for a specified individual who is a U.S. citizen or resident alien for less than the entire taxable year is the portion of the taxable year for which the specified individual is a U.S. citizen or resident Start Printed Page 78555alien. The Form 8938 reporting period for a specified individual who is bona fide resident of Puerto Rico for less than the entire taxable year under § 1.937-1(f)(2)(ii) is the portion of the taxable year for which the specified individual is a U.S. citizen.
For section 6038D purposes, a specified individual is a U.S. citizen, a resident alien of the United States (as determined under section 7701(b) and §§ 301.7701(b)-1 through 301.7701(b)-9 of this chapter), or a nonresident alien who has elected under section 6013(g) or (h) to be taxed as a U.S. resident. A resident alien who elects to be taxed as a resident of a foreign country pursuant to a U.S. income tax treaty's residency tie-breaker rules is a specified individual for purposes of section 6038D and the regulations.
In addition, certain nonresident aliens who are treated as residents under other sections of the Code are specified individuals for the purposes of section 6038D and the regulations . Under section 876 and § 1.876-1, nonresident alien individuals of the United States under section 7701(b) who are bona fide residents of Puerto Rico or a section 931 possession (as defined in § 1.931-1(c)(1)) are subject to tax under sections 1 and 55 in generally the same manner as a U.S. resident. Therefore, the rules under section 6038D apply to a nonresident alien who is a bona fide resident of Puerto Rico or American Samoa in the same manner as they apply to a U.S. citizen or resident.
A specified person that is the owner of an entity disregarded as an entity separate from its owner (as provided in § 301.7701-2(c)(2)(i) of this chapter) (disregarded entity) is treated as having an interest in any specified foreign financial assets held by the disregarded entity. A specified person that is treated as the owner of a trust or any portion of a trust under sections 671 through 679 is treated as having an interest in any specified foreign financial assets held by the trust or by the portion of the trust that the specified person owns, except as described in section 6(B) of this explanation. A specified person is not treated as having an interest in any specified foreign financial assets held by a partnership, corporation, trust (except as described in this explanation), or estate solely as a result of the specified person's status as a partner, shareholder, or beneficiary.
A joint interest in a specified foreign financial asset is subject to reporting under section 6038D and § 1.6038D-2T(a) by each specified person that is a joint owner of the asset. In general, each joint owner includes the full value of the jointly owned asset for purposes of determining whether the aggregate value of all specified foreign financial assets in which the joint owner has an interest exceeds the reporting thresholds set forth in § 1.6038D-2T(a).
Married specified individuals who file a joint annual return for the taxable year must fulfill their reporting requirements under section 6038D and § 1.6038D-2T(a) by filing a single Form 8938 that reports all of the specified foreign financial assets in which either married specified individual has an interest. A specified foreign financial asset that is jointly owned by married specified individuals or a specified foreign financial asset held by a child for which the married specified individuals have made an election under section 1(g)(7) is reported once on the single Form 8938. Married specified individuals who file a joint annual return include the value of a specified foreign financial asset that they jointly own together or a specified foreign financial asset held by a child for which they have made an election under section 1(g)(7) only once in determining whether the aggregate value of all of the specified foreign financial assets in which either married specified individual has an interest exceeds the appropriate reporting threshold set forth in § 1.6038D-2T(a).
A married specified individual who files a separate annual return for the taxable year must fulfill the reporting requirements under section 6038D and § 1.6038D-2T(a) by filing a separate Form 8938 that reports all of the specified foreign financial assets in which the married specified individual has an interest, including assets jointly owned with the married specified individual's spouse. A married specified individual that files a separate annual Start Printed Page 78556return and whose spouse is a specified person includes only one-half of the value of a specified foreign financial asset that the married specified individual jointly owns with his or her spouse in determining whether the married specified individual has an interest in specified foreign financial assets the aggregate value of which exceeds the appropriate reporting threshold set forth in § 1.6038D-2T(a).
A financial account maintained by a U.S. payor as defined in § 1.6049-5(c)(5)(i) (including assets held in such an account) is not a specified foreign financial asset for purposes of section 6038D and the regulations thereunder. For example, a specified person is not required to report a financial account maintained by a U.S. branch of a foreign financial institution described in § 1.1441-1(b)(2)(iv).
Under § 1.6038D-3T(b), specified foreign financial assets also include certain assets that are held outside of a financial account maintained by a financial institution. Specifically, a specified foreign financial asset includes any asset that is held for investment and is described in one or more of the following three categories: Stock or securities issued by a person other than a U.S. person; a financial instrument or contract issued by a person other than a U.S. person or that has a counterparty that is a person other than a U.S. person; and any interest in a foreign entity. For these purposes, a U.S. person is defined under section 7701(a)(30). Whether an entity is a foreign entity is determined under section 1473(5). These three categories are broad and overlap in certain cases such that an asset not held in a financial account may be within more than one of the statutory categories of section 6038D(b)(2). For example, stock issued by a foreign corporation is stock that is issued by a person other than a U.S. person, and is also an interest in a foreign entity.
An asset not held in an account maintained by a financial institution is held for investment for purposes of section 6038D and the regulations if the asset is not used or held for use in the specified person's trade or business. For purposes of determining whether an asset is used or held for use in the specified person's trade or business, the regulations apply principles based on the asset-use test of § 1.864-4(c)(2), with certain modifications. The regulations provide that stock is never considered to be used or held for use in a trade or business in applying the trade or business exception. The Department of the Treasury and the Internal Revenue Service believe this rule is appropriate given the broad exception for section 475 mark-to-market accounting discussed in section 2(D) of this explanation, and the exception from reporting for stock held in a financial account maintained by a foreign financial institution (provided the financial account is reported on Form 8938). The Department of the Treasury and the Internal Revenue Service request comments that concern the treatment of stock under these regulations and, more generally, what refinements, if any, to the regulation's trade or business standard would facilitate the implementation of the trade or business reporting exception.
(C) In the case of a financial instrument or contract held for investment, information that identifies Start Printed Page 78557the financial instrument or contract, including the names and addresses of all issuers and counterparties;
(I) The foreign currency exchange rate and, if the source of such rate is other than as described in § 1.6038D-5T(d)(1), the source of the rate used to determine the specified foreign financial asset's U.S. dollar value, including maximum value; and
(J) For a specified foreign financial asset excepted from reporting on Form 8938 under § 1.6038D-7T(a), the specified person must report the number of each type of form on which the asset is reported directly (for example, Form 3520, “Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts,” Form 3520-A, “Annual Information Return of Foreign Trust With a U.S. Owner,” Form 5471, “Information Return of U.S. Persons With Respect To Certain Foreign Corporations,” Form 8621, “Return by a Shareholder of a Passive Foreign Investment Company or a Qualified Electing Fund,” Form 8865, “Return of U.S. Persons With Respect To Certain Foreign Partnerships,” or Form 8891, “U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans.”)
The value of a specified foreign financial asset must be determined both for purposes of determining if the aggregate value of the specified foreign financial assets in which a specified person holds an interest exceeds the reporting thresholds set forth in § 1.6038D-2T(a) and for purposes of reporting the maximum value of a specified foreign financial asset on Form 8938 as required by § 1.6038D-4T(a)(5). Under § 1.6038D-5T, the value of a specified foreign financial asset for both of these purposes generally is the asset's fair market value. The maximum value of a specified foreign financial asset is the asset's highest fair market value during the taxable year, except as otherwise provided in § 1.6038D-5T, and must be reported on Form 8938 in U.S. dollars. If the maximum value of a specified foreign financial asset is less than zero, the value of the specified foreign financial asset is treated as zero for the purposes of determining the aggregate value of specified foreign financial assets in which a specified person has an interest and determining the maximum value of a specified foreign financial asset required to be reported on Form 8938.
For purposes of determining the aggregate value of specified foreign financial assets in which a specified person has an interest, if the specified person does not know or have reason to know based on readily accessible information the fair market value of the person's interest in a foreign trust Start Printed Page 78558during the taxable year, the value to be included in determining the aggregate value of the specified foreign financial assets is the maximum value of the specified person's interest in the foreign trust.
Except for certain married specified individuals who jointly own a specified foreign financial asset with a spouse, a specified person that jointly owns a specified foreign financial asset must use the value of the entire asset, and not the value of the specified person's separate interest, for purposes of determining whether the reporting thresholds set forth in § 1.6038D-2T(a) are exceeded. A specified person, including a married specified individual, that jointly owns a specified foreign financial asset must report the maximum value of the entire asset during the portion of the taxable year that the specified person has an interest in the asset. Married specified individuals that jointly own a specified foreign financial asset and that file a joint annual income return tax are only required to report the asset once on the single Form 8938 filed with their return.
The notice of proposed rulemaking accompanying these regulations (REG-130302-10) includes Prop. Reg. § 1.6038D-6, which applies section 6038D to certain domestic entities that are formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets. The Department of the Treasury and the Internal Revenue Service anticipate that Prop. Reg. § 1.6038D-6 will be issued as a final regulation during 2012 and will apply to taxable years beginning after December 31, 2011. Until Prop. Reg. § 1.6038D-6 is issued as a final regulation, no domestic entity is required to file Form 8938 to report specified foreign financial assets with its annual return.
A specified person that is treated as an owner of a domestic liquidating trust described in § 301.7701-4(d) of this chapter created pursuant to a court order issued in a bankruptcy under Chapter 7 (11 U.S.C. 701 et seq.) or a confirmed plan under Chapter 11 (11 U.S.C. 1101 et seq.) of the Bankruptcy Code, a domestic widely held fixed investment trust under § 1.671-5, or any portion of such a trust under sections 671 through 679 is not required to file Form 8938 to report any specified foreign financial asset held by the trust.
As described in section 1(A) of this explanation, bona fide residents of the U.S. Virgin Islands and U.S. territories to which section 935 applies (currently, Guam and the Northern Mariana Islands) generally are not required to file a federal income tax return and, therefore, generally would not be required to file a Form 8938 with the Internal Revenue Service. By contrast, certain bona fide residents of Puerto Rico or a section 931 possession as defined in § 1.931-1(c)(1) (currently, American Samoa) who have income from sources outside their U.S. territory of residence may be required to file a federal income tax return; thus, the reporting requirements of section 6038D and the regulations may apply to such persons.
Reporting is also not required with respect to stock or securities or any other interest in an entity organized under the laws of the U.S. territory of which the specified person is a bona fide resident. Similarly, reporting is not required with respect to a financial instrument or contract held for investment if the issuer or counterparty is: (i) An entity organized under the laws of the U.S. territory of which the specified person is a bona fide resident; or (ii) a bona fide resident of the U.S. Start Printed Page 78559territory of which the specified person is a bona fide resident.
If a specified person fails to file a Form 8938 that includes the information required by section 6038D(c) and § 1.6038D-4T with respect to any taxable year at the time and in the manner described in section 6038D(a) and § 1.6038D-2T, a penalty of $10,000 will apply to that specified person under section 6038D(d) and § 1.6038D-8T. If any such failure continues for more than 90 days after the day on which the Commissioner or his delegate mails a notice of the failure to the specified person required to file the Form 8938, the specified person is subject to an additional penalty of $10,000 for each 30-day period (or fraction thereof) during which the failure continues after the 90-day period has expired. The additional (or continuation) penalty is limited to a maximum of $50,000 for each such failure.
Married specified individuals who file a joint annual return and fail to file a required Form 8938, “Statement of Specified Foreign Financial Assets,” that includes the information required by section 6038D(c) and § 1.6038D-4T with respect to any taxable year at the time and in the manner described in section 6038D(a) and § 1.6038D-2T are subject to penalties under section 6038D(d) and § 1.6038D-8T as if the married specified individuals are a single specified person. The liability of married specified individuals who file a joint annual return with respect to penalties under this section is joint and several.
For the purpose of assessing the penalties for failure to disclose, if the Commissioner or his delegate determines that a specified person has an interest in one or more specified foreign financial assets, and the specified person has not provided sufficient information to demonstrate the aggregate value of the assets upon request by the Secretary, then the aggregate value of the assets is treated as being in excess of the applicable reporting threshold set forth in § 1.6038D-2T(a).
If a specified person shows that the failure to report the information required under section 6038D and § 1.6038D-4T is due to reasonable cause and not due to willful neglect, no penalty will be imposed under section 6038D(d) or § 1.6038D-8T. To show that the failure to report is due to reasonable cause and not due to willful neglect, the specified person must make an affirmative showing of all the facts alleged as reasonable cause for the failure to report.
Section 1.6038D-3T also issued under 26 U.S.C. 6038D.Start Printed Page 78560
Section 1.6038D-4T also issued under 26 U.S.C. 6038D.
§ 1.6038D-0T
Outline of regulation provisions (temporary).
This section lists the table of contents for §§ 1.6038D-1T through 1.6038D-8T.
§ 1.6038D-1T
Reporting with respect to specified foreign financial assets, definition of terms (temporary).
§ 1.6038D-2T
Requirement to report specified foreign financial assets (temporary).
§ 1.6038D-3T
Specified foreign financial assets (temporary).
§ 1.6038D-4T
Information required to be reported (temporary).
§ 1.6038D-5T
Valuation guidelines (temporary).
§ 1.6038D-6T
Specified domestic entities (temporary). [Reserved]
§ 1.6038D-7T
Exceptions from the reporting of certain assets under Section 6038D (temporary).
§ 1.6038D-8T
Penalties for failure to disclose (temporary).
(iv) Nonresident alien who is a bona fide resident of Puerto Rico or a section 931 possession (as defined in § 1.931-1(c)(1)).
(3) Resident alien. The term resident alien has the meaning set forth in section 7701(b) and §§ 301.7701(b)-1 through 301.7701(b)-9 of this chapter.Start Printed Page 78561
(4) Bona fide resident of a U.S. possession. The term bona fide resident of a U.S. possession means an individual who is a “bona fide resident” under section 937(a) and § 1.937-1.
(6) Specified foreign financial asset. The term specified foreign financial asset has the meaning set forth in § 1.6038D-3T.
(a) Reporting requirement—(1) In general. Except as otherwise provided, a specified person that has any interest in a specified foreign financial asset during the taxable year must attach Form 8938, “Statement of Specified Foreign Financial Assets,” to that specified person's annual return for the taxable year to report the information required by section 6038D and § 1.6038D-4T if the aggregate value of all such assets exceeds—
(2) Special rule for married specified individuals filing a joint annual return. Except as provided in paragraph (a)(1)(4) of this section, married specified individuals that file a joint annual return for the taxable year must attach a single Form 8938 to their joint annual return to report the information required by section 6038D and § 1.6038D-4T if the aggregate value of all of the specified foreign financial assets in which either married specified individual has an interest exceeds—
(3) Special rule for certain specified individuals living abroad. Except as provided in paragraph (a)(1)(4) of this section, a specified individual who is a qualified individual under section 911(d)(1) for the taxable year is required to attach a Form 8938 to the specified individual's annual return and report the information required by section 6038D and § 1.6038D-4T if the aggregate value of the specified foreign financial assets in which the specified individual has an interest exceeds—
(4) Special rule for qualified individuals filing a joint annual return. A qualified individual under section 911(d)(1) and the qualified individual's spouse who file a joint annual return must attach Form 8938 to their joint annual return to report the information required by section 6038D and § 1.6038D-4T if the aggregate value of all of the specified foreign financial assets in which either married individual has an interest exceeds—
(5) Assets with no positive value. A specified foreign financial asset is subject to reporting even if the specified foreign financial asset does not have a positive value. See § 1.6038D-5T(b) for reporting the maximum value of a specified foreign financial asset, including a specified foreign financial asset that does not have a positive value during the taxable year.
(6) Excepted assets. The value of any specified foreign financial asset in which a specified individual has an interest and that is excluded from reporting on Form 8938 pursuant to § 1.6038D-7T(a) is included for purposes of determining the aggregate value of specified foreign financial assets. The value of any specified foreign financial asset in which a specified individual has an interest and that is excluded from reporting under § 1.6038D-7T(b) or (c) is excluded for purposes of determining the aggregate value of specified foreign financial assets.
(2) Special rule for parent making election under section 1(g)(7). A parent that makes an election under section 1(g)(7) to include certain unearned income of a child in the parent's gross income has an interest in any specified foreign financial asset held by the child Start Printed Page 78562for the purposes of section 6038D and the regulations.
(3) Entities. Except as provided in this paragraph, a specified person is not treated as having an interest in any specified foreign financial assets held by a corporation, partnership, trust, or estate solely as a result of the specified person's status as a shareholder, partner, or beneficiary of such entity. A specified person that is treated as the owner of a trust or any portion of a trust under sections 671 through 679, other than a domestic liquidating trust under § 301.7701-4(d) of this chapter created pursuant to a court order issued in a bankruptcy under Chapter 7 (11 U.S.C. 701 et seq.) or a confirmed plan under Chapter 11 (11 U.S.C. 1101 et seq.) of the Bankruptcy Code, or a domestic widely held fixed investment trust under § 1.671-5, is treated as having an interest in any specified foreign financial assets held by the trust or the portion of the trust. See § 1.6038D-3T(c) to determine whether an interest in a foreign trust or an interest in a foreign estate is a specified foreign financial asset. See § 1.6038D-5T(g) for rules to determine the maximum value of an interest in a foreign trust or estate.
(c) Special rules for joint interests—(1) Aggregate value of assets—(i) Specified persons. Except in the case of a specified person described in paragraph (c)(1)(ii) of this section, each specified person that is a joint owner of a specified foreign financial asset must include the entire value of the specified foreign financial asset (and not the value of the specified person's interest) for purposes of determining whether the aggregate value of the specified person's specified foreign financial assets exceeds the reporting thresholds set forth in § 1.6038D-2T(a).
(ii) Married specified individuals. Married specified individuals who file a joint annual return must include the value of a specified foreign financial asset that they jointly own or in which they have an interest under paragraph (b)(2) of this section only once in determining whether the aggregate value of all of the specified foreign financial assets in which either married specified individual has an interest exceeds the reporting thresholds set forth in § 1.6038D-2T(a). If a married specified individual files a separate annual return and his or her spouse is a specified individual, the married specified individual includes one-half of the value of a specified foreign financial asset that the married specified individual jointly owns with his or her spouse in determining whether the married specified individual has an interest in specified foreign financial assets the aggregate value of which exceeds the reporting thresholds set forth in § 1.6038D-2T(a).
(2) Annual return filed by a married specified individual—(i) Joint annual return. Married specified individuals that file a joint annual return must file a single Form 8938 to fulfill their reporting requirements under section 6038D and § 1.6038D-2T(a). The single Form 8938 must report all of the specified foreign financial assets in which either married specified individual has an interest. If the married specified individuals jointly own a specified foreign financial asset or if they have an interest in a specified foreign financial asset under paragraph (b)(2) of this section, the asset must be reported only once on the single Form 8938 filed for the taxable year.
(ii) Separate annual return. A married specified individual who files a separate annual return for the taxable year must fulfill the reporting requirements under section 6038D and § 1.6038D-2T(a) by filing a separate Form 8938 that reports all of the specified foreign financial assets in which the married specified individual has an interest, including assets jointly owned with the married specified individual's spouse.
(2) Filing requirement—(i) Married specified individuals filing a separate annual return. If H and W file separate annual returns, the aggregate value of the specified foreign financial assets in which H has an interest at the end of the taxable year is $55,000, comprising one-half of the value of the jointly owned asset, $45,000, and the value of H's separately owned specified foreign financial asset, $10,000. The aggregate value of the specified foreign financial assets in which W has an interest at the end of the taxable year is $46,000, comprising one-half of the value of the jointly owned asset, $45,000, and the value of W's separately owned specified foreign financial asset, $1,000. H must file Form 8938 with his annual return for the taxable year because the aggregate value of the specified foreign financial assets in which H has an interest exceeds the applicable reporting threshold ($50,000) set forth in § 1.6038D-2T(a)(1). H must report the maximum value of the entire jointly owned asset, $90,000, and the maximum value of the separately owned asset, $10,000. See § 1.6038D-4T(b) regarding the maximum value of a jointly owned specified foreign financial asset to be reported by a specified person, including a married specified individual, that is a joint owner of an asset. The aggregate value of the specified foreign financial assets in which W has an interest, $46,000, does not exceed the applicable reporting threshold forth in § 1.6038D-2T(a)(1). W is not required to file Form 8938 with her separate annual return.
(ii) Married specified individuals filing a joint annual return. If H and W file a joint annual return, they must file a single Form 8938 with their joint annual return for the taxable year because the aggregate value of all of the specified foreign financial assets in which either H and W have an interest ($90,000 (included only once), $10,000, and $1000, or $101,000) exceeds the applicable reporting threshold ($100,000) set forth in § 1.6038D-2T(a)(2). The single Form 8938 must report the maximum value of the jointly owned specified foreign financial asset, $90,000, and the maximum value of the specified foreign financial assets separately owned by H and W, $10,000 and $1,000, respectively.
(3) Excepted financial accounts— (i) Accounts maintained by U.S. payors. A financial account maintained by a U.S. payor as defined in § 1.6049-5(c)(5)(i) (including assets held in such an account) is not a specified foreign financial asset for purposes of section 6038D and the regulations.
(ii) Mark-to-market election under section 475. A financial account is not a specified foreign financial asset if the rules of section 475(a) apply to all of the holdings in the account or an election Start Printed Page 78563under section 475(e) or (f) is made with respect to all of the holdings in the account.
(9) The foreign currency exchange rate and, if the source of such rate is other than as described in § 1.6038D-5T(d)(1), the source of the rate used to determine the specified foreign financial asset's U.S. dollar value, including maximum value; and
(10) For any specified foreign financial asset excepted from reporting on Form 8938 under § 1.6038D-7T(a), Start Printed Page 78564the specified person must report the number of Forms 3520, “Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts,” Forms 3520-A, “Annual Information Return of Foreign Trust With a U.S. Owner,” Forms 5471, “Information Return of U.S. Persons With Respect To Certain Foreign Corporations,” Forms 8621, “Return by a Shareholder of a Passive Foreign Investment Company or a Qualified Electing Fund,” Forms 8865, “Return of U.S. Persons With Respect To Certain Foreign Partnerships,” Forms 8891, “U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans,” or such other form under Title 26 of the United States Code identified by the Secretary under § 1.6038D-7T(a), timely filed with the Internal Revenue Service on which excepted foreign financial assets are reported or reflected for the taxable year.
(e) Asset held in a financial account. The value of an asset held in a financial account maintained by a foreign financial institution is included in determining the value of that financial account for purposes of § 1.6038D-5T(a).
(i) Maximum value. The maximum value of a specified person's interest in a foreign estate, foreign pension plan, or a foreign deferred compensation plan is the fair market value, determined as of the last day of the taxable year, of the specified person's beneficial interest in the assets of the foreign estate, foreign pension plan, or foreign deferred compensation plan. If the specified person does not know or have reason to know based on readily accessible information such fair market value, the Start Printed Page 78565maximum value to be reported is the fair market value, determined as of the last day of the taxable year, of the currency and other property distributed during the taxable year to the specified person as a beneficiary or participant.
(1) A widely-held fixed investment trust under § 1.671-5; or
(2) A liquidating trust within the meaning of § 301.7701-4(d) of this chapter that is created pursuant to a court order issued in a bankruptcy under Chapter 7 (11 U.S.C. 701 et seq.) or a confirmed plan under Chapter 11 (11 U.S.C. 1101 et seq.) of the Bankruptcy Code.
(a) In general. If a specified person fails to file a Form 8938, “Statement of Specified Foreign Financial Assets,” that includes the information required by section 6038D(c) and § 1.6038D-4T with respect to any taxable year at the time and in the manner described in section 6038D(a) and § 1.6038D-2T, a penalty of $10,000 will apply to that specified person.
(b) Married specified individuals filing a joint annual return. Married specified individuals who file a joint annual return and fail to file a required Form 8938, “Statement of Specified Foreign Financial Assets,” that includes the information required by section 6038D(c) and § 1.6038D-4T with respect to any taxable year at the time and in the manner described in section 6038D(a) and § 1.6038D-2T are subject to penalties under this section as if the married specified individuals are a single specified person. The liability of married specified individuals who file a joint annual return with respect to any penalties under this section is joint and several.
(c) Increase in penalty. If any failure to comply with the applicable reporting Start Printed Page 78566requirement of section 6038D and the regulations continues for more than 90 days after the day on which the Commissioner or his delegate mails a notice of the failure to the specified person required to file the Form 8938, the specified person is required to pay an additional penalty of $10,000 for each 30-day period (or fraction thereof) during which the failure continues after the 90-day period has expired. The additional penalty imposed by section 6038D(d)(2) and this paragraph (c) is limited to a maximum of $50,000 for each such failure.
(d) Presumption of aggregate value. For the purpose of assessing penalties imposed under section 6038D(d), if the Commissioner or his delegate determines that a specified person has an interest in one or more specified foreign financial assets and the specified person does not provide sufficient information to demonstrate the aggregate value of the assets upon request by the Commissioner or his delegate, then the aggregate value of the assets is treated as being in excess of the applicable reporting threshold set forth in § 1.6038D-2T(a).
(e) Reasonable cause exception—(1) In general. If the failure to report the information required in section 6038D(c) and § 1.6038D-4T is shown to be due to reasonable cause and not due to willful neglect, no penalty will be imposed under section 6038D(d) or this section.