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Form 8938 http://www.irs.gov/pub/irs-pdf/f8938.pdf
6038D Information with respect to foreign financial assets.
Treasury Decision 9567, 12/19/2011, IRC Sec(s). 6038D
IRS has issued temporary regs that are intended to provide guidance on reporting requirements imposed by Code Sec. 6038D; . Generally, for tax years beginning after 3/18/2010, Code Sec. 6038D; requires individual who holds any interest in specified foreign financial asset during tax year to attach statement to that individual's tax return to report information identified in Code Sec. 6038D(c); , if aggregate value of specified foreign financial assets in which individual holds interest exceeds $50,000 for tax year, or such higher dollar amount as Secretary may prescribe.
RIN 1545-BK17
SUMMARY: This document contains temporary regulations relating to the provisions of the Hiring Incentives to Restore Employment (HIRE) Act that require foreign financial assets to be reported to the Internal Revenue Service for taxable years beginning after March 18, 2010. In particular, the temporary regulations provide guidance relating to the requirement that individuals attach a statement to their income tax return to provide required information regarding foreign financial assets in which they have an interest. The temporary regulations affect individuals required to file Form 1040, “U.S. Individual Income Tax Return,” and certain individuals required to file Form 1040- NR, “Nonresident Alien Income Tax Return.” The text of these temporary regulations also serves as the text of proposed regulations contained in a cross-reference notice of proposed rulemaking (REG-130302-10) published in the Proposed Rules section in this issue of the Federal Register.
DATES: Effective Date: These regulations are effective on December 19, 2011.
FOR FURTHER INFORMATION CONTACT: Joseph S. Henderson, (202) 622-3880 (not a toll-free call).
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 alien. 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 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).
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).
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 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.
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 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.
These reporting exceptions for certain territory-connected assets do not apply to assets held by a U.S. citizen or resident who is not a bona fide resident of any U.S. territory or an individual who is a bona fide resident of a U.S. territory other than the one to which the assets are connected.
Form TD F 90-22.1, “Report of Foreign Bank and Financial Accounts” (FBAR) Reporting on Form TD F 90-22.1 is required under Title 31 (31 U.S.C. 5314) for other law enforcement purposes in addition to tax administration. As a consequence, different policy considerations apply to Form 8938 and FBAR reporting. These are reflected in the different categories of persons required to file Form 8938 and the FBAR, the different filing thresholds for Form 8938 and FBAR reporting, and the different assets (and accompanying information) required to be reported on each form. Although certain information may be reported on both Form 8938 and the FBAR, the information required by the forms is not identical in all cases, and reflects the different rules, key definitions (for example, “financial account”), and reporting requirements applicable to Form 8938 and FBAR reporting.
These differing policy considerations were recognized during the passage of the HIRE Act and the enactment of section 6038D, and the intention to retain FBAR reporting notwithstanding the enactment of section 6038D was specifically noted in the Technical Explanation Of The Revenue Provisions Contained In Senate Amendment 3310, The “Hiring Incentives To Restore Employment Act,” Under Consideration by the Senate (Staff of the Joint Comm. on Taxation, JCX-4-10 (February 23, 2010)) (Technical Explanation) accompanying the HIRE Act. The Technical Explanation states that "[n]othing in this provision [ section 511 of the HIRE Act enacting section 6038D] is intended as a substitute for compliance with the FBAR reporting requirements, which are unchanged by this provision.” (Technical Explanation at p. 60). Against this background, reporting on Form 8938 and the FBAR is not duplicative and both forms must be filed, if required.
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.
Section 1.6038D-0T also issued under 26 6038D.
Section 1.6038D-1T also issued under 26 6038D.
Section 1.6038D-2T also issued under 26 6038D.
Section 1.6038D-3T also issued under 26 U.S.C. 6038D.
Section 1.6038D-4T also issued under 26 6038D.
Section 1.6038D-5T also issued under 26 6038D.
Section 1.6038D-7T also issued under 26 6038D.
Section 1.6038D-8T also issued under 26 U.S.C. 6038D. ***
This section lists the table of contents for §§ 1.6038D -1T through 1.6038D-8T.
(3) Held for investment. (4)Trade-or-business test.
(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.
(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.
(12) Specified domestic entity.— [Reserved].
(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— (i) $50,000 on the last day of the taxable year; or (ii) $75,000 at any time during the taxable year.
(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— (i) $100,000 on the last day of the taxable year; or (ii) $150,000 at any time during the taxable year.
(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— (i) $200,000 on the last day of the taxable year; or (ii) $300,000 at any time during the taxable year.
(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— (i) $400,000 on the last day of the taxable year; or (ii) $600,000 at any time during the taxable year.
(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).
(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.
(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).
(ii) The trust timely files Form 3520- A, “Annual Information Return of Foreign Trust With a U.S. Owner,” with the Internal Revenue Service for the taxable year; and
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Labels: Form 8938 and Section 6038D