@pk Thank you very much for the information! This makes a lot of sense. I was just worried that the IRS would consider this tax evasion of foreign income since I am reporting it late (even if it is just by a few months and not years). The cash surrender value has been reported on the FBAR for 2021 (I did not have to file FATCA because we were way under the threshold for this form.) and on the FBARs for previous years. I actually missed filing these on time because I thought we were under the $10,000 threshold for FBAR, but I was able to file them later under the IRS’ Delinquent FBAR Submission Procedures because we had no foreign income during any of these years and had marked on schedule B that we have foreign accounts (just marked ‘no’ for the requirement to file FINCEN 114 / FBAR because we thought we were under the threshold). All of these FBARs are acknowledged by FINCEN though and this year’s FBAR was filed before the automatic extension deadline of October 15. My understanding is that we never had to pay income tax on the life insurance policy until we decided to liquidate it in 2021 (so no tax requirement for prior years, just a reporting requirement on FBAR).
Again, thank you very much for the information! This is what I thought we have to do, but it’s great and very helpful to read your explanation.
