Cash inheritance in a foreign bank account with my sister.

[minoerhan]

I inherited a total of $27K worth of foreign currency from my mother. She is not a US citizen and lived abroad. It is deposited now in a foreign bank in a joint account with my sister. My sister is entitled to half of it.  I know I have to report FBAR. Do I report on Form 8938? Do I report 1/2 the amount since its split between my sister. I reside in the US and I file MFJ. Its less than 100K threshold. So I do not need to. Correct?

[DS30 · Accepted solution]

It depends -

You will not pay any taxes on inherited or gifted money because the IRS does not consider this taxable income.

Regarding the amount of the foreign gift -  You only have a Form 3520 filing if the foreign gifts exceed $100,000 in total during the calendar tax year. Form 3520 - gift or inheritance from a foreign person. This form is not supported by TurboTax.

Regarding Form 8938 -

If you are married and you and your spouse file a joint income tax return, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

If you need to file  Form 8938 - Statement of Specified Foreign Financial Assets, will depend on the amount held in the foreign bank account regardless if this account is held jointly with another person that is not your spouse. So if this foreign account held with your sister is more than the reporting threshold (in total), then you will need to report the entire amount report on Form 8938 (even though half may actually belong to your sister).

For example -

• the foreign bank max balance on the account with your sister is $151,000 (USD) - then Form 8938 is needed
• the foreign bank max balance on the account with your sister is $75,000 (USD) - then no Form 8938 is needed

[minoerhan]

Thank you. Since the amount is less than the threshold and I do not need to file, this means that I only have to check the foreign bank box on 1040 Schedule B? Correct?

[DS30]

Correct - include the country codes on Schedule B for your FBAR accounts

[jonlee108]

Is an inheritance considered "receiving a distribution from a foreign trust" or is it "receiving a gift or bequest"? (these two cases are handled differently when completing the 3520)