Do loans to foreign persons, with an agreement, not held in a financial institutions, including a small AFR interest, have to be reported on FINCEN form 8938?

[docholiday]

I saw a post that said no by Desauter, and a post that said yes....so I wonder

[pk]

Loan it self is not a tax event, the earned interest is reportable in the year earned / recieved.  After tax monies  given to a foreign person ( especially  with a track such as bank transfer ) itself is not required to be reported  either on FINCEN 114 or IRS 8938 --- however,  and even though banks  report all suspect activity  to FINCEN, you need to keep good record because if the monies are used  for banned purposes and traced back to you,  it could be a sad story.  At the same people  lend monies to relatives and friends  all the time and across the borders and  things work out OK

[docholiday]

Does it make any difference if the loan was made from overseas to that foreign person?  and also, I read the 8938 instructions on page 6, in two sections I wondered:  "Specified Foreign financial Assets" 2c....I suppose this does not apply because loan agreement is not held in a financial institution?, and "Other specified foreign financial assets" ..."if they are held for investment and not held in a financial account. ....then it says bullet:  a note, bond, debenture or other form of indebtedness ISSUED by a foreign person"...I suppose this does not apply because I am the issuer?, and/or the AFR loan is not held for "investment purposes"?   In this case the loan is issued by me (?), I am lender and they are borrower and it is all overseas. I would think that with all these pages, they would be very clear on a simple mater as a loan to a foreign person!  Any additional thoughts?  Thank for your help!

[ldc2]

I have exactly the same question but I see that nobody has answered.  I hope that this reply to the original question will provoke a knowledgeable answer to the question of IRS treatment of personal loans.  I have read elsewhere that over $10,000 sent as a personal loan whether to relatives or friends or anyone else, and whether overseas or not, should be reported to IRS.  If it is a loan then IRS may require documentation and a minimum interest must be charged (which will be income for your tax return) but it wasn't clear how to determine the minimum rate.  If the transfer is really a gift for which repayment is not expected then other rules apply and tax treatment of gifts has been well answered in the TurboTax forum. 

[DawnC]

You are not required to report personal loans to the IRS.  Who is required to report their foreign accounts to the government, and how do they do so?    

The Bank Secrecy Act requires U.S. persons who own a foreign bank account, brokerage account, mutual fund, unit trust, or other financial account to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Authority (FBAR), if: 

1. The person has financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and 

2. The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year. 

A U.S. person is:

• A citizen or resident of the United States, or 

• Any domestic legal entity such as a partnership, corporation, estate or trust.    @ldc2