Form 8938 foreign financial assets

[syltan]

Had to fill out FBAR Fin Cen Form 114 in the past,but not Form 8938. Because I inherited my mother's saving accounts, the value is much higher for 2016.

Question: Do I have to declare all the interest, even though some of the accounts belonged to my mother for most of the year?

Also, Form 8938 requires maximum account value during year rather than amount year end, which makes the total account values really high. Let's say, Account A has $200,000 on October 1, Account B has $100,000. $100,000 is transferred from A to B, now Account A has $100,000 balance, Account B $200,000. The total for the accounts should be $300,000, but according to the reporting requirements it is now $400,000. Am I interpreting this right?

[pk · Accepted solution]

yes  and NO -- there are two threshholds that trigger the FATCA reporting --  for example for a single filer it  $50,000  aggregate value at the end of the year or $75,000 at any time in the year.   It does mean that in your example for a single taxpayer living in the USA, you have to report any ways because you will be  above the threshhold .

But another exception come into place though because you say you received  a gift/ inheritence from a foreign person abobe $100,000, you need to report that transaction on form 3520. The amount reported on form 3520 exempts you from having to report FATCA form 8938.

Now next year if you do not re-patriate the amounts to the USA, you will have to report both FBAR and FATCA

[syltan]

Thanks. Filing joint return, but inherited accounts in my name. Not planning to bring amounts to U.S. Would it be better in this case to file FBAR and FATCA rightaway this year and forget about the 3520.

[pk]

No you have to  file FBAR and 3520 this year  ( note that FBAR , 8938 and 3520 are required for the person involved , irrespective of filing status )--- you are exempted  from 8938 this year because the amounts are being already reported.

[syltan]

Thanks for earlier answers.  More questions:
 Form 3520 Part IV, 54(a) Date of gift/bequest. Do I use the date accounts were transferred into my name or day my mother died. Bank reported account balances to German IRS as of the day my mother died. Do I have to include condo which I am planning to keep and not rent out?
Usually file Federal electronically, can I still do that and send Form 3520 separately by mail?

[pk]

Sorry for the delay --- unlike FBAR and FATCA reportings , the gifts/ bequests  reporting requirements do not restrict themselves to "cash" or "financial assets" but "of value". Thus the reporting  covers all  items of value. So in your case you will have to report the aggragate value of the cash  and realestate.  
The date of acquisition/ transfer is simpler if you just follow the bank reporting date --  the date of death of the decedant.
Another item to note is that value ( in US $ ) of the condo on the same date should be recorded because this is  your basis in the property when you ( at some future date ) may dispose off  and have to pay the capital gains tax to the USA ( and to Germany ).
As far as filing electronically -- 3520 should be there in TurboTax. On the otherhand, nothing stops you from filing the return without this form and separately file the form 3520 --- however it is safer ( and generally expected ) to be filed together.

[frenchguy]

Hello! Thank you for this thread, I'm in the same situation. I just wanted to ask you one last thing about this use case:

When you say "Now next year if you do not re-patriate the amounts to the USA, you will have to report both FBAR and FATCA". Does it mean that the FATCA (which is included in the tax return declaration), will have as consequence to make this amount of money (gift) taxable the next year?

[Stresstime9]

Form 8938 part III has lines 1f Deductions and 1g Credits. This is to report foreign bank checking accounts which generate no income or interest . The income that goes into the accounts is reported on my tax return. 

These are working bank accounts just like my checking account in the US. There are deductions and credits all the time. The IRS cannot seriously want to know every single trivial transaction I make. These are not high value accounts.

Only my foreign pension account which I has no credits or distributions pushes me into FATCA reporting.

There simply isn't enough space in the column (c) boxes for "Amount reported on form or schedule" to provide my bank statements for the entire year. So what do I put in the box, or do I just ignore  it as a ridiculous and unnecessary intrusion?

[KarenJ2]

If you did not earn any interest or dividends or royalties,etc from your foreign accounts, to report on your tax return., just leave that section blank.  You cannot report what you do not have.

[Stresstime9]

Thank you for the answer.

I had come to the same conclusion that credits and deductions only apply to investment accounts not to normal transactions on checking accounts. I went back to the step by step view on TurboTax and made sure I checked the box "this account does not have any income, credits or deductions."

[Fionja]

Hi, being in the same situation, I am interested in the unanswered part of the original question:

"Form 8938 requires maximum account value during year rather than amount year end, which makes the total account values really high. Let's say, Account A has $200,000 on October 1, Account B has $100,000. $100,000 is transferred from A to B, now Account A has $100,000 balance, Account B $200,000. The total for the accounts should be $300,000, but according to the reporting requirements it is now $400,000. Am I interpreting this right?"

In my case, due to some shifting of assets before transferring the whole to my US account, the total amount inflates the maximum account values by easily 100%. Do I manually change that to an estimate of the maximum value at my "richest point in time" during the year (which is bound to be somewhat tedious and difficult)?

[pk]

@Fionja , per your example , at sometime during the year both account A and B  reached US$200,000.  So for purposes of  ONLY threshold  ( to need to file ) determination  each account must be reported as  US$200,000.   This reporting has NO TAX implications.    If these are bank accounts  i.e. liquid assets then you also have to report  FBAR -- generally FATCA reporting does not  exclude need for  FBAR reporting.

  Here is a summary  comparison of FBAR and FATCA -->  Comparison of Form 8938 and FBAR requirements | Internal Revenue Service

Is there more I can do for you ?