Any reporting when receiving international wire transfer into US?

[ay66026]

I am a US citizen living in US now. I was interested in buying a real estate in Turkey, so I wired $320K from my US account to my father's account in Turkey. He was going to pay this to the seller and register the real estate under my name. Then the real estate deal fell apart, so I asked my father to return my money. After all the commissions, taxes, and forex loss I received a wire transfer in my US account at the amount of $315K. All this traffic happened in 5 business days ($320K wired out and $315K received back).

Clearly this money is not a gift, so no Form 3520 is needed. I never had any account in Turkey, so it feels that there is no FATCA related filing either. IS there any reporting or filing I have to do?

[ToddL99]

I would recommend filing an FBAR (FinCEN 114) report on this transaction, if only as a precautionary measure.

I would also recommend filing Form 8938 Statement of Specified Foreign Financial Assets, also as a precautionary measure.

(Neither of these forms have any effect on your tax liabilities)

While the foreign account was not yours, you clearly had a "financial interest" in the assets of that account (even if only for 5 business days) - your father was holding a significant balance of your funds on your behalf in his account. 

From Report of Foreign Bank and Financial Accounts (FBAR):

"A United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report:

1. a financial interest in or signature or other authority over at least one financial account located outside the United States if
2. the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported."

The Instructions for Form 8938 have very similar language, i.e. a financial interest.

"You must file Form 8938 if you are a specified person that has an interest in specified foreign financial assets and the value of those assets is more than the applicable reporting threshold."

Also, "You have an interest in a specified foreign financial asset even if no income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the asset are included or reflected on your income tax return for this tax year."

"Specified foreign financial assets include the following assets -  Financial accounts maintained by a foreign financial institution".

No exception is listed for assets held on your behalf in an account over which you have no direct control or authority..

[ay66026]

Thanks, very clear. This transaction happened in Mar2021. I have to file FBAR and 8938 when I file for my 2021 taxes in 2022? Or do I have to file immediately now?

[npierson7]

You will have to file FBAR and 8938 when you  file for your 2021 taxes in 2022

[ay66026]

Thanks.

Some of these USD funds were converted into turkish lira, and then after the deal falls apart (2 days later), turkish lira is converted back to USD for wiring back to US. Unfortunately, lira depreciated against USD by 1% which created a loss of 1% of the original USD principal. This reduced $320K to $316K. Is this loss deductible as either capital loss (in schedule D) or as forex loss (as other loss in schedule 1)?

[ReneeM7122]

Foreign currency losses are reportable as ordinary loss under Code Section 988.

Per IRS:  Except as otherwise provided in this section, any foreign currency gain or loss attributable to a section 988 transaction shall be computed separately and treated as ordinary income or loss (as the case may be).

You would report the loss on line 21 of Form 1040 (Other Income or Loss), as this sounds like an investment issue.   It would be a Forex loss only you qualify for trader tax status (business treatment), and in that case you would report the Section 988 ordinary loss on Form 4797, Part II ordinary gain or loss.

[ay66026]

@ReneeM7122 Thanks so much. Line 21 of Form1040 for year 2020 is not "Other Income or Loss". I think since 2019 that old format of 1040 has been changed. Prior to 2019 line 21 of form 1040 was for "other income or loss". Can you please clarify which line this is reported for the new version of the Form 1040, like for 2020? IS t schedule 1?

[JeffreyR77]

First, you have no FBAR reporting requirement. 

You wired funds to an account that you are not a signatory of and received funds from an account that you are not a signatory of. 

You only have FBAR reporting requirements if you are the owner or have signature authority over an account that had a balance of greater than $10K US at any time during the year.  

Your description of the transaction resulted in a change of $5,000 ($320K sent and $315K received back days later).  You described the currency depreciation as a $4,000 loss in value over the same period. 

You could claim the $4k loss due to currency exchange devalue commission etc., but what of the other $1k lost over the 2 days? 

Please clarify if you are in the international real estate market or what your business is? 

You want to ensure you classify the $5,000 in expenses you seek to deduct from a 2 day period are appropriate.  

[ay66026]

Other $1K loss is transfer fees, commissions and government tax on exchanging lira to USD.

@ToddL99 mentioned that I better file FBAR and 8938 because IRS may say that I have financial interest in the acct that my father used to receive my funds. Is there a downside of filing that FBAR/8938?

I don't have any business, I work for a paycheck in US. I am just trying to invest my savings out of USD denominated assets due to endless money printing by the FED.

Should I deduct the $5K loss as capital loss in SchD or ordinary loss in Sch1 as "Other income (loss)"?

[ReneeM7122]

No, there is no downside to filing the FBAR.  You need to report the account if there is more than $10,000 in it at any point during the tax year.  

Foreign currency losses are reportable as ordinary loss under Code Section 988.

Per IRS:  Except as otherwise provided in this section, any foreign currency gain or loss attributable to a section 988 transaction shall be computed separately and treated as ordinary income or loss (as the case may be).

@ay66026