Foreign Financial Assets
By: Joshua B. Glaser, Esq., LL.M. - January 17, 2017
Section 6038D(a) of the Internal Revenue Code requires any individual who, during a taxable year, holds any interest in a Specified Foreign Financial Asset (“SFFA”) to attach Form 8938 to his or her tax return, if the aggregate value of such assets exceed $50,000 at the end of the year, or exceeded $75,000 at any point during the year.
SFFA’s are defined as a financial account maintained by a foreign financial institution (above the monetary threshold). Additionally, SFFA’s include any stock or security issued by a non-US person; any financial instrument or contract held for investment that has an issuer or counterparty other than a US person; and an interest in a foreign entity.
- the trustee has supervisory authority over SFFA obligations;
- the trustee files all required returns timely; and
- the trustee is a bank overseen by a national regulatory agency, a financial institution registered with the SEC, or a domestic corporation whose stock is regularly traded on an established market.
- it is closely held by a US Taxpayer (at least 80% of voting stake), and at least 50% of the entity’s gross income for the taxable year is passive income; or
- at least 50% of the assets held for the taxable year are assets that produce passive income.
** Disclaimer Required by IRS Circular 230** Unless otherwise expressly approved in advance by the undersigned, any discussion of federal tax matters herein is not intended and cannot be used 1) to avoid penalties under the Federal tax laws, or 2) to promote, market or recommend to another party any transaction or tax-related matter addressed.