(D) Amount.— The amount determined under this subparagraph is—The FBAR violation is the failure to file the report or the filing of a false report. The time of the violation thus would be July 1 ((The metaphysical moment in time when 6/30 ends and 7/1 begins is the time that the violation occurs.)) or, in the case of a false FBAR, on the date of filing the FBAR. See e.g., Exhibit 4.26.16-3 (07-01-2008) , in the LCCI initiative, stating: "the balance in the account at the time of the violation (the opening balance of the account on 7/1 of the subsequent year)." The amount penalized under the 50% willful penalty thus is not the highest amount in the account during the year. This obviously can cut both ways.
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(ii) in the case of a violation involving a failure to report the existence of an account or any identifying information required to be provided with respect to an account, the balance in the account at the time of the violation.
Example (inspired by a case I am working on): Taxpayer receives $1,000,000 into a foreign bank account on January 1, 2007, it earns $40,000 interest during the year, and withdraws $1,039,999 on December 30, 2007, leaving $1 in the account. The taxpayer fails to report the $40,000 interest on his 2007 1040. The account then continues after 2007 with a $1 static balance and is closed on December 30, 2009. What penalties apply (other than income tax penalties)? Inside the program, the in lieu of penalty would be $260,000 (25% times the high balance of $1,040,000. Outside the program, the willful FBAR penalty would be a maximum of $100,000 (because the minimum penalty is $100,000). And, of course, if nonwillful, the maximum penalty is still $10,000, the same as otherwise, because that penalty is not keyed to an amount.
This might achieve a better result for the willful penalty, but, as noted, still leaves a substantial willful penalty and does nothing about the potential for criminal prosecution.