Hale Sheppard Article on Form 8938 (4/30/15)

Hale Sheppard, here, has published an article titled "Form 8938 and Foreign Financial Assets:  A Comprehensive Analysis of the Reporting Rules after IRS Issues Final Regulations," here.  It is published in the March/April issue of the International Tax Journal.  The article (i) analyzes the new/final regulations for Form 8938, describing both the changes accepted and rejected by the IRS, (ii) divides and organizes the complicated rules into manageable portions, addresses the confusing overlap between Form 8938 and the FBAR, and (iv) incorporates guidance from multiple sources, aiming to be a “one-stop shop” for all things Form 8938.  Here is an excerpt from the beginning:

General Rule and Overview

The general rule in Code Sec. 6038D(a) looks innocuous, but it is loaded with defined terms, conditions and nuances. This tax provision contains the following mandate:

Any individual who, during any taxable year, holds any interest in a specified foreign  financial asset shall attach to such person’s return of tax imposed by subtitle A for such taxable year the information described in subsection (c) with respect to each such asset if the aggregate value of all such assets exceeds $50,000 (or such higher dollar amount as the Secretary may prescribe). 

That statutory language is daunting, even for seasoned tax professionals. When faced with such density and complexity, it helps to separate the language into manageable pieces. Below is a breakdown of rules under Code Sec. 6038D, which might serve as a checklist for those conducting their own Form 8938 evaluation.

• any specified individual (“SI”)
• who holds an interest
• during any portion of a tax year
• in a specified foreign financial asset (“SFFA”)
• must attach to his timely Form 1040 or Form 1040NR
• a complete and accurate Form 8938
• if the aggregate value of all SFFAs
• exceeds the applicable filing threshold

Hale then provides some details for navigating the statute and the checklist.