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June 29, 2011

IRS Issues another draft version of Form 8938 for foreign financial asset holders

 Form 8938, “Statement of Specified Foreign Financial Assets”

The IRS has issued another new draft Form 8938, “Statement of Specified Foreign Financial Assets,” which is available on IRS's website. Form 8938 will be used by individuals to report an interest in one or more specified foreign financial assets.

Background. For tax years beginning after Mar. 18, 2010, taxpayers with an interest in a “specified foreign financial asset” during the tax year must attach a disclosure statement to their income tax return for any year in which the aggregate value of all such assets is greater than $50,000. 

“Specified foreign financial assets” are: (1) depository or custodial accounts at foreign financial institutions, and (2) to the extent not held in an account at a financial institution, (a) stocks or securities issued by foreign persons, (b) any other financial instrument or contract held for investment that is issued by or has a counterparty that is not a U.S. person, and (c) any interest in a foreign entity. 

For most taxpayers on a Calendar year basis, this form will be due with their 2011 tax return.

The draft Form 8938 was released on June 22nd without instructions. However, the draft form references the instructions throughout, which indicates that they will likely be issued soon.

Part I of the draft form requires information about foreign deposit and custodial accounts, including the maximum value of any such account during the tax year. Part II has similar entries for “other foreign assets,” but notes that specified foreign financial assets that have been otherwise reported on Forms 3520, 3520-A, 5471, 8621, or 8865, do not have to be included on Form 8938. Part III asks for a summary of tax items attributable to the accounts and assets reported in Parts I and II, including associated items such as interest, dividends, and royalties. Part IV requires disclosure of the number of the filed forms referenced in Part II on which any foreign financial assets that were excepted from Part II were reported.

You  can be view the new draft  form on the IRS website at

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