United States

Specified foreign asset reporting expands to entities


The Treasury and IRS recently issued final regulations that will affect the reporting requirements of many domestic entities with specified foreign assets. With the issuance of these regulations, specified domestic entities must start filing Form 8938, Statement of Specified Foreign Financial Assets, with their annual tax return.

In particular, any domestic entity that is formed or availed of principally to avoid the reporting requirement that normally applies to individuals must file Form 8939 under the final regulations. A domestic entity satisfies this test if either (1) at least 50 percent of the entity's gross income or assets is passive, or (2) at least 10 percent of the entity's gross income or assets is passive, and the entity is formed or availed of by an individual with a principal purpose of avoiding the Form 8938 filing requirement. Special rules apply to determine whether income is passive for this purpose.

Entities with taxable years beginning after Dec. 31, 2015, will have to start filing Form 8938 with their 2016 tax return.

Because a failure to file Form 8938 may result in a penalty of $10,000, taxpayers with foreign assets, even if already reported on another form or disclosure statement, should talk with their tax advisors to determine whether they are subject to these expanded filing requirements.

Jamison Sites



Areas of focus: Washington National TaxInternational Tax Planning