Earlier this week, I continued to blog about potential U.S. government reporting requirements for offshore safe deposit boxes.
I “picked apart” FBAR and Form 8938 using the “Comparison of Form 8938 and FBAR Requirements” table (last updated February 10, 2014) on the Internal Revenue Service website, taking away the following:
• Foreign currency, precious metals, and personal property (“such as art, antiques, jewelry, cars and other collectibles”) which are “held directly” are not required to be reported via FBAR and Form 8938.
• “Held directly” means not in a financial account.
• A safe deposit box at a foreign financial institution is not considered a financial account by the IRS.
So, for example, if an individual has an offshore safe deposit box (either at a bank or private vault) and has “directly held” bullion bars, collectible coins, and some foreign currency in it, then it’s my understanding there are no potential U.S. government reporting requirements for the container or its contents.
That being said, where privacy is concerned, note what I blogged back on April 14:
Consider what Laura Saunders reported on The Wall Street Journal website on September 20, 2013. From her article, “Offshore Accounts: No Place to Hide?”:
While safe-deposit boxes don’t have to be reported, they are often tied to bank accounts that could be.
(Editor’s note: Bold added for emphasis)
One more thing. Going back to that IRS comparison table, note what’s specified under “What is Reported?” for Form 8938, Statement of Specified Foreign Financial Assets:
Maximum value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets
And for FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR):
Maximum value of financial accounts maintained by a financial institution physically located in a foreign country
What exactly is a “foreign financial institution?” From the IRS web page entitled, “FATCA Information for Foreign Financial Institutions and Entities”:
FFIs include, but are not limited to:
• Depository institutions (for example, banks)
• Custodial institutions (for example, mutual funds)
• Investment entities (for example, hedge funds or private equity)
• Certain types of insurance companies that have cash value products or annuities
My understanding of the above is, an offshore bank would be considered a foreign financial institution by the IRS, while an offshore private vault would not be.
So there your have it. A basic rundown of potential U.S. government reporting requirements for offshore safe deposit boxes- at least as it stands right now.
Please read all my posts on the topic to-date for a better picture of what’s required and involved:
“Do Offshore Safe Deposit Boxes Have To Be Reported” (April 14)
“Report Of Foreign Banks And Financial Accounts (FBAR)” (April 15)
“Form 8938 And Foreign Account Tax Compliance Act (FATCA)” (April 16)
“Recap Of Ongoing Investigation Into Potential U.S. Government Reporting Requirements Related To Offshore Safe Deposit Boxes” (May 23)
“Picking Apart FBAR And Form 8938” (June 2)
By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)
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