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USTaxAdvising
USTaxAdvising, CPA
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Under FBAR laws - how should I report "account churning?" i.e.

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Under FBAR laws - how should I report "account churning?" i.e. if i have 100,000 in a foreign account, and transfer 10k to 10 different foreign accounts and then the next month forward that to 10 more accounts etc. Must I report all the accounts and their balances which would look like I have hundreds of thousands of dollars sitting in foreign accounts when in reality its just 100k but been transferred around.

Under FBAR 4.26.16.3.6 - Account Valuation # XXXXX - The value of stock, other securities......reported on FBAR is the fair market value at the end of the calendar year...etc.

What about forex accounts? Does that fall under other securities where i report the "fair market value at the end of the calendar year?" If not, and I close one position one day that raises my account balance by 500% but the next day I close a existing losing position that reduces it back down to its former balance, it seems ludicrous to have to report that massive balance that is not real since there were other losing positions that hadn't been closed.

Hello,

 

Under FBAR laws - how should I report "account churning?" - Yes you must report each account and it's maximum balance during the year. I agree it looks like you might have hundreds of thousands of dollars but this is irrelevant. Each account must be reported if you have in all aggregated accounts passed the 10K reporting requirement threshold.

 

Under FBAR 4.26.16.3.6 - Account Valuation # XXXXX - The value of stock, other securities......reported on FBAR is the fair market value at the end of the calendar year...etc. - No,it is the highest balance during the year, translated to USD at the 12/31 exchange rate.

 

What about forex accounts? - only the maximum value of the account as a whole would be reported if the account is held offshore. If the account has numerous positions then the total of all positions would be reported.

 

I hope this helps, please let me know if you have any further questions.

 

Best regards,

Customer: replied 4 years ago.
My question with regards XXXXX XXXXX accounts was a spot forex trading brokerage account. So this is a traded account similar to securities except I trade spot currencies.

To put it simply, if I had a securities brokerage account that had 100k in it, and I had 15 different trading positions in stocks. I close 8 of them one day, and they were so profitable that my balance shoots up to 900k, but in reality I haven't accounted for the other 7 open positions that were losing 900k.

I then close them the next day and my balance comes back to 100k. It is this same scenario except for trading spot forex. I have had many positions during the year that I closed that shot up my balance, but I knew it wasn't a true reflection of my wealth as 5 minutes later I had to close all the losing positions that I was essentially just using as a hedge to keep me afloat. It is not a real reflection of trading profits/losses.

How is that treated? What is the reporting criteria? Does a spot trading forex account fall under stocks and securities that is the fair market value at the end of the calendar year or not.

How is that treated? In this instance you would ignore all the different positions you hold in the foreign account and look to the market value of the account as a whole. This is the balance that is reportable, not each position.

 

What is the reporting criteria? - the reporting criteria is the same as all other accounts. If the aggregate value of all your foreign accounts at any point in the year exceed 10KUSD then each account is reportable.

 

Does a spot trading forex account fall under stocks and securities that is the fair market value at the end of the calendar year or not. - Yes, if the trading account is held in a foreign non US account the balance would be reportable.

 

I hope this clears it up for you. Please let me know if something is not clear.

 

Best regards,

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