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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 11821
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My wife son and I were born in Canada but currently live in

Customer Question

My wife son and I were born in Canada but currently live in the US and are naturalized US citizens. My wife and son inherited money from my wife's parents in Canada. The money is held in a trust in a Canadian financial institution. There are annual distirbutions from the trust as well as taxable dividends and interest. I normally do our taxes with Turbotax. Are they required to complete an FBAR Fincet Form 114 for this?
Submitted: 2 months ago.
Category: Finance
Expert:  Lane replied 2 months ago.

Hi, very possibly not for FBAR (FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR))

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But possibly SO for another rather new disclosure form, form 8938 ( Form 8938, Statement of Specified Foreign Financial Assets ) which has a much higher threshold.

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The TYPES of trusts that have to be reported (for either form) fall under the GRANTOR trust definition where the taxpayer is a grantor (created and controls the trust). This sounds more like an IRRevocable trust, where your daughter and son don't have discretion to take withdrawals at will.

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The reason that I say possibly yes for the 8398 and likely not for the FBAR (Fincen114) is that FOR PURPOSES of FBAR, one is considered to have a disclosable financial interest in the account if the following is true:

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"Financial interest: you are the owner of record or holder of legal title; the owner of record or holder of legal title is your agent or representative; you have a sufficient interest in the entity that is the owner of record or holder of legal title.

Signature authority: you have authority to control the disposition of the assets in the account by direct communication with the financial institution maintaining the account."

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SO, for FBAR purposes, there would need to be more control and ability to sign and withdraw money that it sounds as if they have here.

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However, for form 8938, you are considered to have an interest if the following is true:

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"If any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset are or would be required to be reported, included, or otherwise reflected on your income tax return"

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HOWEVER, here's why they may still not have a disclosure requirement for 8938 purposes. While FBAR is a 10,000 threshold - but again 10,00 on an account you truly own or control - the threshold for reporting on form 8938 is as follows:

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Specified individuals living in the US:

  • Unmarried individual (or married filing separately): Total value of assets was more than $50,000 on the last day of the tax year, or more than $75,000 at any time during the year.

  • Married individual filing jointly: Total value of assets was more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the year

Expert:  Lane replied 2 months ago.

To recap, it sounds as if there's not enough control here for FBAR (Fincen 114) to be applicable.

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BUT, if the account values are high enough, the requirement for reporting that's based simply on having an income tax filing reporting could make form 8938 applicable here.

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Please let me know if you have ANY questions at all, before rating me.

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Thank you!

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents since 1986