How to answer? (foreign accounts question on Sch B)

[Catherine]

Odd one and I can't figure it out from IRS pubs. 

 

Client is part-owner of a hotel outside the country, with his brother.  Brother lives there, runs the place, is subject to FBAR reporting etc.  My client has signature authority over the *corporate* account - basically in case his brother gets sick or has to travel, so someone can sign checks.  It is not his PERSONAL account; it is not titled in his name, etc.  

 

Since he is part owner of the company, he has to file the 8938 and also a 5471 (from which I get all the info from the corporate accountants).  I sent him all the FBAR info to file online (hope he did; out of my hair though) -- but what do we put on the foreign accounts question?  Again - NOT his name.  Just signature authority. 

 

My thought is yes -- but as I was going to print, I am re-thinking myself.  

 

Thanks.

[Lynn EA USTCP in Louisiana]

It depends on the amount of his interest and dividends reported on sch B. my understanding is if the amounts combined are less than $1500 then those questions may be ignored.

[JohnH]

I've always understood it to be the opposite.  If someone has signatory authority over a foreign account, they must answer the questions and attach schedule B even if there is little or even no income from Interest or Dividends. It would be interesting to hear others' thoughts on this.

 

As for the original question, I think he must answer "Yes" even though the account isn't in his name.

 

Here are the instructions for Schedule B.

(Notice the last one -> I understand each to be a stand-alone condition)

 

Purpose of Form

Use Schedule B if any of the following applies.

• You had over $1,500 of taxable interest or ordinary dividends.

• You received interest from a seller-financed mortgage and the buyer used the property as a personal residence.

• You have accrued interest from a bond.

• You are reporting original issue discount (OID) in an amount less than the amount shown on Form 1099-OID.

• You are reducing your interest income on a bond by the amount of amortizable bond premium.

• You are claiming the exclusion of interest from series EE or I U.S. savings bonds issued after 1989.

• You received interest or ordinary dividends as a nominee.

• You had a financial interest in, or signature authority over, a financial account in a foreign country or you received a distribution from, or were a grantor of, or transferor to, a foreign trust. Part III of the schedule has questions about foreign accounts and trusts. 

[ILLMAS]

The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and

The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported. 

[kcjenkins]

And when in doubt, on that one, answer YES.  

 

As my mother told me about whether clothes needed to be washed, "If it's doubtful, it's dirty."

[SaraEA]

Your client is a shareholder and owns a foreign asset, not a foreign account. If it throws off foreign income, that has to be reported.  The 8938 and 5471 take care of the foreign reporting requirements.

 

There is no question on Sch B that you can answer affirmatively.  (Those are aimed at Swiss bank accounts and Cayman Island trusts and their cousins.)  Signature authority has nothing to do with it.  That only applies to trusts and maybe some other weird financial setups.

[Catherine]

Your client is a shareholder and owns a foreign asset, not a foreign account. If it throws off foreign income, that has to be reported.  The 8938 and 5471 take care of the foreign reporting requirements.

 

There is no question on Sch B that you can answer affirmatively.  (Those are aimed at Swiss bank accounts and Cayman Island trusts and their cousins.)  Signature authority has nothing to do with it.  That only applies to trusts and maybe some other weird financial setups.

 

That was _exactly_ the source of my confusion.  Partial owner of a foreign asset which itself has a bank account (or accounts).  NONE of those accounts are for personal use (that would be called embezzling, if I have the definition understood correctly); they are corporate accounts for corporate purposes.  Yet he does have signature authority...  

[easytax]

This video (fabar) answers your question ---- (sorry, I viewed it when original but forgot particulars):

http://www.irsvideos.gov/ElectronicFBAR/

I believe it comes down to dollars in accounts --- even though NOT theirs personally --- the control/possible use exists - so the answer would be --yes.

[SaraEA]

In that case he does have signature authority over a foreign account (didn't read that in the initial post), so answer the Sch B question affirmatively.

[joanmcq]

And don't forget the 8938.or is it the 8988? Form for reporting foreign accounts. Luckily, if it is reported on a 5471 you're filing with the retune, the 8938 only requires you to check a box.

[Catherine]

Got the 8938; yes fortunately a checkbox as I don't know how long it would take to get account & balance details for calendar 2013 from Bermuda.  

 

Thanks to all for the help; there was mention in several places of exemptions for those with signature authority only in several cases but it took WAY longer to find the list of cases.  All either banks or securities firms -- which seems to be even weirder, if they are looking for fraud, as folks with signature authority in those firms would have FAR more ability to hide fraud.  Probably paid off several legis-vermin to get those written in...

[JohnH]

No legislation ever passes until the proper payoffs have been made.

We have the best political system and politicians that money can buy.