How to Valuate Foreign Assets for IRS Reporting Purposes

Sep 07, 2017

This post will summarize the valuation methods used for reporting various foreign assets to the IRS. Be sure to begin by checking out the free FBAR Wiz app to quickly and anonymously determine if you have to disclosure offshore assets to the IRS and what forms that you need to file to do so. Check out the free FBAR Wiz app here. For reporting purposes, a U.S. person must disclose the maximum value of financial accounts maintained in a financial institution located in a foreign country. Valuation of these accounts can be determined using periodic account statements, which should be converted to U.S. dollars at the end of the relevant calendar year, applying the official exchange rate for the last day of the calendar year. You can find the Treasury Reporting Rates of Exchange at the following website: The maximum value of a financial account is the highest balance of both currency and nonmonetary assets that appear on any quarterly or more frequent account statement issued for the reporting year. For instance, if the December 31, 2017 balance is $15,500 but the July 31, 2017 ending balance was $25,200, the maximum reportable value for 2017 is $25,200. In the absence of periodic financial statements, the maximum value will be the largest amount of currency and nonmonetary assets in the account at any time during the year. For reporting purposes, all amounts are rounded up to the nearest whole dollar. Those who have financial interests in multiple foreign accounts (but fewer than 25 accounts) and who are unable to determine if the filing threshold has been met anytime during the year, should complete the appropriate Part II, III, IV, or V section for each of these accounts on the FBAR Form and check the "amount unknown" box, item 15a of the FBAR. Guidelines for persons with financial interests in 25 or more accounts are in the Internal Revenue Manual (see IRM §§ and Taxpayers with multiple reportable accounts must value each account separately. Types of reportable foreign assets "Financial accounts"as used in the realm of IRS offshore disclosures include, but are not limited to: Securities, brokerage, savings, demand, checking, deposit, time deposit, and other accounts maintained with a financial institution; Commodity futures and options accounts; Insurance policies with a cash value; Annuity policies with a cash value; and Shares in a mutual fund or similar pooled fund. Recordkeeping Those required to file an FBAR form must retain financial records for five years, from the due date for filing the FBAR for the calendar year. These records must be available for inspection upon request. Records maintained should contain: Name on each account; Number or other account designation; Name and address of the foreign bank or other person with whom the account is maintained; Type of account; and Maximum value of each account during the reporting period. Be sure not to procrastinate - you can get started quickly via the free FBAR Wiz app to determine if you have an obligation to report offshore accounts to the IRS and what forms you need to file to do so. Check out the great new app here. To learn how to valuate foreign assets and foreign accounts for IRS reporting purposes (like on the FBAR form, for example), check out this related blog post.