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Form 8938 Maximum Asset Value
Form 8938 Maximum Asset Value
Form 8938 Maximum Asset Value: The US Government requires some US Persons to file a Form 8938 in order to report their specified foreign financial assets in accordance with FATCA. Taxpayers are typically required to include the Asset or Account’s Maximum Value if they meet the threshold requirements for reporting. It is not always easy to reconcile foreign account data in order to extract the maximum value. Accurate reporting may depend on which country the Taxpayer resides — and the type of account or asset that they have. And, it may be a difficult time — if not impossible — to obtain the Maximum Value. Unlike large US financial institutions such as Bank of America or Wells Fargo in many foreign countries the Foreign Financial Institutions (FFI) do not provide customers with monthly statements. In fact, in some countries where they utilize Passbook Accounts — which requires the customer to visit the bank in order to get updates on the recent values — the customer may not have updated their passbook in several years, and so the maximum account value in 2014 (the last time their Passbook was updated) may not be representative of the current maximum account or asset value in the current year.
How to Calculate Form 8938 Maximum Account Value
In order to determine the Form 8938 maximum account value, the IRS provides the following:
Reporting Maximum Asset Value
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- “You must report the maximum value during the tax year of each specified foreign financial asset reported on Form 8938. In most cases, the value of a specified foreign financial asset is its fair market value. An appraisal by a third party is not necessary to estimate the maximum fair market value during the year. See Valuing Financial Accounts and Valuing Other Specified Foreign Financial Assets, later.
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Assets With No Positive Asset Value
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If the maximum value of a specified foreign financial asset is less than zero, use a value of zero as the maximum value of the asset. Foreign Currency Conversion If your specified foreign financial asset is denominated in a foreign currency during the tax year, the maximum value of the asset must be determined in the foreign currency and then converted to U.S. dollars. In most cases, you must use the U.S. Treasury Bureau of the Fiscal Service foreign currency exchange rate for purchasing U.S. dollars.
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If no U.S. Treasury Bureau of the Fiscal Service exchange rate is available, you must use another publicly available foreign currency exchange rate for purchasing U.S. dollars and disclose the rate on Form 8938.
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Currency Determination Date
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Use the currency exchange rate on the last day of the tax year to figure the maximum value of a specified foreign financial asset or the value of a specified foreign financial asset for the purpose of determining the total value of your specified foreign financial assets to see whether you have met the reporting threshold. Use this rate even if you sold or otherwise disposed of the specified foreign financial asset before the last day of the tax year.
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What does this Mean?
It means that in general — and when the information is available — the Taxpayer should try to find the highest Fair Market Value during the tax year, noting that the taxpayer does not need to obtain or prepare a formal estimate. Taxpayers should not include negative numbers when calculating the Form 8938 Maximum Account Value — but instead round negative numbers up to zero. In order to obtain the exchange rate, the IRS recommends the US Treasury Bureau Exchange Rate — and in order to determine which quarter to use (Treasury Department exchange rates are published per quarter), the IRS recommends using the exchange rate on the last day of the tax year.
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