I have an individual taxpayer who has invested in partnerships that either are foreign partnerships or have transferred property to a foreign corporation. I think I'm okay on Forms 8865 and 8938, but am really uncertain about filing Forms 926 and 114.
Form 926, I thought that a filing was required if an individual taxpayer directly or indirectly transfers cash to a foreign corporation and immediately after the transfer holds at least 10% of the total voting power or total value of the foreign corp, or the amount transferred by the person to the foreign corporation during the 12 month period ending on the date of the transfer exceeds $100k. However, in my reading of the actual IRS instructions, I can't find this language (maybe the law has changed?). It's looking like I need to file Form 926 for each partnership interest associated with transfers to a foreign corp. Does this make sense?
Form 114, is the individual taxpayer in the situation above considered as having a financial interest in a foreign financial account? I previously thought not, under the reasoning that the taxpayer isn't the owner or record based on my reading, but now I'm questioning this as well.
Grrr. Why do they need so many different forms for foreign information, with such terrible consequences for nonfiling??
Thanks for any help!
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I have an individual taxpayer who has invested in partnerships that either are foreign partnerships or have transferred property to a foreign corporation.
You need to be very clear about the relationships, structures, and entity type of these organizations. That would be part of your due d. As you already mentioned, the exposures for getting these wrong are very high.
As we discussed in the various threads, Treas. Reg. on the classification of foreign entities are very different from those applicable to domestic entities and how the country of the entity's formation classifies the organization for legal and tax purposes is not relevant when it comes to US tax filing and reporting. The reporting requirements and tax implications would not be the same, depending on whether those are foreign corporations, partnerships, or FDE.