Reporting of foreign real estate

[carol-may]

I have a client who inherited an apartment in Israel in 2017.  He and his brothers are now joint owners of the property.  I have the documentation showing transfer of title and an estimate of the value of the property.  I had thought that I would need to report this as an asset on 8938 and FinCEN 114, but it appears that foreign real estate that is directly held does not need to be reported on either form.  I also understand that the client does not have (and did not have) any bank accounts or other assets in Israel - just the property.  We are filing an extension for other reasons, so there should be time to double check and confirm.  Given the potential penalties, I am cautious.

1. Am I reading the forms and instructions clearly, and is it not required to file 8938 and 114 given the facts and circumstances above?

2. If we file a 4868, do I also understand that there are no additional steps required to ask for an extension for 114?

[itonewbie · Accepted solution]

Direct holding of foreign real property is not SFFA for FATCA purposes and it's not reportable for FBAR purposes either because it's neither a foreign bank nor financial account.

If it's a rental property, the income must still be reported on their US tax returns.

If they inherited the property from an NRA or foreign estate, a F.3520 must also be filed to report the bequest.

[carol-may]

Thank you so much for this very helpful response!  I need to find out more information regarding the bequest.  I reviewed the IRS 3520 form.  I have not filed one of these before, but it sounds like it may be required, and since ProSeries does not support, we will have to file the return on paper.  Thanks!

[itonewbie]

Glad to be of help.

[sjrcpa]

3520 is a separate filing, not part of the 1040. So you can still efile the 1040.

[carol-may]

Yes, I saw that when I read further in the instructions.  Thank you!

[DanaL]

NRA?