Foreign reports: temp. Relief for new foreign reporting requirements.

• Author: Josephs, Stuart R.
• Position: FedTax

The August 2010 California CPA discussed the requirement to report information with respect to foreign financial assets under new IRC See. 6038D. The October 2010 issue indicated that the IRS form was not yet released for disclosing interests in specified financial assets under See. 6038D. This requirement was added to the Internal Revenue Code by the 2010 Hiring Incentives to Restore Employment (HIRE) Act (P.L. 1 11-117) enacted March 18, 2010.

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The HIRE Act also added See. 1298(f), effective March 18, 2010, to require U.S. persons who are passive foreign investment company (PFIC) shareholders to file an annual report containing such information as the IRS may requite. Before See. 1298(f)'s enactment, PFIC shareholders were required to file Form 8621 in certain circumstances.

On April 6, 2010, the IRS published Notice 2010-34 which provided that PFIC shareholders not otherwise required to file Form 8621 annually before See. 1298(f)'s enactment would not he required to file an annual report under See. 1298(f) for tax years beginning before March 18, 2010.

The IRS intends to issue regulations under sees. 60381) and 1298(f) and release Form 8938, "Statement of Specified Foreign Financial Assets," and a revised Form 8621, modified to reflect See. 1298(f)'s requirements.

New Rules

An individual required to report an interest in one or more specified foreign financial assets under See. 6038D will be required to attach Form 8938 to the individual's income tax return for the tax year to report the required information.

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A PFIC shareholder required to report information under See. 1298(f) must attach the revised Form 8621 to the PEIC shareholder's income tax return or information return (e.g., Form 1065 "U.S. Return of Partnership Income") for the tax year to report the required information.

Interim Guidance

IRS Notice 2011-55 (IRB 2011-29, July 18, 2011) suspends these new information reporting requirements until the IRS releases Form 8938 and revised Form 8621.

Individuals with reporting requirements under See. 6038D may have to file an income tax return for a tax year before the IRS releases Form 8938. Notice 2011-55 suspends this requirement for these individuals to attach Form 8938 to income tax returns that are filed before Form 8938's release.

Similarly PFIC shareholders that would not be required to file Form 8621 under the current instructions to that form may. under See. 1298(f), have to file an...