Federal Tax News

Do You Have a Foreign Financial Account?

If you own a foreign bank account, brokerage account, mutual fund, unit trust, or other financial account, then you may be required to report the account yearly to the Internal Revenue Service. Under the Bank Secrecy Act, each United States person must file a Report of Foreign Bank and Financial Accounts (FBAR), if:

• The person has financial interest in, signature authority or authority over one or more accounts in a foreign country, and
• The value of the account exceeds $10,000 at any time during the calendar year.
• A United States person is not prohibited from owning foreign accounts. The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.

Form TD F 90-22.1 must be filed on or before June 30. There is no extension available for filing the FBAR. Taxpayers failing to report their foreign financial accounts risk a civil penalty of $10,000. If the failure is willful, the penalty jumps to $100,000 or 50 percent of the transaction or account. Please refer to the IRS website for more information: http://www.irs.gov/businesses/small/article/0,,id=148849,00.html

Community College Meets Definition of Political Subdivision and Sale of Real Estate is Excluded from UBI

The college received an interest in a parcel of unimproved real property. The college planned to subdivide the property into 19 lots and sell the lots to individuals. The lots were not actively marketed. The proceeds from the sale were to be used to finance the building of a new residence hall. Please read the following article from CCH Incorporated for more information: PLR_200619024.pdf.

University's Supporting Organization Deemed an Affiliate of Governmental Unit and Not Required to File Form 990

IRS rules that a supporting organization of a state university that provides professional, general and other liability insurance to the university was deemed an affiliate of a governmental unit and, therefore, was not required to file Form 990. Please read the following article from CCH Incorporated for more information: PLR_200549009.pdf.