3. Does foreign real estate need to be reported on Form 8938?
Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938. For example, a personal residence or a rental property does not have to be reported.
If the real estate is held through a foreign entity, such as a corporation, partnership, trust or estate, then the interest in the entity is a specified foreign financial asset that is reported on Form 8938, if the total value of all your specified foreign financial assets is greater than the reporting threshold that applies to you. The value of the real estate held by the entity is taken into account in determining the value of the interest in the entity to be reported on Form 8938, but the real estate itself is not separately reported on Form 8938.
A lease of foreign real estate would be an asset held for investment by the lessor and thus a specified foreign financial asset, unless the lessor has a business and the leasing activity is part of that business, Gilbert said.
Henderson said the IRS would view a take-back mortgage arrangement in which a taxpayer sells foreign real estate but finances the sale as a contract held for investment that would be reportable. However, if the taxpayer is in the real estate financing business, that may change the result, he said.Hopefully readers with more specific information can weigh in with comments about this issue. In the meantime, I would think that the IRS web site is the more authoritative pronouncement, pending further developments.
The article has some other information potentially useful to readers of this blog. I have requested permission from Tax Analysts to post a link to the article on this page. I should caution that, when Tax Analysts gives permission, the permission is not effective until two weeks after Tax Analysts publication date.