fbar filing - what exchange rate to use for non US accounts

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AdManGam
Posts: 5
Joined: Thu Nov 15, 2018 2:57 pm

fbar filing - what exchange rate to use for non US accounts

Post by AdManGam »

Hello,

First time poster.

Posting on behalf of my wife. US citizen. Moved to Canada in 2016 to live with me. Never filed an FBAR (or tax return, but has no income) since moving - has accounts just barely over $10k USD at various points in 2016 and 2017.

Question is about what rate to use for converting non USD accounts.

Example, In 2016, she had following accounts:

Scotia CDN: Balance was $9,421.76 between January 1 and October 25, 2016; after which it decreased to $9,339.01 for the remainder of the year.
TD Canada Trust (USD account): Balance was $3,000 USD between October 3, 2016 and the end of the year.

The treasury rate at December 31, 2016 was 1.346.

If I was to use the 1.346 rate, the highest aggregate USD balance would be $9,999.82, suggesting that I don't have to report anything. This would be the max value reported.

However, the USD federal reserve rate on October 3, 2016 was 1.3188, resulting in an aggregate max of $10,144.19. It fluctuated quite a bit in October, but before the Scotiabank balance decreased, there is no point where the converted amount would not be below $10,000 USD.

Possibly a rare case (as this was definitely not intentional, had we realized at the time, would have taken action to prevent this).

All that said, what rate should be being used to first determine whether the 10k threshold is actually crossed?

Thanks for your help!
AdManGam
Posts: 5
Joined: Thu Nov 15, 2018 2:57 pm

Re: fbar filing - what exchange rate to use for non US accounts

Post by AdManGam »

Not sure how to edit, but wanted to add:

This is also relevant to 2017, as the balances stayed the same until January 3, 2017, when the USD account was emptied (funds transferred to me). At that point, the federal reserve rate was 1.3437, for a converted aggregate value of $9,950.22. However, the year end Treasury rate was 1.255, and if using that would put us above the $10k threshold.
nelsona
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Re: fbar filing - what exchange rate to use for non US accounts

Post by nelsona »

The FBAR has rules on determining max value, I suggest you read them.

For the most part they go by monthly statement end date value, rated on that date. MAXIMUM VALUES are usually use date specific exchange rates, which are easily available, only periodic INCOME would allow you to use the average rate for the year.

The year-end 2017 rate has nothing to do with your scenario, so why bring it up? the money was exchanged 362 days earlier.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
AdManGam
Posts: 5
Joined: Thu Nov 15, 2018 2:57 pm

Re: fbar filing - what exchange rate to use for non US accounts

Post by AdManGam »

nelsona wrote:
> The FBAR has rules on determining max value, I suggest you read them.
>
> For the most part they go by monthly statement end date value, rated on
> that date. MAXIMUM VALUES are usually use date specific exchange rates,
> which are easily available, only periodic INCOME would allow you to use the
> average rate for the year.
>
> The year-end 2017 rate has nothing to do with your scenario, so why bring
> it up? the money was exchanged 362 days earlier.

hello - thank you for your response.

From what I can find, the maximum account value reported on the FBAR uses the treasury year end rate to convert, even if that rate is not when the max value occurred.

However, searching far and wide on google and reading the fincen form in pdf version, I don't see anywhere how to determine converted values for the purpose of determining whether the $10,000 USD reporting threshold has actually been crossed on day.
AdManGam
Posts: 5
Joined: Thu Nov 15, 2018 2:57 pm

Re: fbar filing - what exchange rate to use for non US accounts

Post by AdManGam »

I re-read the fincen instructions, and found the following:

Step 1. Determine the maximum value of each account (in the currency of that account) during the calendar year being reported. The maximum value of an account is a reasonable approximation of the greatest value of currency or nonmonetary assets in the account during the calendar year. Periodic account statements may be relied on to determine the maximum value of the account, provided that the statements fairly reflect the maximum account value during the calendar year. For Item 15, if the filer had a financial interest in more than one account, each account must be valued separately. For an account denominated in U.S. Dollars, the maximum value of the account is the largest U.S. Dollar value of the account during the report year.

Step 2. In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury's Financial Management Service rate (http://www.fiscal.treasury.gov/fsreport ... h_home.htm ) for the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.

If the maximum account value of a single account or aggregate of the maximum account values of multiple accounts exceeds $10,000, an FBAR must be filed. An FBAR is not required to be filed if the person did not have $10,000 of maximum value or aggregate maximum value in foreign financial accounts at any time during the calendar year.

----

This would seem to suggest valuing every account at its maximum to determine whether the $10,000 USD threshold has passed (again using the year end treasury rate) and not looking at whether on any given day the limit was actually passed. This is contrary to some of what I have read online, and also doesn't seem in the spirit of 'passing $10,000 at any point during the year'

Still confused...
nelsona
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Re: fbar filing - what exchange rate to use for non US accounts

Post by nelsona »

You could always just file FBAR for 2016 and 2017. That would seem to be a lot less than asking questions. They aren't looking for accuracy, they just want the accounts to be reported.
btw, she has no joint account(s) with you? They count too. No RRSP?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
AdManGam
Posts: 5
Joined: Thu Nov 15, 2018 2:57 pm

Re: fbar filing - what exchange rate to use for non US accounts

Post by AdManGam »

nelsona wrote:
> You could always just file FBAR for 2016 and 2017. That would seem to be a
> lot less than asking questions. They aren't looking for accuracy, they just
> want the accounts to be reported.
> btw, she has no joint account(s) with you? They count too. No RRSP?

they are late now, so im concerned about penalties...wife would like to avoid reporting if we are allowed to (ie under threshold) - distrust of govt type ideas in her family.

We also havent filed her 1040...if my understanding is correct, as long as w report any income on her 1040s (which is literally nil, as interest earned is pennies and does not round up)...and we file her FBARs she wont be subject to penalties...do we have to indicate we are filing in this way on the fbar somewhere?

no joint accounts as yet, and no rrsp..
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