Instructions For Form 8938 - 2016 (Page 3 of 14) in pdf

stock of the common parent, is owned

persons (a specified individual or a

A bank that is examined by the Office

by one or more of the other connected

specified domestic entity) as a current

of the Comptroller of the Currency, the

corporations, connected partnerships,

beneficiary for the taxable year.

Board of Governors of the Federal

or the common parent.

Reserve System, the Federal Deposit

Current beneficiary. With respect

Insurance Corporation, or the National

2. Partnership interests

to a taxable year, a current beneficiary

Credit Union Administration,

representing at least 80 percent of the

is any person who at any time during the

A financial institution that is registered

profits interests or capital interests of

taxable year is entitled to, or at the

with and regulated or examined by the

the partnership, other than partnership

discretion of any person may receive, a

Securities and Exchange Commission,

interests in the common parent, is

distribution from the principal or income

owned by one or more of the other

of the trust (determined without regard

A domestic corporation described in

connected corporations, connected

to any power of appointment to the

section 1473(3)(A) or (B), and the

partnerships, or the common parent.

extent that such power remains

regulations issued with respect to those

unexercised at the end of the taxable

provisions,

Percentage of passive assets held

year).

by a corporation or partnership. For

2. The trustee has supervisory

Special rule for general powers of

purposes of determining whether at

authority over or fiduciary obligations

appointment. A current beneficiary

least 50 percent of your assets produce

with regard to the specified foreign

also includes any holder of a general

or are held for the production of passive

financial assets held by the trust, and

power of appointment, whether or not

income, the percentage of passive

3. The trustee files annual returns

exercised, that was exercisable at any

assets held by the corporation or

and information returns by the due date

time during the taxable year. A holder of

partnership for a taxable year is the

(including any applicable extensions) on

a general power of appointment that is

weighted average percentage of

behalf of the trust.

exercisable only on the death of the

passive assets (weighted by total assets

holder is not a current beneficiary.

and measured quarterly). The value of

Domestic trusts owned by one or

assets of the corporation or partnership

more specified persons. A trust

is the fair market value or the book

described in section 7701(a)(30)(E) to

Excepted Specified Domestic

value. The book value of assets is the

the extent the trust or any portion of the

Entities

amount reflected on the corporation’s or

trust is treated as owned by one or more

partnership’s balance sheet and may be

specified persons under sections 671

Entities described in section

determined under either a U.S. or an

through 678 and the regulations.

1473(3). An entity described in section

international financial accounting

1473(3) and the regulations thereunder,

standard. See example below, which

with the exception of a trust that is

Reporting Thresholds

illustrates the application of this

exempt from tax under section 664(c), is

weighted average asset rule.

not a specified domestic entity.

Reporting Thresholds Applying to

Certain domestic trusts. A trust

Specified Individuals

described in section 7701(a)(30)(E) is

Domestic trusts. A trust described in

If you are a specified individual, your

not considered a specified domestic

section 7701(a)(30)(E) is considered a

applicable reporting threshold depends

entity, provided that:

specified domestic entity if and only if

upon whether you are married, file a

1. The trustee is one of the

the trust has one or more specified

joint federal income tax return, and live

following:

inside (or outside) the United States.

Example.

Taxpayers living in the United

States. If you do not live outside the

The following example illustrates the application of the weighted average asset rule.

United States, you satisfy the reporting

threshold discussed next that applies to

DC is a domestic corporation, the total value of the stock of which is owned by L, a specified

you and no exception applies, file Form

individual. DC is a calendar year taxpayer. Less than 50% of DC’s gross income for its taxable year

beginning January 1, 2016, is passive income. DC has the following assets in 2016, measured

8938 with your income tax return.

quarterly:

Unmarried taxpayers. If you are

not married, you satisfy the reporting

threshold only if the total value of your

Passive Assets

Total Assets

specified foreign financial assets is

$150

$200

more than $50,000 on the last day of the

$150

$300

tax year or more than $75,000 at any

time during the tax year.

$300

$500

Married taxpayers filing a joint

$200

$1000

income tax return. If you are married

Taxable Year Totals

$800

$2,000

and you and your spouse file a joint

income tax return, you satisfy the

reporting threshold only if the total value

DC’s weighted passive asset percentage for taxable year 2016 is 40%, that is, DC’s total passive

of your specified foreign financial assets

assets divided by its total assets ($800 / $2,000 = 40%). Because fewer than 50% of DC’s assets

is more than $100,000 on the last day of

produce or are held for the production of passive income and less than 50% of DC’s gross income for

the tax year or more than $150,000 at

its taxable year is passive income, DC does not meet the passive asset or passive income threshold

any time during the tax year.

and would not be a specified domestic entity.

Instructions for Form 8938 (2016)

Instructions For Form 8938 - 2016 Page 3

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