---
kind: "range"
citation: "26 C.F.R. §§ 1.6038D-1–1.6038D-8"
title: "26"
from: "1.6038D-1"
to: "1.6038D-8"
count: 8
url: "https://uscodex.org/cfr/26/1.6038D-1..1.6038D-8"
---

# §1.6038D-1. Reporting with respect to specified foreign financial assets, definition of terms.

- (a) **In general.** The following definitions apply for purposes of [section 6038D](/cfr/26/6038D.md) and the regulations—
  - (1) **Specified person.** The term specified person means a specified individual or a specified domestic entity.
  - (2) **Specified individual.** The term specified individual means an individual who is a—
    - (i) U.S. citizen;
    - (ii) Resident alien of the United States for any portion of the taxable year;
    - (iii) Nonresident alien for whom an election under section [6013(g)](/cfr/26/6013.md?p=g) or [(h)](/cfr/26/6013.md?p=h) is in effect; or
    - (iv) Nonresident alien who is a bona fide resident of Puerto Rico or a [section 931](/cfr/26/931.md) possession (as defined in [§ 1.931-1(c)(1)](/cfr/26/1.931-1.md?p=c-1)).
  - (3) **Resident alien.** The term resident alien has the meaning set forth in [section 7701(b)](/cfr/26/7701.md?p=b) and §§ [301.7701(b)-1](/cfr/26/301.7701..1.md) through [301.7701(b)-9](/cfr/26/301.7701..9.md) of this chapter.
  - (4) **Bona fide resident of a U.S. possession.** The term bona fide resident of a U.S. possession means an individual who is a “bona fide resident” under [section 937(a)](/cfr/26/937.md?p=a) and [§ 1.937-1](/cfr/26/1.937-1.md).
  - (5) **U.S. possession.** The term U.S. possession means American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands.
  - (6) **Specified foreign financial asset.** The term specified foreign financial asset has the meaning set forth in [§ 1.6038D-3](/cfr/26/1.6038D-3.md).
  - (7) **Financial account.** The term financial account has the meaning set forth in [§ 1.1471-5(b)](/cfr/26/1.1471-5.md?p=b), provided, however, that the exclusions of retirement and pension accounts and non-retirement savings accounts under [§ 1.1471-5(b)(2)(i)](/cfr/26/1.1471-5.md?p=b-2-i) and retirement and pension accounts, non-retirement savings accounts, and accounts satisfying similar conditions in an applicable Model 1 IGA or Model 2 IGA under [§ 1.1471-5(b)(2)(vi)](/cfr/26/1.1471-5.md?p=b-2-vi) shall not apply (see the [section 6038D](/cfr/26/6038D.md) coordination rule in [§ 1.1471-5(b)(2)(i)(D)](/cfr/26/1.1471-5.md?p=b-2-i-D)). See [§ 1.6038D-3(a)(2)](/cfr/26/1.6038D-3.md?p=a-2) relating to financial accounts maintained by a financial institution that is organized under the laws of a U.S. possession.
  - (8) **Financial institution.** The term financial institution has the meaning set forth in [section 1471(d)(5)](/cfr/26/1471.md?p=d-5) and the regulations thereunder.
  - (9) **Foreign financial institution.** The term foreign financial institution has the meaning set forth in [§ 1.1471-5(d)](/cfr/26/1.1471-5.md?p=d).
  - (10) **Foreign entity.** The term foreign entity has the meaning set forth in [§ 1.1473-1(e)](/cfr/26/1.1473-1.md?p=e).
  - (11) **Annual return.** The term annual return means an annual federal income tax return of a specified individual or an annual federal income tax return or information return of a specified domestic entity filed with the Internal Revenue Service under section [876](/cfr/26/876.md), [6011](/cfr/26/6011.md), [6012](/cfr/26/6012.md), [6013](/cfr/26/6013.md), [6031](/cfr/26/6031.md), or [6037](/cfr/26/6037.md), and the regulations.
  - (12) **Specified domestic entity.** The term specified domestic entity has the meaning set forth in [§ 1.6038D-6](/cfr/26/1.6038D-6.md).
  - (13) **Model 1 IGA—** and Model 2 IGA. The terms Model 1 IGA and Model 2 IGA have the meanings set forth in § [1.1471-1(b)(78)](/cfr/26/1.1471-1.md?p=b-78) and [(79)](/cfr/26/1.1471-1.md?p=b-79), respectively.
- (b) **Effective/applicability dates—**
  - (1) **In general.** Except as otherwise provided in this [paragraph (b)](#b), this section applies to taxable years ending after December 19, 2011. Taxpayers may elect to apply the rules of this section to taxable years ending prior to December 19, 2011.
  - (2) **Financial accounts.** For purposes of applying the financial account definition in [§ 1.6038D-1(a)(7)](#a-7), the treatment under [§ 1.1471-5(b)(2)(vi)](/cfr/26/1.1471-5.md?p=b-2-vi) of retirement and pension accounts, non-retirement savings accounts, and accounts satisfying similar conditions in an applicable Model 1 IGA or Model 2 IGA (see § [1.1471-1(b)(78)](/cfr/26/1.1471-1.md?p=b-78) and [(79)](/cfr/26/1.1471-1.md?p=b-79)) as financial accounts for purposes of the reporting required under [section 6038D](/cfr/26/6038D.md) and [§ 1.6038D-2(a)](/cfr/26/1.6038D-2.md?p=a) shall apply to taxable years beginning after December 12, 2014.

# §1.6038D-2. Requirement to report specified foreign financial assets.

- (a) **Reporting requirement—**
  - (1) **In general.** Except as otherwise provided, a specified person that has any interest in a specified foreign financial asset during the taxable year must attach Form 8938, “Statement of Specified Foreign Financial Assets,” to that specified person's annual return for the taxable year to report the information required by [section 6038D](/cfr/26/6038D.md) and [§ 1.6038D-4](/cfr/26/1.6038D-4.md) if the aggregate value of all such assets exceeds—
    - (i) $50,000 on the last day of the taxable year; or
    - (ii) $75,000 at any time during the taxable year.
  - (2) **Special rule for married specified individuals filing a joint annual return.** Except as provided in [paragraph (a)(4)](#a-4) of this section, married specified individuals who file a joint annual return for the taxable year must attach a single Form 8938 to their joint annual return for the taxable year to report the information required by [section 6038D](/cfr/26/6038D.md) and [§ 1.6038D-4](/cfr/26/1.6038D-4.md) if the aggregate value of all of the specified foreign financial assets in which either married specified individual has an interest exceeds—
    - (i) $100,000 on the last day of the taxable year; or
    - (ii) $150,000 at any time during the taxable year.
  - (3) **Special rule for certain specified individuals living abroad.** Except as provided in [paragraph (a)(4)](#a-4) of this section, a specified individual who is a qualified individual under [section 911(d)(1)](/cfr/26/911.md?p=d-1) for the taxable year must attach a Form 8938 to his or her annual return for the taxable year to report the information required by [section 6038D](/cfr/26/6038D.md) and [§ 1.6038D-4](/cfr/26/1.6038D-4.md) if the aggregate value of the specified foreign financial assets in which the specified individual has an interest exceeds—
    - (i) $200,000 on the last day of the taxable year; or
    - (ii) $300,000 at any time during the taxable year.
  - (4) **Special rule for married specified individuals filing a joint annual return and living abroad.** A specified individual who is a qualified individual under [section 911(d)(1)](/cfr/26/911.md?p=d-1) for the taxable year and the qualified individual's spouse who file a joint annual return for the taxable year must attach a single Form 8938 to their return for the taxable year to report the information required by [section 6038D](/cfr/26/6038D.md) and [§ 1.6038D-4](/cfr/26/1.6038D-4.md) if the aggregate value of the all of the specified foreign financial assets in which either married individual has an interest exceeds—
    - (i) $400,000 on the last day of the taxable year; or
    - (ii) $600,000 at any time during the taxable year.
  - (5) **Assets with no positive value.** A specified foreign financial asset is subject to reporting even if the specified foreign financial asset does not have a positive value. See [§ 1.6038D-5(b)(3)](/cfr/26/1.6038D-5.md?p=b-3) to determine the maximum value of a specified foreign financial asset that does not have a positive value during the taxable year.
  - (6) **Aggregate value calculation in case of specified foreign financial asset excluded from reporting—**
    - (i) **Specified individual.** The value of any specified foreign financial asset in which a specified individual has an interest and that is excluded from reporting on Form 8938 pursuant to [§ 1.6038D-7(a)](/cfr/26/1.6038D-7.md?p=a) (concerning certain assets reported on another form) is included for purposes of determining the aggregate value of specified foreign financial assets. The value of any specified foreign financial asset in which a specified individual has an interest and that is excluded from reporting under [§ 1.6038D-7(b)](/cfr/26/1.6038D-7.md?p=b) (concerning assets held by certain domestic trusts) or [§ 1.6038D-7(c)](/cfr/26/1.6038D-7.md?p=c) (concerning certain assets owned by a bona fide resident of a U.S. possession) is excluded for purposes of determining the aggregate value of specified foreign financial assets.
    - (ii) **Specified domestic entity.** The value of any specified foreign financial asset in which a specified domestic entity has an interest and that is excluded from reporting on Form 8938 pursuant to [§ 1.6038D-7(a)](/cfr/26/1.6038D-7.md?p=a) (concerning certain assets reported on another form) is excluded for purposes of determining the aggregate value of specified foreign financial assets. For purposes of determining the aggregate value of specified foreign financial assets, a specified domestic entity that is a corporation or partnership and that has an interest in any specified foreign financial asset is treated as owning all the specified foreign financial assets (excluding specified foreign financial assets excluded from reporting on Form 8938 pursuant to [§ 1.6038D-7(a)](/cfr/26/1.6038D-7.md?p=a)) held by all domestic corporations and domestic partnerships that are closely held by the same specified individual as determined under [§ 1.6038D-6(b)(2)](/cfr/26/1.6038D-6.md?p=b-2).
  - (7) **Form 8938 filed with annual return—**
    - (i) **General rule.** A specified person, including a specified individual who is a bona fide resident of a U.S. possession, is not required to file Form 8938 with respect to a taxable year if the specified person is not required to file an annual return with the Internal Revenue Service with respect to such taxable year.
    - (ii) **Consolidated returns.** If a specified domestic entity is a member of an affiliated group of corporations that files a consolidated income tax return, the Form 8938 of the specified domestic entity must be filed with the affiliated group's annual return.
  - (8) **Reporting required regardless of tax result.** The Form 8938 required by [section 6038D](/cfr/26/6038D.md) and this section must be furnished by a specified person even if none of the specified foreign financial assets that must be reported affect the specified person's tax liability under the Internal Revenue Code for the taxable year.
  - (9) **Reporting period.** The reporting period covered by Form 8938 is the specified person's taxable year, except the reporting period for a specified person that is a specified individual for less than an entire taxable year is the portion of the taxable year that the specified person is a specified individual.
  - (10) **Successor forms.** References to Form 8938 include any successor form.
- (b) **Interest in a specified foreign financial asset—**
  - (1) **In general.** A specified person has an interest in a specified foreign financial asset if any income, gains, losses, deductions, credits, gross proceeds, or distributions attributable to the holding or disposition of the specified foreign financial asset are or would be required to be reported, included, or otherwise reflected by the specified person on an annual return. A specified person has an interest in a specified foreign financial asset even if no income, gains, losses, deductions, credits, gross proceeds, or distributions are attributable to the holding or disposition of the specified foreign financial asset for the taxable year.
  - (2) **Property transferred in connection with the performance of services.** A specified person that is transferred property in connection with the performance of personal services is first considered to have an interest in the property for purposes of [section 6038D](/cfr/26/6038D.md) on the first date that the property is substantially vested (within the meaning of [§ 1.83-3(b)](/cfr/26/1.83-3.md?p=b)) or, in the case of property with respect to which a specified person makes a valid election under [section 83(b)](/cfr/26/83.md?p=b), on the date of transfer of the property.
  - (3) **Special rule for parent making election under section 1(g)(7).** A parent who makes an election under [section 1(g)(7)](/cfr/26/1.md?p=g-7) to include certain unearned income of a child in the parent's gross income has an interest in any specified foreign financial asset held by the child for the purposes of [section 6038D](/cfr/26/6038D.md) and the regulations.
  - (4) **Entities—**
    - (i) **In general.** Except as provided in this [paragraph (b)(4)](#b-4), a specified person is not treated as having an interest in any specified foreign financial assets held by a corporation, partnership, trust, or estate solely as a result of the specified person's status as a shareholder, partner, or beneficiary of such entity.
    - (ii) **Specified foreign financial assets held by certain trusts.** A specified person that is treated as the owner of a trust or any portion of a trust under [sections 671 through 679](/cfr/26/671..679.md), other than a domestic liquidating trust under [§ 301.7701-4(d)](/cfr/26/301.7701-4.md?p=d) of this chapter created pursuant to a court order issued in a bankruptcy under Chapter 7 ([11 U.S.C. 701](/usc/11/701.md) et seq.) or a confirmed plan under Chapter 11 ([11 U.S.C. 1101](/usc/11/1101.md) et seq.) of the Bankruptcy Code, or a domestic widely held fixed investment trust under [§ 1.671-5](/cfr/26/1.671-5.md), is treated as having an interest in any specified foreign financial assets held by the trust or the portion of the trust.
    - (iii) **Specified foreign financial assets held by a disregarded entity.** A specified person that owns a foreign or domestic entity that is disregarded as an entity separate from its owner as described in [§ 301.7701-2](/cfr/26/301.7701-2.md) of this chapter (a disregarded entity) is treated as having an interest in any specified foreign financial assets held by the disregarded entity.
    - (iv) **Interest in a foreign trust or foreign estate.** See [§ 1.6038D-3(c)](/cfr/26/1.6038D-3.md?p=c) to determine whether an interest in a foreign trust or foreign estate is a specified foreign financial asset. See [§ 1.6038D-5(f)](/cfr/26/1.6038D-5.md?p=f) to determine the maximum value of an interest in a foreign trust or foreign estate.
- (c) **Special rules for joint interests—**
  - (1) **In general—**
    - (i) **Determining aggregate value of assets.** Except as otherwise provided in this [paragraph (c)](#c), each specified person that is a joint owner of a specified foreign financial asset (whether with a spouse or other person) must include the entire value of the specified foreign financial asset (and not the value of the specified person's interest) for purposes of determining whether the aggregate value of the specified person's specified foreign financial assets exceeds the reporting thresholds set forth in [§ 1.6038D-2(a)](#a).
    - (ii) **Reporting maximum value.** Except as provided in [paragraph (d)](#d) of this section, a specified person that is a joint owner of a specified foreign financial asset must report the entire value of each jointly owned specified foreign financial asset on Form 8938.
  - (2) **Aggregate asset value for married specified individuals filing a joint annual return.** Married specified individuals who file a joint annual return must include the value of each specified foreign financial asset that they jointly own or in which both have an interest under [paragraph (b)(1)](#b-1) of this section only once in determining whether the aggregate value of all of the specified foreign financial assets in which either married specified individual has an interest exceeds the reporting thresholds set forth in [§ 1.6038D-2(a)](#a).
  - (3) **Aggregate asset value for married specified individual filing a separate annual return—**
    - (i) **Both spouses are specified individuals.** If a married specified individual files a separate annual return and his or her spouse is a specified individual, the married specified individual must include one-half of the value of a specified foreign financial asset that the married specified individual jointly owns with his or her spouse in determining whether the married specified individual has an interest in specified foreign financial assets the aggregate value of which exceeds the reporting thresholds set forth in [§ 1.6038D-2(a)](#a).
    - (ii) **One spouse is not a specified individual.** If a married specified individual files a separate annual return and his or her spouse is not a specified individual, the married specified individual must include the entire value of a specified foreign financial asset that the married specified individual jointly owns with his or her spouse in determining whether the married specified individual has an interest in specified foreign financial assets the aggregate value of which exceeds the reporting thresholds set forth in [§ 1.6038D-2(a)](#a).
- (d) **Annual return filed by a married specified individual—**
  - (1) **Joint annual return.** Married specified individuals who file a joint annual return must file a single Form 8938 to fulfill their reporting requirements under [section 6038D](/cfr/26/6038D.md) and [§ 1.6038D-2(a)](#a). The single Form 8938 must report all of the specified foreign financial assets in which either married specified individual has an interest. If both married specified individuals jointly own a specified foreign financial asset or if they have an interest in a specified foreign financial asset under [paragraph (b)(1)](#b-1) of this section, the asset must be reported only once on the single Form 8938 filed for the taxable year.
  - (2) **Separate annual return.** A married specified individual who files a separate annual return for the taxable year must fulfill the reporting requirements under [section 6038D](/cfr/26/6038D.md) and [§ 1.6038D-2(a)](#a) by filing a separate Form 8938 with his or her return that reports all of the specified foreign financial assets in which the married specified individual has an interest, including each of the assets jointly owned with the married specified individual's spouse or with another person. If both of the spouses are specified individuals, each specified individual must report the entire value of each specified foreign financial asset that the spouses jointly own on Form 8938, not the value taken into account under [paragraph (c)(3)(i)](#c-3-i) of this section for purposes of applying the applicable reporting thresholds.
- (e) **Special rules for dual resident taxpayers—**
  - (1) **In general.** Subject to the provisions of paragraphs [(e)(2)](#e-2) and [(3)](#e-3) of this section, a specified individual is not required to report specified foreign financial assets on Form 8938 for a taxable year or any portion of a taxable year that the individual is a dual resident taxpayer (within the meaning of [§ 301.7701(b)-7(a)(1)](/cfr/26/301.7701..7.md) of this chapter) who is treated as a nonresident alien pursuant to [§ 301.7701(b)-7](/cfr/26/301.7701..7.md) of this chapter for purposes of computing his or her U.S. tax liability with respect to the portion of the taxable year the individual is considered a dual resident taxpayer.
  - (2) **Dual resident taxpayer filing as a nonresident alien at end of taxable year.** If a specified individual to whom this [paragraph (e)](#e) applies computes his or her U.S. income tax liability as a nonresident alien on the last day of the taxable year and complies with the filing requirements of § [301.7701(b)-7(b)](/cfr/26/301.7701..7.md) and [(c)](/cfr/26/301.7701.md?p=c) of this chapter and, in particular, such individual timely files with the Internal Revenue Service Form 1040NR, “U.S. Nonresident Alien Income Tax Return,” or Form 1040NR-EZ, “U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents,” as applicable, and attaches thereto Form 8833, “Treaty-Based Return Position Disclosure Under Section [6114](/cfr/26/6114.md) or [7701(b)](/cfr/26/7701.md?p=b),” such individual will not be required to report specified foreign financial assets on Form 8938 with respect to the portion of the taxable year covered by Form 1040NR (or Form 1040NR-EZ).
  - (3) **Dual resident taxpayer filing as resident alien at end of taxable year.** If a specified individual to whom this [paragraph (e)](#e) applies computes his or her U.S. income tax liability as a resident alien on the last day of the taxable year and complies with the filing requirements of [§ 1.6012-1(b)(2)(ii)(a)](/cfr/26/1.6012-1.md?p=b-2-ii-a) and, in particular, such individual timely files with the Internal Revenue Service Form 1040, “U.S. Individual Income Tax Return,” or Form 1040EZ, “Income Tax Return for Single and Joint Filers With No Dependents,” as applicable, and attaches a properly completed Form 8833 to the schedule required by [§ 1.6012-1(b)(2)(ii)(a)](/cfr/26/1.6012-1.md?p=b-2-ii-a), such individual will not be required to report specified foreign financial assets on Form 8938 with respect to the portion of the individual's taxable year reflected on the schedule to such Form 1040 or Form 1040EZ required by [§ 1.6012-1(b)(2)(ii)(a)](/cfr/26/1.6012-1.md?p=b-2-ii-a).
- (f) **Example.** The following example illustrates the application of [paragraph (c)](#c) of this section:
- (g) **Effective/applicability dates.** This section, with the exception of [§ 1.6038D-2(a)(6)(ii)](#a-6-ii), applies to taxable years ending after December 19, 2011. [Section 1.6038D-2(a)(6)(ii)](#a-6-ii) applies to taxable years beginning after December 31, 2015. Taxpayers may elect to apply the rules of this section, with the exception of [§ 1.6038D-2(a)(6)(ii)](#a-6-ii), to taxable years ending on or prior to December 19, 2011.

# §1.6038D-3. Specified foreign financial assets.

- (a) **Financial accounts—**
  - (1) **In general.** Except as otherwise provided in this section, a specified foreign financial asset includes any financial account maintained by a foreign financial institution. An asset held in a financial account maintained by a foreign financial institution is not required to be separately reported on Form 8938, “Statement of Specified Foreign Financial Assets.”
  - (2) **Financial account in a U.S. possession.** A specified foreign financial asset includes a financial account maintained by a financial institution that is organized under the laws of a U.S. possession.
  - (3) **Excepted financial accounts—**
    - (i) **Accounts maintained by U.S. payors.** A financial account maintained by a U.S. payor as defined in [§ 1.6049-5(c)(5)(i)](/cfr/26/1.6049-5.md?p=c-5-i) (including assets held in such an account) is not a specified foreign financial asset for purposes of [section 6038D](/cfr/26/6038D.md) and the regulations.
    - (ii) **Mark-to-market election under section 475.** A financial account is not a specified foreign financial asset if the rules of [section 475(a)](/cfr/26/475.md?p=a) apply to all of the holdings in the account or an election under section [475(e)](/cfr/26/475.md?p=e) or [(f)](/cfr/26/475.md?p=f) is made with respect to all of the holdings in the account.
- (b) **Other specified foreign financial assets—**
  - (1) **In general.** Except as otherwise provided in this section, a specified foreign financial asset includes any of the following assets that are not financial accounts and that are held for investment and not held in an account maintained by a financial institution—
    - (i) Stock or securities issued by a person other than a United States person (including stock or securities issued by a person organized under the laws of a U.S. possession);
    - (ii) A financial instrument or contract that has an issuer or counterparty which is other than a United States person (including a financial instrument or contract issued by a person organized under the laws of a U.S. possession); and
    - (iii) **An interest in a foreign entity.**
  - (2) **Mark-to-market election under section 475.** An asset is not a specified foreign financial asset if the rules of [section 475(a)](/cfr/26/475.md?p=a) apply to the asset or an election under section [475(e)](/cfr/26/475.md?p=e) or [(f)](/cfr/26/475.md?p=f) is made with respect to the asset.
  - (3) **Held for investment.** An asset is held for investment for purposes of [section 6038D](/cfr/26/6038D.md) and the regulations if that asset is not used in, or held for use in, the conduct of a trade or business of a specified person.
  - (4) **Trade-or-business test.** For purposes of [section 6038D](/cfr/26/6038D.md) and the regulations, an asset is used in, or held for use in, the conduct of a trade or business and not held for investment if the asset is—
    - (i) Held for the principal purpose of promoting the present conduct of the trade or business;
    - (ii) Acquired and held in the ordinary course of the trade or business, as, for example, in the case of an account or note receivable arising from that trade or business; or
    - (iii) Otherwise held in a direct relationship to the trade or business as determined under [paragraph (b)(5)](#b-5) of this section.
  - (5) **Direct relationship between holding an asset and a trade or business—**
    - (i) **In general.** In determining whether an asset is held in a direct relationship to the conduct of a trade or business by a specified person, principal consideration will be given to whether the asset is needed in the trade or business of the specified person. An asset shall be considered needed in the trade or business, for this purpose, only if the asset is held to meet the present needs of that trade or business and not its anticipated future needs. An asset shall be considered as needed in the trade or business if, for example, the asset is held to meet the operating expenses of the trade or business. Conversely, an asset shall be considered as not needed in the trade or business if, for example, the asset is held for the purpose of providing for future diversification into a new trade or business, future plant replacement, or future business contingencies. Stock is never considered used or held for use in a trade or business for purposes of applying this test.
    - (ii) **Presumption of direct relationship.** An asset will be treated as held in a direct relationship to the conduct of a trade or business of a specified person if—
      - (A) The asset was acquired with funds generated by the trade or business of the specified person or the affiliated group of the specified person, if any;
      - (B) The income from the asset is retained or reinvested in the trade or business; and
      - (C) Personnel who are actively involved in the conduct of the trade or business exercise significant management and control over the investment of such asset.
- (c) **Special rule for interests in foreign trusts and foreign estates.** An interest in a foreign trust or a foreign estate is not a specified foreign financial asset of a specified person unless the person knows, or has reason to know based on readily accessible information, of the interest. Receipt of a distribution from the foreign trust or foreign estate constitutes actual knowledge for this purpose.
- (d) **Examples.** Examples of assets other than financial accounts that may be considered other specified foreign financial assets include, but are not limited to—
  - (1) Stock issued by a foreign corporation;
  - (2) A capital or profits interest in a foreign partnership;
  - (3) A note, bond, debenture, or other form of indebtedness issued by a foreign person;
  - (4) An interest in a foreign trust;
  - (5) An interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement with a foreign counterparty; and
  - (6) Any option or other derivative instrument with respect to any of the items listed as examples in this paragraph or with respect to any currency or commodity that is entered into with a foreign counterparty or issuer.
- (e) **Effective/applicability dates.** This section applies to taxable years ending after December 19, 2011. Taxpayers may elect to apply the rules of this section to taxable years ending prior to December 19, 2011.

# §1.6038D-4. Information required to be reported.

- (a) **Required information.** The following information must be reported on Form 8938, “Statement of Specified Foreign Financial Assets,” with respect to each specified foreign financial asset:
  - (1) In the case of a financial account, the name and address of the foreign financial institution with which the account is maintained and the account number of the financial account;
  - (2) In the case of stock or securities, the name and address of the issuer, and information that identifies the class or issue of which the stock or security is a part;
  - (3) In the case of a financial instrument or contract, information that identifies the financial instrument or contract, including the names and addresses of all issuers and counterparties;
  - (4) In the case of an interest in a foreign entity, information that identifies the interest, including the name and address of the foreign entity in which the interest is held;
  - (5) The maximum value of the specified foreign financial asset during the portion of the taxable year in which the specified person has an interest in the asset;
  - (6) In the case of a financial account that is a depository account as defined in [§ 1.1471-5(b)(3)(i)](/cfr/26/1.1471-5.md?p=b-3-i) or a custodial account as defined in [§ 1.1471-5(b)(3)(ii)](/cfr/26/1.1471-5.md?p=b-3-ii), whether the account was opened or closed during the taxable year;
  - (7) The date, if any, on which the specified foreign financial asset, other than a financial account that is a depository account as defined in [§ 1.1471-5(b)(3)(i)](/cfr/26/1.1471-5.md?p=b-3-i) or a custodial account as defined in [§ 1.1471-5(b)(3)(ii)](/cfr/26/1.1471-5.md?p=b-3-ii), was either acquired or disposed of (or both) during the taxable year;
  - (8) The amount of any income, gain, loss, deduction, or credit recognized for the taxable year with respect to the reported specified foreign financial asset, and the schedule, form, or return filed with the Internal Revenue Service on which the income, gain, loss, deduction, or credit, if any, is reported or included by the specified person;
  - (9) The foreign currency in which the account is maintained or the asset is denominated, the foreign currency exchange rate and, if the source of such rate is other than as described in [§ 1.6038D-5(c)(1)](/cfr/26/1.6038D-5.md?p=c-1), the source of the rate used to determine the specified foreign financial asset's U.S. dollar value, including maximum value;
  - (10) For any specified foreign financial asset excepted from reporting on Form 8938 under [§ 1.6038D-7(a)](/cfr/26/1.6038D-7.md?p=a), the specified person must report the number of Forms 3520, “Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts,” Forms 3520-A, “Annual Information Return of Foreign Trust With a U.S. Owner,” Forms 5471, “Information Return of U.S. Persons With Respect To Certain Foreign Corporations,” Forms 8621, “Return by a Shareholder of a Passive Foreign Investment Company or a Qualified Electing Fund,” Forms 8865, “Return of U.S. Persons With Respect To Certain Foreign Partnerships,” and, solely for taxable years beginning after March 18, 2010, and ending on or before December 31, 2013, Forms 8891, “U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans,” or such other form under [Title 26](/cfr/26.md) of the United States Code identified by the Secretary under [§ 1.6038D-7(a)](/cfr/26/1.6038D-7.md?p=a), timely filed with the Internal Revenue Service on which excepted foreign financial assets are reported or reflected for the taxable year; and
  - (11) Such other information as may be required by Form 8938 or its instructions or other guidance.
- (b) **Effective/applicability dates.** This section applies to taxable years ending after December 19, 2011. Taxpayers may elect to apply the rules of this section to taxable years ending prior to December 19, 2011.

# §1.6038D-5. Valuation guidelines.

- (a) **Fair market value.** Except as provided in paragraphs [(c)](#c) and [(e)](#e) of this section, the value of a specified foreign financial asset for purposes of determining the aggregate value of specified foreign financial assets held by a specified person and the maximum value of a specified foreign financial asset required to be reported on Form 8938, “Statement of Specified Foreign Financial Assets,” is the asset's fair market value.
- (b) **Valuation of assets—**
  - (1) **Maximum value.** Except as provided in this section, the maximum value of a specified foreign financial asset means a reasonable estimate of the asset's maximum fair market value during the taxable year.
  - (2) **U.S. dollars.** For purposes of determining the aggregate value of specified foreign financial assets in which a specified person has an interest and determining the maximum value of a specified foreign financial asset, the value of a specified foreign financial asset denominated in a foreign currency during the taxable year must be determined in the foreign currency and then converted to U.S. dollars.
  - (3) **Asset with no positive value.** If the maximum fair market value of a specified foreign financial asset is zero or less than zero, then the asset's value is treated as zero for purposes of determining the aggregate value of specified foreign financial assets in which a specified person has an interest, and the maximum value of the specified foreign financial asset is zero for purposes of reporting under [§ 1.6038D-4(a)(5)](/cfr/26/1.6038D-4.md?p=a-5).
- (c) **Foreign currency conversion—**
  - (1) **In general.** Except as provided in paragraphs [(c)(2)](#c-2) and (d) of this section, the U.S. Treasury Department's Bureau of the Fiscal Service foreign currency exchange rate is to be used to convert the value of a specified foreign financial asset into U.S. dollars for purposes of determining the aggregate value of specified foreign financial assets in which a specified person has an interest and determining the maximum value of a specified foreign financial asset.
  - (2) **Other publicly available exchange rate.** If no U.S. Treasury Department Bureau of the Fiscal Service foreign currency exchange rate is available for a particular currency, another publicly available foreign currency exchange rate may be used to convert the value of a specified foreign financial asset into U.S. dollars. In such case, the source of the foreign currency exchange rate must be disclosed on Form 8938.
  - (3) **Currency exchange rate.** In converting the currency of a foreign country, the foreign currency exchange rate applicable for converting the currency into U.S. dollars (that is, to purchase U.S. dollars) must be used.
  - (4) **Determination date.** In converting the currency of a foreign country into U.S. dollars for purposes of determining the maximum value of a specified foreign financial asset and determining the aggregate value of specified foreign financial assets in which a specified person has an interest, the applicable foreign currency exchange rate is the rate on the last day of the taxable year of the specified person, even if the specified person sold or otherwise disposed of a specified foreign financial asset prior to the last day of such year.
- (d) **Financial accounts.** A specified person may rely upon periodic account statements that are provided at least annually by or on behalf of a financial institution maintaining an account, including the foreign currency conversion reflected in those statements, to determine the financial account's maximum value unless the specified person has actual knowledge, or reason to know based on readily accessible information, that the statements do not reflect a reasonable estimate of the maximum account value during the taxable year.
- (e) **Asset held in a financial account.** The value of an asset held in a financial account maintained by a foreign financial institution is included in determining the value of that financial account for purposes of [§ 1.6038D-5(a)](#a).
- (f) **Other specified foreign financial assets—**
  - (1) **General rule.** Except as provided in paragraphs [(f)(2)](#f-2) and [(3)](#f-3) of this section, for specified foreign financial assets that are not financial accounts and that are held for investment and not held in an account maintained by a financial institution, a specified person may use the value of the asset as of the last day of the taxable year on which the specified person has an interest in the asset as the maximum value of that asset, unless the specified person has actual knowledge, or reason to know based on readily accessible information, that the value does not reflect a reasonable estimate of the maximum value of the asset during the taxable year.
  - (2) **Interests in trusts that are specified foreign financial assets—**
    - (i) **Maximum value.** If a specified person is a beneficiary of a foreign trust, the maximum value of the specified person's interest in the trust is the sum of—
      - (A) The fair market value, determined as of the last day of the taxable year, of all of the currency or other property distributed from the foreign trust during the taxable year to the specified person as a beneficiary; and
      - (B) The value, determined as of the last day of the taxable year, of the specified person's right as a beneficiary to receive mandatory distributions from the foreign trust as determined under [section 7520](/cfr/26/7520.md).
    - (ii) **Reporting threshold.** For purposes of determining the aggregate value of specified foreign financial assets in which a specified person has an interest, if the specified person does not know, or have reason to know based on readily accessible information, the fair market value of the person's interest in a foreign trust during the taxable year, the value to be included in determining the aggregate value of the specified foreign financial assets is the maximum value of the specified person's interest in the foreign trust under [paragraph (f)(2)(i)](#f-2-i) of this section.
  - (3) **Interests in estates, pension plans, and deferred compensation—** plans—(i) Maximum value. The maximum value of a specified person's interest in a foreign estate, foreign pension plan, or foreign deferred compensation plan is the fair market value, determined as of the last day of the taxable year, of the specified person's beneficial interest in the assets of the foreign estate, foreign pension plan, or foreign deferred compensation plan. If the specified person does not know, or have reason to know based on readily accessible information, such fair market value, the maximum value to be reported is the fair market value, determined as of the last day of the taxable year, of the currency and other property distributed during the taxable year to the specified person as a beneficiary or participant.
    - (ii) **Reporting threshold.** For purposes of determining the aggregate value of specified foreign financial assets in which a specified person has an interest, if the specified person does not know, or have reason to know based on readily accessible information, the fair market value of the person's interest in a foreign estate, foreign pension plan, or foreign deferred compensation plan during the taxable year, the value to be included in determining the aggregate value of the specified foreign financial assets is the fair market value, determined as of the last day of the taxable year, of the currency and other property distributed during the taxable year to the specified person as a beneficiary or participant.
- (g) **Effective/applicability dates.** This section applies to taxable years ending after December 19, 2011. Taxpayers may elect to apply the rules of this section to taxable years ending prior to December 19, 2011.

# §1.6038D-6. Specified domestic entities.

- (a) **Specified domestic entity.** A specified domestic entity is a domestic corporation, a domestic partnership, or a trust described in [section 7701(a)(30)(E)](/cfr/26/7701.md?p=a-30-E), if such corporation, partnership, or trust is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets. Whether a domestic corporation, a domestic partnership, or a trust described in [section 7701(a)(30)(E)](/cfr/26/7701.md?p=a-30-E) is a specified domestic entity is determined annually.
- (b) **Corporations and partnerships—**
  - (1) **Formed or availed of.** Except as otherwise provided in [paragraph (d)](#d) of this section, a domestic corporation or a domestic partnership is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets if and only if—
    - (i) The corporation or partnership is closely held by a specified individual as determined under [paragraph (b)(2)](#b-2) of this section; and
    - (ii) At least 50 percent of the corporation's or partnership's gross income for the taxable year is passive income or at least 50 percent of the assets held by the corporation or partnership for the taxable year are assets that produce or are held for the production of passive income as determined under [paragraph (b)(3)](#b-3) of this section (passive assets). For purposes of this [paragraph (b)(1)(ii)](#b-1-ii), the percentage of passive assets held by a corporation or partnership for a taxable year is the weighted average percentage of passive assets (weighted by total assets and measured quarterly), and the value of assets of a corporation or partnership is the fair market value of the assets or the book value of the assets that is reflected on the corporation's or partnership's balance sheet (as determined under either a U.S. or an international financial accounting standard).
  - (2) **Closely held—**
    - (i) **Domestic corporation.** A domestic corporation is closely held by a specified individual if at least 80 percent of the total combined voting power of all classes of stock of the corporation entitled to vote, or at least 80 percent of the total value of the stock of the corporation, is owned, directly, indirectly, or constructively, by a specified individual on the last day of the corporation's taxable year.
    - (ii) **Domestic partnership.** A partnership is closely held by a specified individual if at least 80 percent of the capital or profits interest in the partnership is held, directly, indirectly, or constructively, by a specified individual on the last day of the partnership's taxable year.
    - (iii) **Constructive ownership.** For purposes of this [paragraph (b)(2)](#b-2), sections [267(c)](/cfr/26/267.md?p=c) and [(e)(3)](/cfr/26/267.md?p=e-3) apply for the purpose of determining the constructive ownership of a specified individual in a corporation or partnership, except that [section 267(c)(4)](/cfr/26/267.md?p=c-4) is applied as if the family of an individual includes the spouses of the individual's family members.
  - (3) **Determination of passive income and assets—**
    - (i) **Definition of passive income.** Except as provided in [paragraph (b)(3)(ii)](#b-3-ii) of this section, for purposes of [paragraph (b)(1)(ii)](#b-1-ii) of this section, passive income means the portion of gross income that consists of—
      - (A) Dividends, including substitute dividends;
      - (B) Interest;
      - (C) Income equivalent to interest, including substitute interest;
      - (D) Rents and royalties, other than rents and royalties derived in the active conduct of a trade or business conducted, at least in part, by employees of the corporation or partnership;
      - (E) Annuities;
      - (F) The excess of gains over losses from the sale or exchange of property that gives rise to passive income described in [paragraphs (b)(3)(i)(A) through (b)(3)(i)(E)](#b-3-i-A..b-3-i-E) of this section;
      - (G) The excess of gains over losses from transactions (including futures, forwards, and similar transactions) in any commodity, but not including—

        (1) Any commodity hedging transaction described in [section 954(c)(5)(A)](/cfr/26/954.md?p=c-5-A), determined by treating the corporation or partnership as a controlled foreign corporation; or

        (2) Active business gains or losses from the sale of commodities, but only if substantially all the corporation or partnership's commodities are property described in paragraph (1), (2), or (8) of section 1221(a);

      - (H) The excess of foreign currency gains over foreign currency losses (as defined in [section 988(b)](/cfr/26/988.md?p=b)) attributable to any [section 988](/cfr/26/988.md) transaction; and
      - (I) Net income from notional principal contracts as defined in [§ 1.446-3(c)(1)](/cfr/26/1.446-3.md?p=c-1).
    - (ii) **Exception from passive income treatment for dealers.** Notwithstanding [paragraph (b)(3)(i)](#b-3-i) of this section, in the case of a corporation or partnership that regularly acts as a dealer in property described in [paragraph (b)(3)(i)(F)](#b-3-i-F) of this section (referring to the sale or exchange of property that gives rise to passive income), forward contracts, option contracts, or similar financial instruments (including notional principal contracts and all instruments referenced to commodities), the term passive income does not include—
      - (A) Any item of income or gain (other than any dividends or interest) from any transaction (including hedging transactions and transactions involving physical settlement) entered into in the ordinary course of such dealer's trade or business as such a dealer; and
      - (B) If such dealer is a dealer in securities (within the meaning of [section 475(c)(2)](/cfr/26/475.md?p=c-2)), any income from any transaction entered into in the ordinary course of such trade or business as a dealer in securities.
    - (iii) **Related entities.** For purposes of applying the passive income and asset thresholds of [paragraph (b)(1)(ii)](#b-1-ii) of this section, all domestic corporations and domestic partnerships that are closely held by the same specified individual as determined under [paragraph (b)(2)](#b-2) of this section and that are connected through stock or partnership interest ownership with a common parent corporation or partnership are treated as owning the combined assets and receiving the combined income of all members of that group. For purposes of the preceding sentence, assets relating to any contract, equity, or debt existing between members of such a group, as well as any items of gross income arising under or from such contract, equity, or debt, are eliminated. A domestic corporation or a domestic partnership is considered connected through stock or partnership interest ownership with a common parent corporation or partnership if stock representing at least 80 percent of the total combined voting power of all classes of stock of the corporation entitled to vote or of the value of such corporation, or partnership interests representing at least 80 percent of the profits interests or capital interests of such partnership, in each case other than stock of or partnership interests in the common parent, is owned by one or more of the other connected corporations, connected partnerships, or the common parent.
  - (4) **Examples.** The following examples illustrate the application of this section:
- (c) **Domestic trusts.** Except as otherwise provided in [paragraph (d)](#d) of this section, a trust described in [section 7701(a)(30)(E)](/cfr/26/7701.md?p=a-30-E) is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets if and only if the trust has one or more specified persons as a current beneficiary. The term current beneficiary means, with respect to the taxable year, any person who at any time during such taxable year is entitled to, or at the discretion of any person may receive, a distribution from the principal or income of the trust (determined without regard to any power of appointment to the extent that such power remains unexercised at the end of the taxable year). The term current beneficiary also includes any holder of a general power of appointment, whether or not exercised, that was exercisable at any time during the taxable year, but does not include any holder of a general power of appointment that is exercisable only on the death of the holder.
- (d) **Excepted domestic entities.** An entity is not considered to be a specified domestic entity if the entity is—
  - (1) **Certain persons described in section 1473(3).** An entity, except for a trust that is exempt from tax under [section 664(c)](/cfr/26/664.md?p=c), that is excepted from the definition of the term “specified United States person” under [section 1473(3)](/cfr/26/1473.md?p=3) and the regulations issued under that section;
  - (2) **Certain domestic trusts.** A trust described in [section 7701(a)(30)(E)](/cfr/26/7701.md?p=a-30-E) provided that the trustee of the trust—
    - (i) Has supervisory authority over or fiduciary obligations with regard to the specified foreign financial assets held by the trust;
    - (ii) Timely files (including any applicable extensions) annual returns and information returns on behalf of the trust; and
    - (iii) **Is—**
      - (A) A bank that is examined by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the National Credit Union Administration;
      - (B) A financial institution that is registered with and regulated or examined by the Securities and Exchange Commission; or
      - (C) A domestic corporation described in section [1473(3)(A)](/cfr/26/1473.md?p=3-A) or [(B)](/cfr/26/1473.md?p=3-B), and the regulations issued with respect to those provisions.
  - (3) **Domestic trusts owned by one or more specified persons.** A trust described in [section 7701(a)(30)(E)](/cfr/26/7701.md?p=a-30-E) to the extent such trust or any portion thereof is treated as owned by one or more specified persons under [sections 671 through 678](/cfr/26/671..678.md) and the regulations issued under those sections.
- (e) **Effective/applicability dates.** This section applies to taxable years beginning after December 31, 2015.

# §1.6038D-7. Exceptions from the reporting of certain assets under section 6038D.

- (a) **Elimination of duplicative reporting of assets—**
  - (1) **In general.** A specified person is not required to report a specified foreign financial asset on Form 8938, “Statement of Specified Foreign Financial Assets,” if the specified person—
    - (i) Reports the asset on at least one of the following forms timely filed with the Internal Revenue Service for the taxable year—
      - (A) Form 3520, “Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts” (in the case of a specified person that is the beneficiary of a foreign trust);
      - (B) Form 5471, “Information Return of U.S. Persons With Respect To Certain Foreign Corporations”;
      - (C) Form 8621, “Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund”;
      - (D) Form 8865, “Return of U.S. Persons With Respect To Certain Foreign Partnerships”;
      - (E) For taxable years beginning after March 18, 2010, and ending on or before December 31, 2013, Form 8891, “U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans”; or
      - (F) Any other form under [Title 26](/cfr/26.md) of the United States Code timely filed with the Internal Revenue Service and identified for this purpose by the Secretary in regulations or other guidance; and
    - (ii) **Reports on Form 8938 the filing of the form on which the asset is reported.**
  - (2) **Foreign grantor trusts.** A specified person that is treated as an owner of a foreign trust or any portion of a foreign trust under [sections 671 through 679](/cfr/26/671..679.md) is not required to report any specified foreign financial assets held by the foreign trust on Form 8938, provided—
    - (i) The specified person reports the trust on a Form 3520 timely filed with the Internal Revenue Service for the taxable year;
    - (ii) The trust timely files Form 3520-A, “Annual Information Return of Foreign Trust With a U.S. Owner,” with the Internal Revenue Service for the taxable year; and
    - (iii) The Form 8938 filed by the specified person for the taxable year reports the filing of the Form 3520 and Form 3520-A.
  - (3) **Joint Form 5471 or Form 8865 filing.** A specified person that is included as part of a joint Form 5471 filing pursuant to [§ 1.6038-2(j)](/cfr/26/1.6038-2.md?p=j) or a joint Form 8865 filing pursuant to [§ 1.6038-3(c)](/cfr/26/1.6038-3.md?p=c) and who notifies the Internal Revenue Service as required by [§ 1.6038-2(i)](/cfr/26/1.6038-2.md?p=i) or [§ 1.6038D-(3)(c)](/cfr/26/1.6038D-.md?p=3-c) will be considered to have filed a Form 5471 or Form 8865 for purposes of [paragraph (a)(1)](#a-1) of this section.
- (b) **Owner of certain trusts.** A specified person that is treated as an owner of any portion of a domestic trust under [sections 671 through 678](/cfr/26/671..678.md) is not required to file Form 8938 to report any specified foreign financial asset held by the trust if the trust is—
  - (1) A widely-held fixed investment trust under [§ 1.671-5](/cfr/26/1.671-5.md); or
  - (2) A liquidating trust within the meaning of [§ 301.7701-4(d)](/cfr/26/301.7701-4.md?p=d) of this chapter that is created pursuant to a court order issued in a bankruptcy under Chapter 7 ([11 U.S.C. 701](/usc/11/701.md) et seq.) or a confirmed plan under Chapter 11 ([11 U.S.C. 1101](/usc/11/1101.md) et seq.) of the Bankruptcy Code.
- (c) **Special rules for bona fide residents of a U.S. possession.** A specified individual who is a bona fide resident of a U.S. possession is not required to include the following specified foreign financial assets in the determination of the aggregate value of his or her specified foreign financial assets and, if required to file Form 8938 with the Internal Revenue Service, is not required to report the following specified foreign financial assets:
  - (1) A financial account maintained by a financial institution organized under the laws of the U.S. possession of which the specified individual is a bona fide resident;
  - (2) A financial account maintained by a branch of a financial institution not organized under the laws of the U.S. possession of which the specified individual is a bona fide resident, if the branch is subject to the same tax and information reporting requirements applicable to a financial institution organized under the laws of the U.S. possession;
  - (3) Stock or securities issued by an entity organized under the laws of the U.S. possession of which the specified individual is a bona fide resident;
  - (4) An interest in an entity organized under the laws of the U.S. possession of which the specified individual is a bona fide resident; and
  - (5) A financial instrument or contract held for investment, provided each issuer or counterparty that is not a United States person is—
    - (i) An entity organized under the laws of the U.S. possession of which the specified individual is a bona fide resident; or
    - (ii) A bona fide resident of the U.S. possession of which the specified individual is a bona fide resident.
- (d) **Effective/applicability dates.** This section applies to taxable years ending after December 19, 2011. Taxpayers may elect to apply the rules of this section to taxable years ending prior to December 19, 2011.

# §1.6038D-8. Penalties for failure to disclose.

- (a) **In general.** If a specified person fails to file a Form 8938, “Statement of Specified Foreign Financial Assets,” that includes the information required by [section 6038D(c)](/cfr/26/6038D.md?p=c) and [§ 1.6038D-4](/cfr/26/1.6038D-4.md) with respect to any taxable year at the time and in the manner described in [section 6038D(a)](/cfr/26/6038D.md?p=a) and [§ 1.6038D-2](/cfr/26/1.6038D-2.md), a penalty of $10,000 will apply to that specified person.
- (b) **Married specified individuals filing a joint annual return.** Married specified individuals who file a joint annual return and fail to file a required Form 8938 that includes the information required by [section 6038D(c)](/cfr/26/6038D.md?p=c) and [§ 1.6038D-4](/cfr/26/1.6038D-4.md) with respect to any taxable year at the time and in the manner described in [section 6038D(a)](/cfr/26/6038D.md?p=a) and [§ 1.6038D-2](/cfr/26/1.6038D-2.md) are subject to penalties under this section as if the married specified individuals are a single specified individual. The liability of married specified individuals who file a joint annual return with respect to any penalties under this section is joint and several.
- (c) **Increase in penalty.** If any failure to comply with the applicable reporting requirement of [section 6038D](/cfr/26/6038D.md) and the regulations continues for more than 90 days after the day on which the Commissioner or his delegate mails a notice of the failure to the specified person required to file the Form 8938, the specified person is required to pay an additional penalty of $10,000 for each 30-day period (or fraction thereof) during which the failure continues after the 90-day period has expired. The additional penalty imposed by [section 6038D(d)(2)](/cfr/26/6038D.md?p=d-2) and this [paragraph (c)](#c) is limited to a maximum of $50,000 for each such failure.
- (d) **Presumption of aggregate value.** For the purpose of assessing penalties imposed under [section 6038D(d)](/cfr/26/6038D.md?p=d), if the Commissioner or his delegate determines that a specified person has an interest in one or more specified foreign financial assets and the specified person does not provide sufficient information to demonstrate the aggregate value of the assets upon request by the Commissioner or his delegate, then the aggregate value of the assets is treated as being in excess of the applicable reporting threshold set forth in [§ 1.6038D-2(a)](/cfr/26/1.6038D-2.md?p=a).
- (e) **Reasonable cause exception—**
  - (1) **In general.** If the failure to report the information required in [section 6038D(c)](/cfr/26/6038D.md?p=c) and [§ 1.6038D-4](/cfr/26/1.6038D-4.md) is shown to be due to reasonable cause and not due to willful neglect, no penalty will be imposed under [section 6038D(d)](/cfr/26/6038D.md?p=d) or this section.
  - (2) **Affirmative showing required.** In order to show that the failure to report the information required in [section 6038D(c)](/cfr/26/6038D.md?p=c) and [§ 1.6038D-4](/cfr/26/1.6038D-4.md) is due to reasonable cause and not due to willful neglect for purposes of [section 6038D(g)](/cfr/26/6038D.md?p=g) and this section, the specified person must make an affirmative showing of all the facts alleged as reasonable cause for the failure to disclose.
  - (3) **Facts and circumstances taken into account.** The determination of whether a failure to disclose a specified foreign financial asset on Form 8938 was due to reasonable cause and not due to willful neglect is made on a case-by-case basis, taking into account all pertinent facts and circumstances. The fact that a foreign jurisdiction would impose a civil or criminal penalty on the specified person (or any other person) for disclosing the required information is not reasonable cause.
- (f) **Penalties for underpayments attributable to undisclosed foreign financial assets—**
  - (1) **Accuracy-related penalty.** For application of the accuracy-related penalty in the case of any portion of an underpayment attributable to any undisclosed foreign financial asset understatement, see [section 6662(j)](/cfr/26/6662.md?p=j).
  - (2) **Criminal penalties.** In addition to other penalties, failure to comply with the reporting requirements of [section 6038D](/cfr/26/6038D.md) and the regulations, or any underpayment related to such failure, may result in criminal penalties under sections [7201](/cfr/26/7201.md), [7203](/cfr/26/7203.md), [7206](/cfr/26/7206.md), et seq., or other provisions of Federal law.
- (g) **Effective/applicability dates.** This section applies to taxable years ending after December 19, 2011. Taxpayers may elect to apply the rules of this section to taxable years ending prior to December 19, 2011.