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Maximum account value

The Form 8938 instructions describe maximum account value as the highest value of a financial account during the tax year.

Meaning and use

The Internal Revenue Service instructions for Form 8938 describe maximum account value as the account's highest value during the tax year. They require this value for each specified foreign financial asset reported on the form, with financial account values generally based on fair market value.[1]

The instructions distinguish an account's maximum value from the value used to decide whether the total value of specified foreign financial assets meets a reporting threshold. They generally use fair market value for that total, and give a separate rule for a foreign trust interest when its fair market value during the year is not known or readily accessible.[1]

For a financial account, periodic statements for the tax year may provide the reported maximum. That treatment has a condition: the account holder cannot know or have reason to know from readily accessible information that the statements fail to give a reasonable estimate of the year's maximum.[1]

Valuation rules and exceptions

For an asset denominated in foreign currency, the instructions require determining its maximum in that currency and converting it to U.S. dollars. The exchange rate is generally the rate for purchasing U.S. dollars published by the Treasury Bureau of the Fiscal Service. Generally, use the exchange rate from the last day of the tax year even if the asset was disposed of earlier; for a financial account, you may instead rely on the conversion rate in a statement issued at least annually by the institution maintaining the account.[1]

If the maximum value is below zero, the reported maximum is zero. For an asset other than a financial account, the instructions generally permit using its value on the last day of the tax year when it is held for investment outside a financial institution's account, unless readily accessible information indicates that value is not a reasonable estimate of its maximum during the year.[1]

Foreign trust interests have a separate calculation for beneficiaries. It adds cash or other property distributed to the beneficiary during the year to the value of a right to mandatory distributions, measured under section 7520 tables at year end. For foreign estates, pensions, and deferred compensation plans, the general measure is the fair market value of the beneficial interest at year end. If you received no distributions during the tax year and do not know or have reason to know based on readily accessible information the fair market value of your interest as of the last day of the tax year, use zero as the maximum value of the asset.[1]

Jointly owned assets

The amount reported for joint ownership depends on filing circumstances. Spouses filing a joint return report an asset they own together once on their combined Form 8938, using the entire asset's maximum value. Spouses filing separate returns each report a jointly owned asset on their own forms, also using the entire value. Other joint owners report the entire asset value when the special joint-return rule does not apply.[1]

Questions and answers

Does maximum account value mean the account balance at year end?

The Form 8938 instructions refer to the maximum during the tax year. Periodic statements may be used unless readily accessible information gives reason to know they do not reasonably estimate that maximum.[1]

How are foreign currency account values converted?

The instructions say to determine maximum value in the foreign currency, then convert to U.S. dollars. Generally, the exchange rate from the last day of the tax year applies, including when the asset was disposed of earlier.[1]

What value applies to a jointly owned account?

For spouses filing jointly, the asset is reported once at its entire value. When spouses file separately, each reports the entire maximum value on their separate Form 8938.[1]

How do the instructions value a foreign trust interest?

For a beneficiary, the maximum value adds distributions during the tax year and the value of a right to mandatory distributions at year end. The instructions use valuation tables under section 7520 for that right.[1]

  • Reporting threshold for Form 8938: The Form 8938 instructions set asset value thresholds for specified individuals based on marital status, filing status, and qualifying residence abroad.
  • FATCA: FATCA requires certain U.S. taxpayers to report foreign assets and financial institutions to report accounts to the IRS. Form 8938 may apply at thresholds.
  • Financial interest in an account: FBAR rules define financial interest through account ownership or relationships to the legal title holder. A U.S. person named on an account has an interest.
  • Specified individual: The Form 8938 instructions use specified individual for several categories of people. U.S. citizens and resident aliens count, as do some nonresident aliens.

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Sources and data notes
  1. Internal Revenue Service, Instructions for Form 8938. https://www.irs.gov/instructions/i8938. Retrieved .
  2. FinCEN, Report foreign bank and financial accounts. https://www.fincen.gov/report-foreign-bank-and-financial-accounts. Retrieved .
  3. U.S. Government, 31 CFR 1010.350. https://ecfr.io/Title-31/Section-1010.350. Retrieved .
  4. Internal Revenue Service, FATCA summary. https://www.irs.gov/businesses/corporations/summary-of-key-fatca-provisions. Retrieved .
  5. U.S. Department of the Treasury, FATCA: agreements by jurisdiction. https://home.treasury.gov/policy-issues/tax-policy/foreign-account-tax-compliance-act. Retrieved .
  6. Internal Revenue Service, 26 CFR 1.1471-4. https://www.irs.gov/instructions/iw9. Retrieved .

Dates in this block record when each source was read for this page.