Citizenship Status and Foreign Income

Question 1

Foreign Income: What form do you file for income/ownership from a foreign trust or a large gift from a foreign person

Answer 1

Form 3520

Question 2

Foreign Income: What form do you use to report interest in a foreign partnership?

Answer 2

Form 8865

Question 3

Foreign Income: What is form 8938

Answer 3

Report foreign financial assets >$50,000 on the last day of the tax year OR
>$75,000 any day of the year
double for MFJ
* do not file if you don’t meet filing requirement
File with the IRS

Question 4

Foreign Income: What is GILTI and who is taxed? Form?

Answer 4

GILTI: TP share of Global Intangible low-tax income

TP owns 10% value OR voting rights in a controlled foreign corp (CFC).

form: 8992

Question 5

Foreign Income: What is FinCen 114 of FBAR?

Answer 5

Who: US citizen, resident or person doing business in the US
File with: Financial Crimes Enforcement Network 4/15
For: ownership interest or authority over a foreign financial account with an aggregate value > $10,000 any time during the year.
Civil and Criminal penalties if you don’t file.

Question 6

Foreign Income: What form do you use to report foreign financial account income > $10,000 anytime during the tax year

Answer 6

FinCen 114 or FBAR

Question 7

Foreign Income: What form is used to report income for directors/officers/shareholders of certain foreign corporations?

Answer 7

Form 5471

Question 8

What type of citizen statuses are their?

Answer 8

1. US citizen
2. US national
3. US Resident Alien
4. Non-Resident Alien
5. Dual Status Alien

Question 9

What is a Non-Resident Alien?

Answer 9

1. Not a US citizen

2. Does NOT pass either the green card test or the substantial presence test

Question 10

What is a green card?

Answer 10

A document issued by the US government that gives an immigrant the privilege of permanently residing in the US.

Question 11

What is the Green Card Test for Resident Alien?

Answer 11

TP has a green card that makes him a lawful permanent resident.

Question 12

What are the three statuses for Aliens to the US?

Answer 12

1. US Resident Alien
2. Non-Resident Alien
3. Dual - Status Alien

Question 13

What is a US Resident-Alien?

Answer 13

Not a US citizen but passes either:

• the Green Card Test OR
• The Substantial Presence Test
• Must file a tax return as if they are a US Citizen

Question 14

What is a Dual-Status Alien?

Answer 14

Resident Alien for part of the year and Non-Resident Alien for the rest of the year.

Question 15

When can Resident status of a Non-Resident Alien be revoked?

Answer 15

1. when ever either spouse chooses (year of)
2. death of either spouse - (If surviving spouse is a US citizen then QW/MFJ rules apply (year after revoked)
3. divorce or legal separation (year of )
4. Inadequate records (anytime the IRS decides)

Question 16

In what situations can a NR Alien file a US tax return?

Answer 16

1. married to a US citizen or resident and elects to report all world wide income
2. TP was a resident by the end of the tax year (Dual Status)

Question 17

When can a TP married to a NR Alien be claim the Head of Household filing status? How is EIC affected?

Answer 17

Requiremenst HH:
1. Spouse is a NR Alien at any time during the year
2. TP chooses not to treat spouse as a RA
3. TP meets the rest of the HH requirements
Spouses are considered unmarried for HH and married for EIC

Question 18

What should be included in a letter revoking a NR Aliens status as a RA?

Answer 18

1. name, address, ssn or itin of each spouse
2. name, address of person revoking for a dead spouse
3. state, foreign countries, and property where community property laws apply

Question 19

Can a NR Alien get EIC?

Answer 19

NO. Exception: If NR Alien files MFJ and declares all worldwide income

Question 20

Is a NR Alien required to file a tax return? What is the tax rate?

Answer 20

Yes: If the person earns wages effectively connected to a US business (US income only)
Tax Rate: 30%

Question 21

How are scholarships, fellowships and grants taxed for NR Aliens?

Answer 21

If the funds where received for activities conducted outside the US the money is treated as foreign sourced income and not included on a US tax return

Question 22

What credits are disallowed for NR Aliens? (2)

Answer 22

1. elderly
2. education unless TP elects to be treated like a US resident
3. EIC

Question 23

Can a NR Alien take the standard deduction or itemized deductions?

Answer 23

Standard Deduction: Yes
Itemized Deduction: Yes, if the deduction is connected to income from a US trade or business 
Some things that can be itemized: 
-state and local taxes
- charity to a US organization
-casualty and theft loss

Question 24

Substantial Presence Test:
How long does a Non-Resident Alien have to be in the United States to be considered a resident? If they are resident what would their immigration status be?

Answer 24

The Substantial Presence test would be used. 
At least :
2019: 31 days AND
183 days during 2019,2018,2017
Count all days in 2019
Count 1/3 days in 2018
Count 1/6 days in 2017

Immigration status would be Dual Status - part year Non-resident alien and part year Resident Alien

Question 25

Foreign Income: How are Form 8938 and FBAR different? (3)

Answer 25

1. FBAR foreign financial acct >$10000
   8938 aggregate foreign financial assets >50,000 for year OR $75,000 any day during year
2. FBAR filed: Financial Crimes Enforcement Network
   8939 filed: with TP’s regular IRS return
3. FBAR: limited to bank and financial accounts
   8939: not limited to bank/financial accounts

Question 26

What qualifies as a CFC (Controlled Foreign Corporation)?

Answer 26

US shareholders own more than 50% of:

1. all voting power of all classes of voting stock OR
2. Total value of all the stock of the corporation

Question 27

What form is used to report transactions of US person with a foreign trust?

Answer 27

3520

Question 28

What form is used to report US taxpayers interest in a foreign partnership?

Answer 28

8865

Question 29

Who must file form 8865 (US taxpayer’s interest in a foreign trust)? (4)

Answer 29

1. => 50% ownership
2. => 10% ownership of US controlled PS
3. Contributed property resulting in:
   * => 10% interest OR
   * > $100,000 FMV
4. Has a reportable event (acquisition, disposition or change in % ownership)

Question 30

Foreign or Domestic Income: A NR-Alien student receives a scholarship/fellowship/grant from a US company/school for activities OUTSIDE the US?

Answer 30

Foreign Income and not taxable on a US tax return