Specified Foreign Financial Assets — 1121 Inst 8938 (PDF)

Types of Specified Foreign Financial Assets

Specified foreign financial assets include the following assets.

Financial accounts maintained by a foreign financial institution.
The following foreign financial assets if they are held for investment and not held in an account maintained by a financial institution.

a. Stock or securities issued by someone that is not a U.S. person (including stock or securities issued by a person organized under the laws of a U.S. possession).

b. Any interest in a foreign entity.

c. Any financial instrument or contract that has an issuer or counterparty that is not a U.S. person (including a financial contract issued by, or with a counterparty that is, a person organized under the laws of a U.S. possession).

For foreign financial assets excepted from reporting, see Assets Not Required To Be Reported , later.

Financial Account

A financial account is any depository or custodial account (under Regulations section 1.1471-5(b)(1)(i) or (ii)) maintained by a foreign financial institution as well as any equity or debt interest in a foreign financial institution (other than interests that are regularly traded on an established securities market) or any cash value life insurance or annuity contract maintained by an insurance company or other foreign financial institution. 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 (American Samoa, Guam, the Commonwealth of

the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands).

Foreign financial institution. In most cases, a foreign financial institution is any financial institution that is not a U.S. entity and satisfies one or more of the following.

It accepts deposits in the ordinary course of a banking or similar business.
It holds financial assets for the account of others as a substantial part of its business.
It is engaged (or holds itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest (including a futures or forward contract or option) in such securities, partnership interests, or commodities.

Other Specified Foreign Financial Assets

Examples of other specified foreign financial assets include the following, if they are held for investment and not held in a financial account.

Stock issued by a foreign corporation.
A capital or profits interest in a foreign partnership.
A note, bond, debenture, or other form of indebtedness issued by a foreign person.
An interest in a foreign trust or foreign estate.
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.
An option or other derivative instrument with respect to any of these examples or with respect to any currency or commodity that is entered into with a foreign counterparty or issuer.

Assets held for investment. You hold an asset, including a partnership interest, for investment if you do not use it in, or hold it for use in, the conduct of any trade or business.

Stock is not considered used or held for use in the conduct of a trade or business.

If you are required to file