In a Facebook discussion, I said,
4. FINCEN only covers financial accounts. You are not required to report gold or other precious metals or cash held abroad. Your statement that the rules apply to the contents of safe deposit boxes is false. There is an IRS FAQ that says so. I linked to it repeatedly.
Reader Dog Thorburn responded,
On # 4, respectfully John, you are incorrect.
I had such a case. My client thought reporting the contents of his safe deposit box in Switzerland might be required when this crap began to come down in '08. I didn't believe it, and after reading the reg's and making little sense of them, I called the IRS regulation writer who wrote the reg's. She told me the contents, precious metals, had to be reported. Now, granted, that doesn't mean she was right. But upon further investigation, I concluded she was. Show me your IRS FAQ link please!
Doug Thorburn John T. Reed Good to know, but this refers to Form 8938, not the FinCEN report. Is the answer in regards to FinCEN the same, or is it different? It clearly was required in 2008 when I researched the topic. (BTW, the link is an excellent resource. Thank you.)
Doug Thorburn John T. Reed Robert W. Wood, who writes a tax column for Forbes, and Milan Ball write that the contents of safe deposit boxes "may" be reportable, and get into the gory details in this excellent piece: http://www.woodllp.com/Publications/Articles/pdf/Reporting_Cash_TN.pdf
Doug Thorburn And this shows the vast differences in reporting requirements between Form 8938 and Form 114 (FinCEN). Note that it states reporting safe deposit box contents isn't required for either form, but the IRS wrote this and we all know (or do we?) that we cannot rely on the IRS's own pronouncements as substantive authority. It's a disgusting state of affairs.
John T. Reed Requiring divulging the contents of a safe deposit box, especially one in a foreign country, strikes me as a search without probable cause or a warrant. The government has the right to enforce laws, but not to be generally nosy for no particular purpose.
I would like to see Doug’s citation on that. Also seems like it is covered by various money laundering rules like having to disclose when you take $10,000 or more across the border. Or when you wire money abroad.
Even the bank that holds the safe deposit box gives you a private room in which to access the contents and looks the other way literally if you open it in their presence.
Divulging the contents of a safe deposit box also sounds like something for a debtor deposition where a person is in bankruptcy or has lost a judgement but not yet paid it.
Doug Thorburn Governments violate the real law--the Constitution--all the time with impunity (a subject for a different time: how stare decisis allowed law to deviate so far from the original intent). One of the links (and I've only skimmed them so far, but I will more thoroughly digest them later) says that IF you can instruct the bank to open the safe deposit box and instruct them to buy or sell contents to it, THEN the contents of that box must be reported on the FinCEN (back then, FBAR) report. Unfortunately, my client died last year, so I can't ask him if that was the case. However, we both concluded that the contents must be reported and we did a sort-of "silent" filing with a request for abatement of penalties. Never heard from them, which made us both very happy.
The Constitution—the highest authority for those not knowledgeable about U.S. law—says you cannot do a search without a warrant and that warrant must be based upon a probable cause to believe that a crime has been committed which must come from a credible affidavit. There has been much talk about lately regarding the FISA warrant on Carter Page.
Regulations must stay within the mandate of BOTH the Constitution and the statute that authorizes them.
Seems to me the citizen or U.S. resident in question ought not disclose it on Constitutional grounds. Perhaps also on statutory grounds if there is no explicit statute requiring it.
In the event of litigation on it, the Treasury would have to state how the court in question had jurisdiction and in the event of a very likely 12(b)(6) motion (failure to state a cause of action, that is, suing over a law violation that violates no law), state the Constitutional and statutory genesis of the law violation. Absent that, the Treasury should lose the motion.
I need to see the chain of authority from the U.S. Constitution and other pertinent statutes to the conclusion that U.S. residents must disclose foreign currency held in the form of cash needs to be disclosed to the Treasury absent a search warrant of unpaid judgment against the resident.
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