What IRS tax form would I fill out if I received a return from a high yield off shore investment?
Full Question:
Answer:
If you are a U.S. citizen or resident alien, you must report income from all sources within and outside of the U.S. Income must be reported whether or not you receive a Form W-2 Wage and Tax Statement, a Form 1099 (Information Return) or the foreign equivalents. See Publication 525, Taxable and Nontaxable Income at the link below for more information.
In addition to reporting your worldwide income, you must also report on your U.S. tax return whether you have any foreign bank or investment accounts. The Bank Secrecy Act requires you to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if:
-You have financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and
-The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.
More information on foreign financial account reporting requirements is in News Release FS-2007-15, Foreign Financial Accounts Reporting Requirements and Publication 4261, Do You have a Foreign Financial Account?
Generally the "character" and "source" of income are not changed by shifting income items through one or more additional entities (domestic or foreign).
For example:
If a foreign trust is not treated as a grantor trust, distribution of its income is taxable to U.S. beneficiaries when made. Distributions of trust corpus are not taxable. IRC § 652 (simple trusts) and IRC § 662 (complex trusts) specify that distributions have the same character in the hands of the beneficiaries that the income had in the hands of the trustee.
A capital gain from a U.S. partnership remains a capital gain in the hands of the partners to that U.S. partnership, and to any persons receiving the income in additional tiers below the initial recipient.
We are unable to provide legal or tax advice, as this service provides information of a general legal nature. The answer will depend on the nature of the investment and the facts involved.
