# FMV in FCATs



## cescolar (May 31, 2013)

I own 49% of a Spanish corporation. The company has a debts and has not made any money in years.
The company owns some real estate, but, given the state of that market there, there are no buyers.
I filed form 8938 for it. I would like to not do it in the future. Could I argue that since nobody in their right mind would buy 49% of a money losing corporation that its FMV is 0?


----------



## Bevdeforges (Nov 16, 2007)

You can argue anything you like. US tax law is based on precedent as much as on the actual statutes and regulations. You only have to defend the position you take if the IRS comes back asking questions, and chances are they won't do that until your tax returns come to their attention for some reason.

Depending on what the rest of your return looks like, you may be able to get away with the 0 valuation of the corporation without difficulty. But all this FATCA reporting stuff is fairly new, and I haven't heard of too many prosecutions so far, so it's hard to know what level of enforcement to expect. I don't, however, believe that there is a tremendous risk of IRS auditors combing through the corporate records in Spain (or any other country outside the US) trawling for corporations that meet the technicalities of the FATCA reporting rules. What auditors are assigned to non-US work will be dealing with identified problems and big banks known for their "secret accounts" and dubious investment fronts. 
Cheers,
Bev


----------



## cescolar (May 31, 2013)

Ok, I could probably get away with it. I am just intellectually curious about it.

_IRS Definition: Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. IRS Publication 561_

If no buyer if their right mind would buy a property right now, then I am arguing that the property has 0 value. (Perhpas when the market conditions change, it will have value again...)


----------



## Bevdeforges (Nov 16, 2007)

It can depend, too, on what the IRS interest is in the asset. There was a case a couple years back about a family that inherited a work of art. For some reason, however, the particular piece cannot be sold - there is a legal ban on sale or transfer of the work. (I forget the details.) 

The IRS is valuing the piece at several million dollars, resulting in a significant estate tax bill for the heirs, however there is the argument that, because the piece cannot legally be sold, that the FMV should be $0. And because of the restriction on the sale, they can't loan or donate the piece to a museum to claim the tax deduction, either.

Still, given the financial state of Spain at the moment, I think you can probably support your FMV of $0 for the time being.
Cheers,
Bev


----------



## BBCWatcher (Dec 28, 2012)

So if the share in the business is genuinely worth zero, why don't you sell it to your relative for $1?


----------



## cescolar (May 31, 2013)

Bevdeforges said:


> There was a case a couple years back about a family that inherited a work of art. For some reason, however, the particular piece cannot be sold - there is a legal ban on sale or transfer of the work. (I forget the details.)


Yes, I remember that case. And I think the family got stuck with the 7 million assessment, which I thought was grossly unfair!


----------

