# SCI property USA taxes



## April10

Hello
I am living in France and I bought a house with 5 other people through an SCI. Does anyone know if I need to declare my portion of the SCI as assets on my American taxes? thank you


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## Bevdeforges

If it's the house you're living in, then no, I wouldn't bother to declare it. If you're using the house as an investment (say, renting it out) then perhaps it would be best to report the SCI shares as your investment.


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## 255

April10 -- Bev is right, real estate, held in your own name is not reportable as a financial asset on IRS form 8938 (if you are deriving income, that is reported elsewhere.) If the value of your interest in the foreign entity (SCI,) puts you over the threshold for filing IRS form 8938, then you have to report your interest in the SCI, but not the real estate specifically. Cheers, 255


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## April10

It is so nice to find helpful people. Thank you both for your answers. Because there are 4 of us in the SCI the income from rent I have to declare here in France is about 1000euros. So I will put that in deriving income elsewere. There is no interest made. 
As far as the "shares" go, I'm not sure if that is "CAPITAL SOUSCRIT - APPELE, NON VERSE" 
I'm not sure that my american lawyer understands the French/american system....
This is what she wrote me "You said you own part of the building that is rented. What is her portion worth? This would be included in her total foreign assets."
the "building" is our secondary house. 
That is why I got so confused. This is all so frustrating and new for me.


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## 255

April10 -- You have to divorce yourself from the idea that you own foreign real estate. In fact, you own part of a company, the SCI, that owns foreign real estate. If all the SCI owns is the property in question, then your portion of the SCI on 31 December is whatever percentage (25%?) of the "fair-market-value" the property is worth. Of course, the SCI probably has a bank account to collect rents, so that is also included in the assets of the SCI. 

It depends on the value of your interest (it doesn't mater if it's shares, units, or another kind of ownership interest,) as to your reporting requirement on IRS form 8938 -- the threshold is $50K. So a couple of examples:

a. Your ownership interest in the SCI is $40K and you have no other reportable foreign assets. In this case you have no reporting requirement (other than your distributions from the SCI, as passive income.)

b. Your ownership interest in the SCI is again $40K, but in this case you have $20K worth of euros in a French checking account (remember you have to covert euros to USD.) Now you have $60K of reportable assets (the checking account and your interest in the SCI,) so yo are over the $50K threshold and you now have a reporting requirement. Again, still no reporting requirement for the real estate property, just your ownership interest in the SCI!

c. Your interest in the SCI is $60K -- now you have a reporting requirement of all your foreign assets.

My comments only concern your U.S. tax obligations. Cheers, 255


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## April10

I think that I just might have understood. Thank you for this wonderful explaniation. My last question... I imagine I get to pay American taxes on my foreign assets? which sadly are now over $50,000 because of the interest in the SCI.


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## 255

April10 -- I would say "gladly" your foreign assets are over $50K! The reporting requirement for foreign assets is only an "information" return. There are zero taxes, by the U.S. on foreign or domestic assets, at this time (the current administration has talked about a "wealth tax," but I think it will be tough to get through the Senate.) You will only owe taxes to the U.S. on your distributions from the SCI, but you can get a tax credit for any taxes paid to France. Cheers, 255


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## 255

April10 -- You didn't ask, but if a U.S. person holds more than 10% of a foreign entity, you'll need to file IRS form 5471 for the SCI. Cheers, 255


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## Bevdeforges

April10 said:


> I think that I just might have understood. Thank you for this wonderful explaniation. My last question... I imagine I get to pay American taxes on my foreign assets? which sadly are now over $50,000 because of the interest in the SCI.


You don't pay US taxes on the assets, but only on the income from the assets (i.e. your share of any rentals, less your share of the expenses related to that income).


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## April10

Ok. Thank you. And yes, it is gladly that I own part of this new house.... I am thankful. Just a bit stressed out by all this tax stuff. Thanks again


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## eairicbloodaxe

April10 said:


> Ok. Thank you. And yes, it is gladly that I own part of this new house.... I am thankful. Just a bit stressed out by all this tax stuff. Thanks again


Don't forget (if the plan is to rent the place out as a holiday let) an SCI can only rent an unfurnished property.
You need to find another way to fund and own the furniture.

Kind regards


Ian


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## 2022WT

255 said:


> April10 -- You didn't ask, but if a U.S. person holds more than 10% of a foreign entity, you'll need to file IRS form 5471 for the SCI. Cheers, 255


HI I came across your posting. We have a SCI-IS, all income/expenses stay within SCI-IS. We do not wish to receive any reportable income for the US tax return. We just need to declare ownership of the corp.
For the form 5471, why does it ask all the details of the SCI ?


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## 255

@2022WT -- Your question: "For the form 5471, why does it ask all the details of the SCI ?" The U.S. is always looking for a windfall from so called "rich" Americans "stashing" money overseas. The 5471 is an information return designed to capture those folks. Unfortunately, it also affects "the little guys," just like FATCA -- lots of unintended consequences. Cheers, 255


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## 2022WT

2022WT said:


> HI I came across your posting. We have a SCI-IS, all income/expenses stay within SCI-IS. We do not wish to receive any reportable income for the US tax return. We just need to declare ownership of the corp.
> For the form 5471, why does it ask all the details of the SCI ?


@255-- thanks a lot. My US CPA completely gave up on me on 5471, she asked me to provide her equivalent of American style balance sheet/ income statement for her or she cannot do anything. I am trying my best to fill this form out myself. Since it is informational return, how accurate does it have to be? The French tax return is what puzzles me more, any resources on understanding French tax return for SCI? or resources for helping with form 5471 from French return?
Many thanks!


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## 2022WT

eairicbloodaxe said:


> Don't forget (if the plan is to rent the place out as a holiday let) an SCI can only rent an unfurnished property.
> You need to find another way to fund and own the furniture.
> 
> Kind regards
> 
> 
> Ian


Hi Ian,
My understanding is, SCI-IS allows furnished rentals. Do check.


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## 255

@2022WT -- The balance sheet and income statement are standard documents to track the health of a business. An income statement assesses profit/loss over a period of time whereas the balance sheet shows the financial position of a business at a period of time. The information from these documents is what is needed to complete 5471. These should be simple to prepare. Your French tax return doesn't really play into it. There are plenty of samples for income sheet and balance statements, for free, online. The instructions for form 5471 can explain any questions you have, on filling out specific lines. Cheers, 255


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## dpdapper

Just saw this thread. So if one has a non-income generating SCI (it owns an apartment used solely as a secondary residence and is never rented) which is the right form to file? The instructions for 8938 say you don’t need to file it if you file 5471, but 5471 doesn’t have the same exception for 8938. They do seem to report much of the same information.


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