# FBAR question for a friend



## spinningbird5 (Jul 6, 2019)

I'm asking for an anxious friend. I have learned a lot about my own situation from this forum in the past and thus would like to relay her questions here. Sincerely hoping someone can share their thoughts on what to do next.

Friend doesn't feel comfortable to further share some details, please kindly understand. 

------ friend's message below: ----------

Citizen by marriage. 
Currently living oversea with husband for work. Intend to go back to the US eventually.
Properly reported all income and asset each year since having US tax obligation.

1982 family co-founded a quite successful medium size business. 
1995 parents early retired from this business with their cash.
1997 to diversify the risk and for estate planning, parents moved majority of their cash to form a foreign company. Net is between 4-5 MM. I owned 1% of the company at age 12.
2006 parents divorced and terminated this company and all funds are split between parents. 
2010 I came to the US
2012 Married to my husband.


A while ago, I was informed that the existence of the company was "leaked" and it's possible that the authority would know the existence but not the termination. 

And since I was underage I didn't have any documentation about the company's starting and ending. And my parents already lost the documents as it's been more than 10 years since they terminated the company.

So I'm very worried that what if the IRS will later request information about it and I wouldn't able to prove it with paperwork that it has long been terminated before I came to the US and that I'd never participated in any activity with this company.

All I can do is trying to reason with them that I was too young and the termination was done by my parents long time ago. 

But what if they don't believe it and try to place a big fine on me or accusation without any evidence? Will I be totally defenseless? 

I want to do something so that I can feel more prepared! Some ideas include:
1. come forward with the authority and tell them the truth ASAP, since it might get muddier as time goes by. 
2. try to have parents look for the paperwork but unlikely it will work. 
3. trust the system and the process that they wouldn't make accusation without an evidence, and will take my words as good faith.

I'm getting more anxious day by day and really want to stop worrying about it or do something to prepare for it... what can I do???? 

------ end friend's message ----------

Could someone who know better how the IRS usually handles information request advise if she's over worried or what are proper defense she could have?

thank you.


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## Nononymous (Jul 12, 2011)

So this friend isn't currently in the US, but it US tax compliant because she intends to return and is generally law-abiding, if I understand it?

And this friend is worried that the IRS will somehow penalize her for having had a $50k share in a foreign company that existed between 1997 and 2006 - well before she came to the US in 2010?

This is nuts. She should just forget about it. As far as I can tell - not being a tax accountant or lawyer - there's nothing for her to be accused of, with or without evidence. I have no idea what "the existence of the company was leaked" could even mean in this context.


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## Bevdeforges (Nov 16, 2007)

There is nothing to worry about. Company was terminated in 2006, before the person went to the US. Ancient history and of no import to the IRS or any other US authorities.

It's safe to assume here that the parents have no US tax obligations - but even if they did, they would be the ones with a "problem" if there was some sort of problem with the way the company was dissolved or how the funds were distributed. But there is no impact whatsoever on the daughter from any of this.


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## Moulard (Feb 3, 2017)

According to the timeline the family business was dissolved before your friend became a US person. Therefore there is nothing to worry about from a US tax compliance perspective. There are no retrospective filing requirements.


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## spinningbird5 (Jul 6, 2019)

Thanks everyone for the replies.. I think what's concerning here is the burden of proof:



---------------- friend message ----------------------

Thanks for the response. 


My primary concern is if the burden of proof is on me to prove that the company was terminated before I came to the US...?

From what I was told, the information that leaked seems to only indicate that all 3 of our names (parents and I) co-owned the business, nothing more.

If the authority would like to place a fine, I'm afraid that it will become a "my words against theirs" situation and I am defenseless ... it would make me feel safer if burden of proof is on their end, but who knows ..

I'm hoping to find some past contacts from my parents so that I could request some copies of the documents but it's more than a decade, not sure if anything would be left.


As you know, I am not in the US now and don't think there are lawyers here that understand US tax and reporting this much. 

Can you ask them if they know who has the burden of proof? Do I need to be worried about potential accusation without basis? 

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## Nononymous (Jul 12, 2011)

Burden of proof for what? Accusation of what?

There is literally nothing she could be accused of or penalized for.

This is slightly bonkers.


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## Bevdeforges (Nov 16, 2007)

Have to agree with Nononymous. What "authority" (US, I assume) and what information has "been leaked"? A foreign company is of no interest to the IRS unless it was owned by a US citizen/taxpayer and/or was doing business in or with the US. 

The company doesn't even exist anymore. Depending on what country it was established in, there should be some record of it in the appropriate business registration archives that would show when it was disbanded. But that's all public information (usually) and if a question were ever to arise, that's where she should refer anyone asking about it.


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## Moulard (Feb 3, 2017)

I agree wholeheartedly with Bev and Non on this.

That said fear is not always rational.

Perhaps one course of action your friend could take is to get an extract from a relevant corporate register that shows the date the company was formally wound up and then file it in the bottom of their filing cabinet as a "just in case" for an event that will never happen.

I am guessing that it was some form of Pty Ltd type company (even if it was privately held) and that the country in question has a corporate regulator responsible for companies (even if only as a names register). If the company was formally wound up, there should be public records that states the company name has been de-registered \.

Using the Australian regulator by way of an example, you can search a business name and return its formally registered name, company number, tax number, registration status, address etc... 

Not that it would ever happen, but with a copy of that filed away, it would be prima facie evidence that the company was disolved before your friend became a US person.


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## NatGold (Jul 9, 2019)

If she was not a U.S. Citizen / Tax Resident when the company was active/terminated, I don't see any reason it would be declared now that she is a citizen. 

The IRS only implements worldwide taxation once you gain tax residency, but doesn't go back and that income is not subject to U.S. taxation UNLESS it had U.S. Sourced Income, which it doesn't seem like it did. 

Basically, just wait for a letter from the IRS (which should never come) and at that point, they will provide you with what steps to take next. 

If she is really concerned, she can call the IRS International Hotline to confirm: +1 267-941-1000 for international callers or overseas taxpayers


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## spinningbird5 (Jul 6, 2019)

Thanks everyone for the responses. I've also shared some useful past post from this forum (which educated me quite a lot) with my friend. I think she's less panic now. To hopefully put an end to this, she wanted to try to explain why she acted paranoid:

----------- friend message ------------

Thanks for all your input.

I guess I was too panic stricken to think straight. The company was formed in one of the so called "tax heaven" (of course my parents weren't doing anything weird there ..), so to me it looks alerting. And I have heard that recently the IRS (the "authority" I was referring to) has earned a lot from placing a fine on the violators (some even said even jail time! :/ :/). So I was afraid that they are financially motivated to target people that they know might have foreign assets that are not reported in the fbar or tax return, without trying to obtain some adequate "evidence" first. And since I don't have documents with me right now, I was afraid I wouldn't be able to defend myself.


But I guess and hope there are still processes in the system and if this really happens then there should be public records of that being dissolved before I became a US person, as a comment mentioned above. Likely this will never happen.

btw does anyone know if those public records exist of a company being dissolved, how long do they usually keep those?

Thanks a lot for the replies again.
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