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International Reporting - See Special Enrollment Exam

  1. Which of the following statements is correct regarding Rafael's 2025 reporting obligations?
    Answer: Rafael must file Form 8938 with his 2025 Form 1040 because the account balance exceeded $50,000 on the last day of the year, and he must also file FinCEN Form 114 with FinCEN because the account exceeded $10,000 at any time during 2025. FinCEN Form 114 instructions; 31 U.S.C. § 5314; IRC § 6038D. The unmarried-resident Form 8938 threshold is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the year; Rafael's year-end balance of $58,000 meets it. The FBAR threshold is more than $10,000 at any time, without regard to income. Choice A correctly states both obligations. Choice B misstates the FBAR filing method and the Form 8938 threshold. Choice C swaps the filing destinations and wrongly treats Form 114 as satisfying Form 8938. Choice D invents an income requirement for FBAR. FinCEN Form 114 is due April 15 with an automatic extension to October 15 and is filed electronically with FinCEN; Form 8938 is filed with the income tax return.
  2. Which of the following statements is correct regarding Giselle's obligation to report these gifts?
    Answer: Giselle must report the gifts on Form 3520 because the aggregate amount received from the foreign corporation exceeded $20,116. IRC § 6039F; Form 3520 instructions. A U.S. person must report purported gifts received from a foreign corporation on Form 3520 when the aggregate amount from that source exceeds $20,116 for 2025. The threshold applies to the total received from that source during the year, not separately to each gift, and Giselle received $25,000. Choice D is correct. Choice B ignores the aggregation rule. Choice C names the wrong form: Form 8938 reports specified foreign financial assets that a taxpayer holds, not gifts received. Choice A names the wrong form: Schedule B is not the reporting vehicle for foreign gifts.
  3. Which of the following correctly describes her 2025 reporting obligations?
    Answer: She must file Form 3520 to report the gift, and she must file an FBAR to report the Irish account. IRC § 6039F and the Instructions for Form 3520, Part IV, require a US person to report purported gifts from foreign corporations or foreign partnerships that exceed $20,116 in aggregate for 2025. The $25,000 she received exceeds that amount. The IRS may treat a purported gift from a foreign corporation as income, but the reporting duty applies either way. Separately, the Irish account held $25,000, which exceeds the $10,000 aggregate maximum-value threshold for FinCEN Form 114 (FBAR), and the FBAR obligation does not depend on where the deposited money came from. Choice A is correct. Choice B wrongly exempts an account because it was funded with a gift. Choice C applies the $100,000 threshold for gifts from nonresident alien individuals to a gift from a foreign corporation. Choice D treats Form 8938 as a substitute for the FBAR; the two are separate filings, and her $25,000 of foreign assets is below every Form 8938 threshold in any case.
  4. Which of the following correctly describes the treatment of the $21,000 of German income tax on her 2025 return?
    Answer: The $1,500 of German tax attributable to the included wages is eligible for the foreign tax credit on Form 1116; the remaining $19,500, attributable to the excluded wages, may not be credited, deducted, or carried over. IRC § 911(d)(6) disallows a deduction or credit for foreign income taxes paid with respect to amounts excluded under § 911, and Treas. Reg. § 1.911-6 allocates the taxes between excluded and included earned income. Of the $21,000 of German tax, $21,000 × 130,000/140,000 = $19,500 is attributable to the excluded wages and may not be credited, deducted, or carried over. The remaining $1,500 is attributable to the included wages and is eligible for the foreign tax credit on Form 1116, subject to the usual § 904 limitation (and, if not currently usable, to the foreign tax credit carryover rules). Choice A would allow a credit for taxes on the excluded income. Choice C wrongly treats the disallowed portion as a carryover. Choice B wrongly assumes the FEIE forces an itemized deduction and ignores that § 911(d)(6) also bars the deduction for taxes on excluded income.
  5. Marta, a U.S. citizen, was a bona fide resident of Costa Rica for all of 2025 and elected the foreign earned income exclusion. In 2025 she received $142,000 in salary for services performed in Costa Rica, $6,000 of interest from a Costa Rican bank, and $9,000 of dividends from a foreign corporation. What amount of this foreign income is includible in her 2025 U.S. gross income?
    Answer: $27,000 Governing authority: IRC § 911(a), (b)(2)(D). Before the exclusion, Marta's foreign income is $157,000 ($142,000 salary + $6,000 interest + $9,000 dividends). The foreign earned income exclusion for 2025 is limited to $130,000 of foreign earned income. The salary is foreign earned income, so $130,000 is excluded and the remaining $12,000 of salary is included. The interest and dividends are not foreign earned income, so the entire $15,000 is included. Total includible income = $12,000 + $6,000 + $9,000 = $27,000. Choice A ($15,000) excludes the full salary without applying the $130,000 cap and includes only the investment income. Choice B ($21,000) includes the remaining $12,000 salary and the $9,000 dividends but omits the $6,000 interest. Choice D ($157,000) is the pre-exclusion total and ignores the exclusion entirely.
  6. Which of the following correctly describes whether she must file Form 8938 or an FBAR for 2025?
    Answer: She must file an FBAR, but no Form 8938, because the condominium is not a specified foreign financial asset and the account value is below the Form 8938 threshold. IRC § 6038D and the Instructions for Form 8938; for the FBAR, 31 U.S.C. § 5314 and 31 C.F.R. §§ 1010.350 and 1010.306(c). Specified foreign financial assets for Form 8938 include foreign financial accounts but not foreign real estate held directly, so the French condominium is excluded. For an unmarried taxpayer living in the United States, Form 8938 is required only when specified foreign financial assets exceed $50,000 at year end or $75,000 at any time during the year. The Swiss account was $30,000 at year end and $35,000 at its highest, so no Form 8938 is required. An FBAR (FinCEN Form 114) is required when the aggregate maximum value of foreign financial accounts exceeds $10,000 at any time during the calendar year; the Swiss account's $35,000 maximum exceeds that, so an FBAR is required. Directly held foreign real estate is not reportable on either form. Choice C is correct. Choice A is wrong because it counts the condominium, which is not reportable on Form 8938 or the FBAR; without it, the account is below the Form 8938 thresholds. Choice B reverses the result: the Form 8938 thresholds are not met, while the Swiss account alone triggers the FBAR, and the condominium does not remove that obligation. Choice D applies the $200,000 threshold for taxpayers living abroad, which does not apply to a U.S. resident, and it ignores the FBAR, whose $10,000 threshold the account exceeds.
  7. Which of the following is correct regarding his treatment as an expatriate for 2025?
    Answer: He is a covered expatriate because his average annual tax liability exceeds $206,000; he must file Form 8854 and pay the exit tax on his net unrealized gain to the extent it exceeds $890,000. Under IRC § 877(a)(2), an expatriate is a covered expatriate if any one of three tests is met: average annual US income tax liability exceeds the indexed amount ($206,000 for 2025), net worth is at least $2 million, or the individual fails to certify compliance with US tax obligations. His $225,000 average tax liability exceeds $206,000, so he is covered even though his net worth is below $2 million and even though he certified compliance. Under IRC § 877A, a covered expatriate must file Form 8854 and pays a mark-to-market exit tax on net unrealized gain only to the extent it exceeds the indexed exclusion of $890,000. Choice A treats the tests as cumulative and incorrectly states that no Form 8854 is due. Choice C misunderstands the certification, which only avoids the third test. Choice D wrongly limits the $890,000 exclusion to long-term residents; it applies to covered expatriates generally.
  8. Which of the following correctly describes his 2025 international reporting obligations?
    Answer: He must file Form 8938 because the December 31 balance exceeds the $50,000 threshold for taxpayers who are not living abroad, and he must also file an FBAR. IRC § 6038D and the Instructions to Form 8938 require a specified person who is not living abroad to file when specified foreign financial assets exceed $50,000 at year end or $75,000 at any time. The higher thresholds for taxpayers living abroad apply only when the taxpayer has a tax home abroad and meets the § 911(d)(1) bona fide residence or physical presence tests; the stem states he meets neither, so the $50,000/$75,000 thresholds govern. His year-end balance of $60,000 exceeds $50,000, so Form 8938 is required. The same accounts are foreign financial accounts whose aggregate value exceeded $10,000, so an FBAR is also required. Choice A wrongly applies the living-abroad thresholds. Choice C uses the $100,000 MFJ year-end threshold for an unmarried filer. Choice D ignores both obligations, which attach regardless of when during the year the accounts were opened.
  9. Which of the following is the correct response regarding his FBAR obligation for 2025?
    Answer: An FBAR is required, and it must be filed electronically with FinCEN by April 15, 2026, with an automatic extension to October 15, 2026. FinCEN Form 114 instructions (implementing 31 U.S.C. § 5314) require every U.S. person having a financial interest in, or signature authority over, a foreign financial account to file an FBAR when the aggregate value of the accounts exceeds $10,000 at any time during the calendar year. The account reached $12,400 in May, so the threshold is met even though the December 31 balance was $4,100, and co-ownership with a nonresident alien does not relieve a U.S. citizen co-owner of the reporting duty. The FBAR is filed electronically with FinCEN, not with the Form 1040, and is due April 15, 2026, with an automatic extension to October 15, 2026. Choice A misstates the test as a year-end balance test. Choice B wrongly treats co-ownership with a nonresident alien as an exemption. Choice D misstates both the filing method and the filing channel.
  10. Which of the following is correct regarding his eligibility to claim the foreign earned income exclusion on his 2025 return?
    Answer: He satisfies the physical presence test because the 12-month period from February 1, 2025 through January 31, 2026 includes more than 330 full days in Brazil, so wages earned in 2025 during that period qualify for the exclusion. Under IRC § 911(d)(1)(B), an individual meets the physical presence test if physically present in a foreign country at least 330 full days during any 12 consecutive months; the 12-month period may begin or end in a different tax year. From February 1, 2025 through January 31, 2026, the taxpayer was physically present in Brazil for 304 full days in 2025 plus 31 full days in January 2026, a total of 335 full days, so the test is met and the 2025 wages earned within that period are eligible for the foreign earned income exclusion, subject to the applicable statutory dollar limit. Choice A wrongly confines the test to the 2025 calendar year. Choice B wrongly treats full-year bona fide residence as required; it is an alternative test, not the physical presence test. Choice C misstates the proration, which is based on days in the qualifying 12-month period, not on days of physical presence.
  11. If Mina chooses to claim the foreign earned income exclusion for 2025, which of the following is correct?
    Answer: She may exclude $130,000 on Form 2555; the remaining $20,000 is included, and only taxes allocable to that amount may be credited. IRC § 911; IRC § 904. For 2025, the foreign earned income exclusion ceiling is $130,000. Because Mina was a bona fide resident of Japan for the entire year, the ceiling is not prorated. The remaining $20,000 of foreign earned income is included in gross income. Under IRC § 911(d)(6), foreign taxes on income excluded under § 911 are neither deductible nor creditable; taxes allocable to the remaining $20,000 may be creditable, subject to the § 904 limitation. Choice A is wrong because the exclusion cannot exceed $130,000 and some of the Japanese tax may be allocable to the non-excluded $20,000. Choice C is wrong because the $130,000 ceiling applies to all foreign earned income, not only wages. Choice D is wrong because the exclusion is elective and does not require claiming the foreign tax credit; the credit is a separate relief that cannot be used for the excluded income.
  12. Which of the following statements is correct regarding Hal's treatment as a covered expatriate?
    Answer: Hal is a covered expatriate because his average annual net income tax exceeded $206,000, and he must file Form 8854 to report his expatriation. IRC § 877A(g); Form 8854 instructions. For 2025, a covered expatriate includes a U.S. citizen who relinquishes citizenship and whose average annual net income tax for the five tax years ending before expatriation exceeds $206,000. Hal's average of $215,000 satisfies the test, so he is a covered expatriate and must file Form 8854. Choice B is wrong because the average tax test applies to citizens who expatriate, not only to long-term residents. Choice A is wrong because certification of compliance only addresses the certification test; the tax-based test still applies. Choice D is wrong because the filing is on Form 8854, not FinCEN Form 114, and the expatriation tax is a mark-to-market tax on net unrealized gain above the § 877A exclusion ($890,000 for 2025), not a tax on all net worth.
  13. Rosa, an unmarried U.S. citizen living in the United States, is required to file a 2025 U.S. income tax return. During 2025, her only specified foreign financial assets were two foreign financial accounts. The combined value of the two accounts was $50,000 on December 31, 2025, and their highest combined value during the year was $74,000. She received no foreign gifts and had no reportable transactions with a foreign trust. How many of the following must she file for 2025: FBAR (FinCEN Form 114), Form 8938, and Form 3520?
    Answer: 1 Governing authority: 31 U.S.C. § 5314; 31 CFR § 1010.350; IRC §§ 6038D, 6039F, and 6048. The FBAR is required if the aggregate value of foreign financial accounts exceeded $10,000 at any time during the calendar year. Rosa's accounts reached $74,000, so the FBAR must be filed. Form 8938 is required of an unmarried U.S.-resident filer only if the aggregate value of specified foreign financial assets is more than $50,000 on the last day of the year or more than $75,000 at any time during the year. Rosa's year-end value was exactly $50,000—not more than $50,000—and the year's high of $74,000 did not exceed $75,000, so Form 8938 is not required. She received no foreign gifts and had no reportable transactions with a foreign trust, so Form 3520 is not required. Therefore exactly one form—the FBAR—must be filed. Choice A (0) misses the FBAR requirement. Choice C (2) treats the exactly-$50,000 year-end balance as satisfying Form 8938's 'more than $50,000' test; equality with the threshold does not trigger Form 8938. Choice D (3) assumes all three forms are required despite the Form 8938 thresholds not being met and the absence of reportable foreign gifts or foreign trust transactions.
  14. Which of the following is correct regarding the 2025 Form 8938 filing thresholds for a taxpayer's specified foreign financial assets?
    Answer: A married taxpayer filing separately who lives in the United States must file when, and only when, the aggregate value of the specified foreign financial assets was more than $50,000 on the last day of the tax year or more than $75,000 at any time during the year. IRC § 6038D; Form 8938 instructions. For 2025, the Form 8938 thresholds are: U.S. residents — unmarried or MFS, more than $50,000 at year-end or more than $75,000 at any time; MFJ, more than $100,000 at year-end or more than $150,000 at any time. For taxpayers living abroad — unmarried or MFS, more than $200,000 at year-end or more than $300,000 at any time; MFJ, more than $400,000 at year-end or more than $600,000 at any time. Choice A correctly states the U.S.-resident MFS threshold. Choice B misstates the amount by using the U.S.-resident MFJ thresholds. Choice C misstates the amount by using the living-abroad MFJ thresholds for an unmarried taxpayer. Choice D misstates the amount by using the living-abroad unmarried/MFS thresholds for a married taxpayer filing jointly. Form 8938 is filed with the income tax return, not with FinCEN.

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