quick FBAR question

I'm filling out our Form TD F 90-22.1 and had a quick question regarding the "maximum value" to report.

When we moved here, we transferred about $15K into our account in order to buy a car; it was in our account for all of two days. The figure appears in the daily balance of our statement, but not the closing balance for that month.

Is the "maximum value" the highest amount on any given day (and hence would include the $15K)? Or is it the maximum value of the account as based on the closing balance of each statement?

Thanks for any guidance!

It must be filed if your balance exceed $10,000 at ANY time, even for one day.

Thanks for your reply, DrSuperL99!

Yes, I understand that I must file it. However, the form asks for the "maximum value" of the account from the quarterly or periodic statements. I was wondering if "maximum value" meant the highest number the account reached at any given moment, or the highest closing balance on the statements.

Sorry, I miswrote. It is the maximum value on the given day as well.

Thanks so much for the quick reply!

Quote from Taxpayer Advocate: "In October 2008, the IRS revised Form TD F 90-22.1, which now requires the taxpayer to provide the exact maximum value of the account in U.S. dollars during the calendar year being reported instead of a range as on prior versions of the form.  However, when the account is denominated in foreign currency, the taxpayer is instructed to use the official exchange rate at the end of the year. Given the volatility of exchange rates, the maximum value in U.S. dollars may be different at the time of the maximum balance on the account and at the end of the year. U.S. citizens abroad are concerned about the inherent ambiguity in these instructions and are confused about what exchange rate to use – the one for the date of the maximum balance on the account or the rate of exchange on the last day of the year.  It is also unclear what exchange rate taxpayers should use to calculate the maximum aggregate value of all foreign financial accounts at any time during the taxable year."

So... which one do we use? Last year I used the official treasure exchange rate for the year, is that what we continue to use?

I was planning to use the Dec 31, 2009 exchange rate on www.oanda.com.

Now I'm one of the confused taxpapers referenced in guya's quote. It would seem to make more sense to use the exchange rate on the day of the balance; however, the FBAR instructions say "Convert foreign currency by using the official exchange rate at the end of the year."

Which brings up another question: is the "official exchange rate at the end of the year" the exchange rate on Dec 31, or the yearly average exchange rate published by the IRS?

I was told this one last year: http://fms.treas.gov/intn.html#rates

Thanks for the link!

My guess is they probably don't really care about the EXACT amount, and just want to make sure it's not hundreds of thousands of dollars.

The "official" exchange rate is the "unofficial exchange rate(!)" as posted on the IRS site, for the year.
 

My guess is they probably don't really care about the EXACT amount

If you were ever required to substantiate your return, then I think the IRS would care, especially in the current TARP environment. I imagine the IRS and Congress want every last $ they can find.

Hi theOAP!

My impression is that this figure does not affect our taxes in any way, and is just for reporting purposes. I can't imagine what difference a few hundred dollars (caused by using one exchange rate instead of another) would make.

Anyway, I thought the "unofficial exchange rate" was a yearly average exchange rate, used for converting income distributed throughout the year. I thought we were supposed to use the Dec 31 exchange rate on the FBAR.

Please correct me if I'm wrong!

My impression is that this figure does not affect our taxes in any way

Your absolutely right, what you report on the FBAR does not affect your taxes, as long as it more or less agrees with your 1040, Schedule B reporting. $75,000 on your FBAR savings accounts report and $5 interest on Sch. B! It is possible, but one may be required to explain it. (I'm paranoid enough to believe that computers do talk to each other.)

I think the point of Guya's post is that no one is 100% clear on this, at present. My interpretation is that it is not the Dec. 31 rate, but the unofficial rate. Perhaps we'll both get some further feedback on this. 

The instructions are pretty clear

Convert foreign currency by using the official exchange rate at the end of the
year. In valuing currency of a country that uses multiple currency in the account were converted into United States dollars at the close of the calendar year. The value of stock, other securities, or other non-monetary assets in an account reported on TD F 90-22.1 is the fair market value at the end of the calendar year or, if withdrawn from the account, at the time of the withdrawal.

All references are to the end of year exchange rate.

Your income tax returns is another matter than the average yearly rate may make more sense (but even this rate isn't *required*).

And the FBARs forms do indeed care about EXACT amounts.

Thanks, Sara!

So to be perfectly clear, we should use the Dec 31 exchange rate (and not the "unofficial rate" that the IRS publishes at the end of the year)?