Free IRS Enrolled Agent SEE Part 1 (Individuals) Specialized Returns for Individuals Practice Questions
Specialized Returns for Individuals on the IRS SEE Part 1 covers estate tax under §2010 (basic exclusion, DSUE portability via §2010(c)(4), Form 706), gift tax (annual exclusion, lifetime exemption, Form 709), and international information reporting (FBAR / Form 8938 / Form 3520 thresholds).
Sample Questions
Question 1
Easy
Form 8938 (Statement of Specified Foreign Financial Assets) is filed with the IRS in which manner?
Solution
Per the Form 8938 instructions and Treas. Reg. §1.6038D-2(a)(5), Form 8938 is attached to the taxpayer's annual income tax return — Form 1040 for an individual, Form 1120 for a corporation, etc. — and is timely filed when the income tax return (including any timely extension) is timely filed. It is NOT a separate filing with FinCEN or any specific service center.
Question 2
Medium
Which statement best describes the statutory reasonable-cause defense available against a non-willful FBAR penalty?
Solution
31 USC §5321(a)(5)(B)(ii) provides a reasonable-cause exception to the non-willful FBAR penalty only if both (i) the failure was due to reasonable cause AND (ii) the amount of the transaction or the balance in the account was properly reported on the income tax return for that year. Both prongs are required — reasonable cause alone does not suffice if the underlying income was not properly reported.
Question 3
Hard
Which of the following items is reportable on Form 8938 (Statement of Specified Foreign Financial Assets) but is NOT reportable on FinCEN Form 114 (FBAR)?
Solution
FBAR (under 31 CFR 1010.350) is account-based: it reaches financial accounts maintained at foreign financial institutions. Directly held foreign stock or other securities — held in certificated form by the taxpayer rather than through any custodian — are not 'accounts' and therefore are outside the FBAR regime. Form 8938, by contrast, reaches 'specified foreign financial assets' under IRC §6038D, a defined set that expressly includes stock or securities issued by a non-U.S. person and held for investment, even when not held through a custodial account. A foreign-bank deposit account and a foreign-brokerage account both appear on FBAR (and on Form 8938 if the thresholds are met). Foreign stock held inside a U.S. brokerage account is generally reported on neither form, because the custodian is a U.S. financial institution.