19 Stocks and Brokerage Accounts Across Borders: Reporting and Tax
Question for this chapter. If you live in the U.S. and keep a brokerage account with stocks or funds in your home country, what do you need to report to the U.S., and how are those funds treated?
Answer. Two separate U.S. reports apply to foreign accounts: the FBAR and Form 8938. Passing one test does not settle the other, so you may owe both. Separately, a fund bought abroad may count as a passive foreign investment company, which brings in Form 8621 and a special way of treating distributions and sales.
What to check
- Decide on the FBAR and on Form 8938 independently, since each has its own test and its own filing route.
- Remember that the account is reported as a whole; the stocks inside it are not listed one by one, but a foreign mutual fund still counts for both reports.
- For each fund or locally listed ETF, check whether it meets the income test or the asset test for passive foreign investment company status.
- If a fund qualifies, note which handling method applies: the default method or one of the two elections.
- Gather distribution and purchase records from earlier years, because the excess distribution calculation depends on them.
What to confirm. Confirm your residence status and any treaty position first, and check how tax already paid in the home country connects to the U.S. return through the foreign tax credit.
One-line summary. Foreign brokerage accounts call for two separate U.S. reports, and funds held inside them may need their own special form.
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