This question over whether or not you need to report gold, gold bullion, or gold coins on your FBAR form is actually somewhat tricky to answer. While the IRS attempts to give guidance regarding this question, the guidance is vague. Additionally, the IRS has taken recent action that contradicts its own statements. As we consider FBAR gold reporting, we will discuss what the likely response would be by the IRS of failing to report gold bullion accounts and physical gold.
Stay golden Pony Boy, just not overseas
Let's start with IRS FBAR FAQs
Q. Is an FBAR required for accounts maintained with financial institutions located in a foreign country if the accounts hold noncash assets, such as gold?
A. Yes. An account with a financial institution that is located in a foreign country is a financial account for FBAR purposes whether the account holds cash or non-monetary assets.
The interesting thing is that relates to the location of the financial institution, not the money/assets. Which is obviously a silly concept, because where does money "live?" That is, you could have a Swiss bank account back by gold bullion in the US and that is reportable on an FBAR, but if you have a US bank account that is back by gold held in Switzerland, then that account isn't reportable. Trust us, this issue has come up.
So we can safely say that yes, if you have a gold-backed account that is overseas, you must report it on your FBAR regardless of where gold is actually located. But now, we ask what if you are stashing gold coins and bullion in a safety deposit box.
Do you have to file an FBAR for physical gold stored overseas?
And here are some other questions – Does it matter if that safety deposit box in is Switzerland or the US? And what's the difference between putting gold in a safety deposit box and say a hotel safe? Or a hole in the earth?
To help us answer this question we turn to the FBAR FAQ asking a very basic question:
Q. What is a financial account?
A. A “financial account” includes any bank, securities, securities derivatives or other financial instruments accounts. The term includes any savings, demand, checking, deposit or any other account maintained with a financial institution or other person engaged in the business of a financial institution. Financial accounts also generally include any accounts in which the assets are held in a commingled fund, and the account owner holds an equity interest in the fund (including mutual funds). Individual bonds, notes, or stock certificates held by the filer are not a financial account nor is an unsecured loan to a foreign trade or business that is not a financial institution.
So it doesn't sound like a safety deposit box could be considered a financial account.
But you have to understand, in a recent FBAR verdict, the Defendant Jon McBride was not even the owner of a financial account, but rather the beneficiary. Even though he did not have signatory authority or actual ownership, the Federal Court decided that this was enough to assess him $200,000 FBAR penalty. So clearly, we can expect the courts to define the law as broadly as possible and even contra to the current guidance and OVDI FAQs.
The best thing to do, we have found, is if it is questionable, to include it on an FBAR (although it may be argued to not be included as part of the FBAR-equivalent penalty for OVDI purposes). Cynically, we could say that if you are going to hold on to gold coins, do it domestically.