QUESTION: It is my understanding that owning a variable offshore
annuity would result in the owner checking "No" on his income tax
return for foreign ownership of an account. Can you confirm this? Any
comments?

REPLY: You are referring to the question on the tax return about "Did
you have an interest in or signature or other authority over a
financial account in a foreign country such as a bank account,
securities account or other financial account?"

It seems to me that an investment of funds in a foreign variable
annuity would be construed to be a foreign financial account by the
IRS. There is some ambiguity as to whether a simple debt obligation
like a bond or a certificate of deposit or a fixed return annuity
would be regarded as a financial "account". However, the IRS appears
to construe the definition very broadly and the penalty for a
non-willfull failure to file the FBAR Form TD F 90-22.1 is $10,000.
The IRS provides a limited amount of information on their web site at
http://www.irs.gov/businesses/small/article/0,,id=148845,00.html

The report is due on or before June 30th and that date is not extended
by an extension of time to file an income tax return.

There are a number of exceptions such as the $10,000 threshhold but
the IRS does not mention all of the exceptions. Last year I wrote and
published an extensive guide to the subject, which includes my
responses to more than 50 questions posed by members of this group.
The information is still current and more information about my report
is available at http://www.offshorepress.com/fbar.htm

Vern Jacobs
http://www.offshorepress.com/fbar.htm