When ”Beneficial Ownership” Constitutes A Financial Interest And Triggers An FBAR Requirement
September 29, 2022 ...
When it comes to an FBAR filing requirement a recent decision in the Katholos case confirms:
“Although an ownership interest in an entity would certainly be considered a financial interest in that entity, ownership is not necessary to have a financial interest."
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Virginia La Torre Jeker - @VLJeker
and
John Richardson - @Expatriationlaw
discuss this issue in the context of the life of Americans abroad.
On August 10, 2022 a US District Court issued a ruling on the ongoing Katholos FBAR saga.
https://casetext.com/case/united-states-v-katholos
Of particular interest is the following paragraph:
"Here, it is undisputed that Katholos was a beneficial owner of the Storchen Finance Account. In general, a “beneficial owner” is “[o]ne recognized in equity as the owner of something because use and title belong to that person, even though legal title may belong to someone else; esp., one for whom property is held in trust.-Also terms equitable owners Owner, Black's Law Dictionary (11th ed. 2019). Though Katholos denies that her status as a beneficial owner is “tantamount to having a ‘financial interest' in the account that may give rise to the FBAR reporting requirements,” Dkt. 98-1, ¶ 25, the Court concludes that, as a beneficial owner, Katholos had an equitable claim or right to the Storchen Finance Account- even if she did not have legal title. And because “interest” includes equitable rights to property, Katholos's arguments regarding legal title, who funded the account, and direct interest are not dispositive. See Continental Cas. Co. v. Bowen, No. 2:09-cv-00810-TC, 2011 WL 222340, *4 (D. Utah Jan. 21, 2011) (“Although an ownership interest in an entity would certainly be considered a financial interest in that entity, ownership is not necessary to have a financial interest.”). Thus, based on her status as a beneficial owner, the Court concludes that Katholos had a financial interest in the Storchen Finance Account."
Bottom Line: The Katholos decision reinforces the principle that one can't avoid the FBAR filing requirement by keeping your name off the account.
