July 28, 2016

The United States Court of Appeals for the Ninth Circuit recently reversed the ruling issued by the United States District Court of California, resulting in the verdict that online gambling accounts do not have to be reported on an FBAR form (United States v. Hom, 2016 U.S. App. LEXIS 13269, 9th Cir. 2016).

Any US person that has a financial interest or signatory authority over a foreign (outside of the United States) financial account and the aggregate value of the foreign account(s) exceeds $10,000 at any time during the calendar year, needs to report this to the IRS by electronically filing FinCEN Form 114 (Report of Foreign Bank and Financial Accounts) a/k/a the FBAR form (hereinafter referred to as the “FBAR”).

In the case mentioned above, the plaintiff held two online poker gambling accounts and the issue discussed was whether these online accounts require the filing of an FBAR form, i.e., can these accounts be identified as "bank securities or other financial accounts" and whether these accounts are considered to be in a "foreign country" under 31 U.S.C §103.24 and 31 U.S.C. §5314.

The Ninth Circuit reversed the decision made in the District court and  concluded that these accounts  do not fall within the definition of accounts that need reporting for FBAR purpose because the companies that own these sites do not function as banks, since their primary and only existence is to facilitate online gambling and they serve no other financial purpose.

The content of this article is intended to provide a general guide to the subject matter and is not a substitute for legal consultation. Specific legal advice should be sought in accordance with the particular circumstances.