FATCA and French Property Sales: IRS Obligations for US Persons

US citizen, Green Card holder, or individual subject to US federal tax law: if you sell an apartment in France, your obligations to the IRS go well beyond a simple capital gains return. FATCA, FBAR, Form 8938, Schedule D: a set of reporting requirements whose non-compliance can trigger penalties sometimes exceeding the value of the property itself. This guide details each obligation, its exact scope, and the pitfalls to avoid.

US tax obligations related to the ownership and disposal of real property in France apply to all “US persons” within the meaning of US federal tax law. This concept covers several categories of individuals that should be clearly distinguished.

US citizens are subject to the US “citizenship-based taxation” system: they are taxed on their worldwide income regardless of their country of residence, even if they have never lived in the United States. A US citizen born in France of American parents who has always lived in France is a US person subject to IRS obligations. Green Card holders (Lawful Permanent Residents) are treated as US tax residents for the entire duration of their status, even if they live primarily abroad. Individuals subject to the Substantial Presence Test — that is, those who have spent enough days in the United States during the relevant period — may also qualify as US tax residents for a given year.

The capital gain realised on the sale of real property located in France is a “capital gain” for the IRS. It must be reported on Schedule D of the annual Form 1040 return. If the property has been held for more than 12 months, it qualifies as a long-term capital gain eligible for preferential rates (0%, 15%, or 20% depending on taxable income). If held for fewer than 12 months, it is taxed as ordinary income (marginal rate up to 37%).

One often-overlooked effect: if the US dollar has appreciated against the euro between purchase and sale, the dollar-denominated gain may be larger than the euro-denominated gain. Conversely, if the dollar has depreciated, the dollar gain may be lower. This currency difference is real and can create a taxable gain in the United States even where the sale results in a loss in euros — or significantly reduce a substantial gain in euros.

The Schedule D filing deadline is that of Form 1040: 15 April of the year following the sale, with an automatic extension to 15 October (or 15 June for US persons residing abroad).

The Report of Foreign Bank and Financial Accounts (FBAR), filed on FinCEN Form 114, is the most widely known and most frequently violated reporting obligation for US persons living abroad. It applies to any person who has had, at any point during the year, an interest in or signature authority over foreign bank or financial accounts whose aggregate value exceeds USD 10,000.

The USD 10,000 threshold is an annual aggregation threshold, not a per-account threshold. If you hold three accounts in France (current account, livret A, PEA) none of which has ever exceeded USD 5,000 individually but whose combined peak value during the year exceeded USD 10,000, you must file the FBAR. The calculation is based on the maximum value of each account during the calendar year, converted into dollars at the year-end exchange rate published by the Treasury.

The FBAR deadline is 15 April of the following year, with an automatic extension to 15 October (no formal request required since 2016). Penalties for non-wilful violations start at USD 10,000 per year per account. For wilful violations, they can reach the greater of USD 100,000 or 50% of the account balance — per year, per account.

Form 8938, “Statement of Specified Foreign Financial Assets,” is the FATCA reporting obligation proper. It is filed as an attachment to the annual Form 1040 and must be submitted when the total value of “specified foreign financial assets” exceeds the following thresholds:

• US resident, single filer: USD 50,000 at the last day of the year or USD 75,000 at any point during the year
• US resident, joint return: USD 100,000 at year-end or USD 150,000 at any point
• Non-US resident, single filer: USD 200,000 at year-end or USD 300,000 at any point
• Non-US resident, joint return: USD 400,000 at year-end or USD 600,000 at any point

“Specified foreign financial assets” include in particular: foreign bank accounts, foreign securities accounts, shares or interests in unlisted foreign entities, and foreign life insurance with a cash surrender value. However, real property held directly is not a specified foreign financial asset for Form 8938 purposes — although the bank account receiving the sale proceeds most certainly is.

The distinction between direct ownership and ownership through a company is one of the most complex issues in Franco-American tax law. For directly owned property:

• The real property itself is not reportable on Form 8938 (it is not a financial asset)
• Bank accounts used for rental income or charges are reportable on the FBAR if over USD 10,000
• Rental income is reportable on Schedule E of Form 1040
• The capital gain on sale is reportable on Schedule D

For property held through a SCI (French property partnership):

• SCI shares are likely specified foreign financial assets for Form 8938 purposes (if the SCI is treated as a foreign entity, which is the default position absent a check-the-box election)
• Form 5471 (information return for interests in foreign corporations) may be required if the SCI is treated as a “controlled foreign corporation”
• The disposal of SCI shares triggers a separate analysis under US tax law, which may differ significantly from the direct-ownership treatment

When selling your French apartment as a US person, here is the complete list of forms potentially required for the year of the sale:

• Form 1040 with Schedule D: capital gains reporting, mandatory. Includes the Foreign Tax Credit via Form 1116 to credit the French tax paid.
• Form 1116: calculation of the Foreign Tax Credit (credit for French tax against US tax liability). Passive category for passive property gains. 10-year carryforward and 1-year carryback.
• FinCEN 114 (FBAR): if foreign bank accounts exceed USD 10,000 at the annual peak (commonly triggered by depositing sale proceeds into a French account).
• Form 8938: if total specified foreign financial assets exceed the applicable thresholds. Not applicable to directly held real estate, but check other assets (accounts, life insurance policies).
• Form 8621: if any French fund in the portfolio qualifies as a Passive Foreign Investment Company (PFIC) — particularly relevant for French mutual funds (OPCVM) or unit-linked insurance.

Good preparation before signing can reduce administrative burdens and, in some cases, US tax exposure.

• Plan the signing date in line with your US tax calendar: Form 8938 and FBAR thresholds are assessed at 31 December. A sale completed in January rather than December can shift the exposure window by a full year.
• Transfer the sale proceeds to the United States promptly to limit Form 8938 exposure — without eliminating the FBAR obligation (which is also assessed at the annual peak).
• Keep all supporting documents: the notarial deed, the capital gains certificate (Form 2048-IMM), French bank statements, and the exchange rate at the transaction date. The IRS may request these documents several years after the sale.
• Coordinate with a CPA experienced in Franco-American files: the subject matter is dense (FATCA, FTC, PFIC, FBAR, Schedule D) and errors on cross-border returns carry particularly severe consequences. ACCREDITAX can connect you with specialists.