Was Mother Teresa a “U.S. person” under the Internal Revenue Code subject to worldwide income taxation and FBAR reporting?

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Mother Teresa was named an honorary citizen by a proclamation of the U.S. President and an act of Congress.  Mother Teresa

Mother Teresa received her honorary citizenship while she was still living in 1996 pursuant to Public Law 104-218.

Did Mother Teresa need to file FBARS (foreign bank account reports) for the accounts in India and throughout the world where she oversaw non-profit organizations and had “signature authority over” such accounts?  The FBAR filing requirement has been around since 1970, although only in the last few years have individuals and the U.S. federal government become aware and enforced it vigorously.

Fortunately, for Mother Teresa and the executor of her estate, there was a 6 year statute of limitations against an assessment of FBAR penalties against her individually, over such non-U.S. accounts. When does the Statute of Limitations Run Against the U.S. Government Regarding FBAR Filings?

Assume, however, that her Missionaries of Charity that operated in over 100 countries had some 50 accounts in countries outside the U.S. where Mother Teresa had signature authority over such accounts in 1996.   In such a scenario, since Mother Teresa was an “honorary citizen” during that year, she presumably was a “U.S. person” under Section 7701 of the Internal Revenue Code.  She would therefore also have been subject a host of other tax and filing requirements as a U.S. citizen.  See USCs and LPRs Living Outside the U.S. – Key Tax and BSA Forms.

Would she have had a legal defense (e.g., “reasonable cause”) for not being subject to the US$10,000 civil penalty per account for each failure to file the FBAR?  In this example, 50 accounts multiplied by US$10,000 per account equals US$500,000 of civil penalties per year for failure to file.

The law  is obligatory.  See, FOREIGN BANK ACCOUNT REPORTS – 2011 REGULATIONS EXTEND RULES TO MANY UNAWARE PERSONS, published in the International Tax Journal.  Specifically, 31 Section 5314 imposes the reporting requirement.  Fortunately (or unfortunately) for individuals like Mother Teresa, the actual imposition of the penalty is in the hands of the government, since the statute provides in relevant part –

The Secretary of the Treasury may impose a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.”  31 U.S.C. Section 5321(a)(5)(B)

Sounds crazy – but it is the law and life in the U.S.


As Mother Teresa said –

. . . La vida es misterio, devélalo.
La vida es promesa, cúmplela.
La vida es tristeza, supérala.
La vida es himno, cántalo.
La vida es combate, acéptalo.
La vida es una tragedia, domínala.
La vida es aventura, arrástrala.
La vida es felicidad, merécela.
La vida es la vida, defiéndela.



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