If the individual who is in physical possession of cash in excess of $10,000 does not claim such cash—

(1) as his, or

(2) as belonging to another person whose identity the Secretary can readily ascertain and who acknowledges ownership of such cash,

In the case of any assessment resulting from the application of subsection (a)—

(1) the entire amount of the cash shall be treated as taxable income for the taxable year in which the possession occurs,

(2) such income shall be treated as taxable at the highest rate of tax specified in section 1, and

(3) except as provided in subsection (c), the possessor of the cash shall be treated (solely with respect to such cash) as the taxpayer for purposes of chapters 63 and 64 and section 7429(a)(1).

If, after an assessment resulting from the application of subsection (a), such assessment is abated and replaced by an assessment against the owner of the cash, such later assessment shall be treated for purposes of all laws relating to lien, levy and collection as relating back to the date of the original assessment.

For purposes of this section—

(1) Cash The term “cash” includes any cash equivalent.

The term “cash equivalent” means—

(A) foreign currency,

(B) any bearer obligation, and

(C) any medium of exchange which— (i) is of a type which has been frequently used in illegal activities, and (ii) is specified as a cash equivalent for purposes of this part in regulations prescribed by the Secretary.

Any cash equivalent shall be taken into account—

(A) in the case of a bearer obligation, at its face amount, and

(B) in the case of any other cash equivalent, at its fair market value.

(Added Pub. L. 97–248, title III, § 330(a), Sept. 3, 1982, 96 Stat. 619; amended Pub. L. 100–647, title I, § 1001(a)(1), Nov. 10, 1988, 102 Stat. 3349.)