Bank Trusts or Fidiecomisos, who knows what?

[Roberto]

There is a fresh surge of rumors about changes in responsibilities of Trust Holders with the US authorities. Like everyone has to report and there is a $10,000 fine, finger nails pulled out, etc. There was a link to a US Govt. site, posted here that , it seemed to me, clearly stated that the reporting responsibility of a US citizen holder of a Mex Bank Trust on property in Mexico for exclusive owner use, did not have reporting responsibilities, perhaps unless the property was used for income.

There have been recent changes in the process to acquire a Bank Trust and the dust has not settled on that issue yet.

Anyone have good hard information with supporting documentation, not rumor or heresay, about this issue? This issue has nothing directly to do with the possibility of doing away with Bank Trusts in Mexico.

 

[Terry C]

[h=1]IRS Revenue Ruling 2013-14 States A Fideicomiso Is Not A Trust For United States Tax Purposes[/h]June 20, 2013
In IRS Revenue Ruling 2013-14, the Internal Revenue Service clearly stated that a Fideicomiso isn’t a “trust” for United States tax purposes. American taxpayers who own their Mexican coastal real estatethrough a fideicomiso are not required to submit foreign trust forms (Forms 3520 and 3520-A). As a result, such taxpayers do not need to worry about the failure-to-file penalties associated with these forms.

There is another ruling coming out around June 24 I hear...

 

[Kea]

Other IRS forms related to foreign assets include the FBAR and Form 8938. See instructions to see if they apply to you:

FBAR -- http://www.irs.gov/pub/irs-pdf/f90221.pdf

Form 8938 -- http://www.irs.gov/pub/irs-pdf/i8938.pdf


And for information on FATCA (Foreign Account Tax Compliance Act):

Foreign Account Tax Compliance Act (FATCA)

Here is the actual Revenue Ruling 2013-14 -- http://www.irs.gov/pub/irs-drop/rr-13-14.pdf

There have been concerns that Rev Rul 2013-14 does not exclude ALL fideicomisos from the 3520 / 3520A filing requirement. Please do your own research to make sure your fidiecomiso meets all the requirements spelled out in the Rev Rul. The "Holdings" section on page 6 of the document states that the ruling does not apply if the fideicomiso ... "holds legal title to any assets other than" your one specific property or "is permitted or required to engage in any activity beyond holding legal title." (I will be getting a Spanish-speaking friend to read my fideicomiso to make sure that mine meets the requirements.)

Because the potential penalties are so severe, I believe people should read (or try to read) the IRS publications themselves. (They are much easier to read than the actual tax code. That would be a more accurate source, but much more challenging to read!) After that, you can look at the rumors and discussions by those how may (or may not) know what they are talking about.

 

[Roberto]

Thanks Kea. Yes people need to read the publications themselves. This thing has the potential to get out of control, what with rumors and lazy people !!

 

[Roberto]

That ruling 2013-14 is good and nice that the actual IRS staff author's phone number is provided for inquiry. Good stuff. Thanks again.

 

[Kea]

Yes, I did notice the phone number at the bottom of the page. This ruling does seem pretty clear. But like everything else, the devil is in the details.

 

[El Gato]

One of our homeowners, Theresa Keeley posted the following on our site.

Fideicomisos (Mexican Land Trusts) Are Not Trusts—Really, This Time - No more filing Form 3520-3520-A!

Today, we are happy to announce that U.S. taxpayers can continue to hold their Mexican real estate—whether residential or not—through fideicomisos without worrying about the arcane U.S. foreign-trust reporting rules. Amy Jetel’s work helping U.S. taxpayers with this issue over the last few years has finally led to a Revenue Ruling holding that a fideicomiso (called a “Mexican Land Trust” in the ruling) is not a “trust” for U.S. tax purposes.

I last told you all about a private letter ruling (PLR 201245003) from the IRS on behalf of a client who owned coastal Mexican real estate. In that PLR, the IRS held that the client’s Mexican Land Trust was not truly a “trust” under U.S. tax law. Accordingly, the U.S. reporting requirements applicable to “foreign trusts” did not apply. However, a PLR is binding only for the taxpayer who requested it. This new Revenue Ruling is binding authority that all taxpayers can rely on.

Thus, if you have been filing Forms 3520 and 3520-A for your fideicomiso, you can stop. However, we recommend that you file forms that are properly marked “final” so that the IRS will not expect any more forms from you. If you need help filing final Forms 3520 and 3520-A, I would be happy to help.
Theresa Keeley
Santerrre & Vande Krol, Ltd.