A U.S. person typically owns Mexican real estate near the coast
or the border through a Mexican Land Trust (a.k.a., fideicomiso). It was widely believed that the IRS
considered a Mexican Land Trust to be subject to the foreign trust information
filing requirements, such as IRS Forms 3520 and 3520-A. In a recent ruling (Rev. Rul. 2013-14), the IRS has officially acknowledged
what seemed obvious to many tax experts: there is no “trust”. Just because something is called a “trust” (“fideicomiso”)
doesn’t mean it is taxed as a trust.
Under U.S. income tax law, a trust is an arrangement created by a
declaration (will or trust document) where one person (fiduciary or trustee)
takes ownership of property in order to protect or conserve it for another
person (beneficiary). Where the Mexican fiduciary,
usually a Mexican bank, has no rights or obligations beyond simply holding
title to the property in place of the U.S. person, there exists no trust under
U.S. income tax law, so there are no foreign trust reporting requirements for
the fideicomiso.
© Michael Fitzsimmons, CPA, San Diego, CA http://fitz-cpa.com/
