There seems to be some confusion as to whether or not a Mexican land trust, known as a fideicomiso, has to be reported to the IRS as a foreign trust on your tax return or included on your FBAR.
On June 6, 2013 the IRS issued Revenue Ruling 2013-14 which gave taxpayers specific direction in this area.
IRS Revenue Ruling 2013-14
The Mexican Constitution specifically prohibits non-citizens from holding direct title to land in certain areas of Mexico (restricted zones). However, non-citizens can still acquire property through a Mexican land trust held by a Mexican bank (fideicomiso).
In the majority of these agreements, the bank has no function other than to hold the title. In these cases, the IRS ruled that a Mexican land trust (MLT) is not a trust within the meaning of § 301.7701-4(a).
That means that there is no need to report the fideicomiso as a foreign trust on Forms 3520, 3520-A or the FBAR.
If, however, the bank engages in other activities beyond just holding the deed, then it may actually be considered a foreign trust and would have to be reported as such.
The IRS ruling is well written and provides additional information on the topic. To read it in its entirety, click HERE.
Let’s Wrap This Up
This article is purely informational and is not intended to constitute legal or tax advice. If you have questions related to your own tax situation, you should contact a tax professional or the IRS to assist you.
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