AlanDow
Junior Nomad
Posts: 38
Registered: 1-23-2011
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Now That IRS has Definitively Ruled Fideicomiso not a Foreign Trust, What To Do If You Have Been Annually Filing IRS Forms 3520 and 3520A
Background - After much debate as to whether or not a Mexican Fideicomiso is considered a foreign trust by the IRS – which would require annual
filings of a foreign trust disclosure on forms 3520A (due by March 15 of each year) and form 3520 (due by April 15th of each year) the IRS recently
issued a private letter ruling that for one taxpayer that definitively said they did not have to file these forms related to their Fideicomiso. Then
the IRS helped out all US taxpayers who have a Fideicomiso, by following up that private letter ruling with a “revenue ruling” that can be relied on
by all taxpayers – IRS revenue ruling 2013-14 specifically address the Mexican Fideicomiso, and lists an example of a Fideicomiso that is used as a
residence, and concludes this is not a foreign trust (and therefore no filing of forms 3520 and 3520A is needed).
As someone who had been annually filing these foreign trust IRS forms that are no longer necessary, per IRS revenue ruling 2013-14, I wondered what
now – do I have to go back and reopen and amend my prior filings, or just stop filing them, or file one more “final return” citing this revenue ruling
as the reason for ceasing these annual filings. There are a couple of attorneys / CPAs that specialize in this area that have posted info on the
internet and it appears that the best answer I found is that we should file one more “Final” 3520 and 3520A return. If you do not do so, you might
start getting automated notices of failure to file, and or start accruing penalties and interest for not filing (assuming you have been annually
filing these 3520 and 3520A foreign trust returns, and then just stop filing them without explanation).
So with the filing due date for the 3520A fast approaching (March 15th) I decided to go ahead and do a final filing of this form - I just filled out
the first page of form 3520A as usual, except I checked the box near the top of the form that says – Final Return, and I also hand wrote in red at the
top of the form – "Final Return". I attached a statement (copied below) and also a copy of the actual revenue ruling. Hopefully this does the trick.
Cover letter statement sent to IRS along with my Final 3520A filing - "Enclosed is the Final filing of Form 3520A. Also enclosed is Revenue Ruling
2013-14 that describes a typical Fideicomiso or Mexican Land Trust (MLT) and concludes that the arrangement is not a trust within the meaning of §
301.7704-4(a). Since the purpose and terms of my Mexican Fideicomiso trust are virtually the same as the Situation One described in this attached IRS
Revenue Ruling (the purpose being to secure title to property I bought in Mexico that is used solely as a part time residence for myself, however that
cannot legally be held directly in my name under Mexican law since I am not a Mexican citizen) I am no longer required to file forms 3520 and 3520A
pursuant to this Revenue Ruling 2013-14".
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bajajudy
Elite Nomad
Posts: 6886
Registered: 10-4-2004
Location: San Jose del Cabo,BCS
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I would talk to my accountant.
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oladulce
Super Nomad
Posts: 1625
Registered: 5-30-2005
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I just sent in our FINAL 3520-A's also. A consult with a tax attorney/Mexico specialist regarding the "final" submission requirements and internet
research led me to follow the same procedure you described AlanDow. I might have gotten carried away with my red pen and use of the word "FINAL"
though 
After the 3520's next month-- free at last!
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CortezBlue
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This allows the folks that didn't file to say
I told you so!
Ok, just being funny
But seriously, just because the IRS asks for data that was very iffy, why bother providing it.
“Two things are infinite: the universe and human stupidity; and I'm not sure about the universe.”
- Albert Einstein
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www.cortezblue.com
We put the FUNK in disFUNKtion |
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oladulce
Super Nomad
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| Quote: | Originally posted by CortezBlue
This allows the folks that didn't file to say
I told you so!
Ok, just being funny
But seriously, just because the IRS asks for data that was very iffy, why bother providing it. |
Can't tell if you're joking, but I'll bite...
My neighbor's $300,000 fine from the IRS for not reporting his Fidei's was our motivator to begin filing the forms. We feigned ignorance about the
filings for many years until we observed what he had to endure.
A couple years ago I left out 1 of the 50-something pages of 3520 when I sent in the forms. Sometimes it's 4 months between US mail forwardings and
we didn't get the IRS letters about the missing page until after they hit us with fine of $10,000. It was resolved eventually but required hours and
hours on the phone and was stressful trying to deal with it from remote BCS without phones, fax, etc.
I'm with AlanDow - you want to get this "final filing" right so you can forever close up the can of worms that's opened when you involve the IRS.
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