Americans take Advantage for lifestyle seekers with IRS revision.
Non-Mexican persons cannot directly hold title to residential real property in certain restricted zones in Mexico, but may hold title to residential real property in the restricted zones through a fideicomiso—a Mexican land trust (MLT) arrangement with a Mexican bank—provided that a permit is obtained from Mexico’s Ministry of Foreign Affairs.
The IRS concluded in Rev. Rul. 2013-14 [PDF 27 KB] that none of the MLT arrangements discussed in the revenue ruling is a “trust” under the Treasury regulations, regardless of the nature of the owner.
Tax professionals note that in issuing Rev. Rul. 2013-14, the IRS alleviates an ongoing taxpayer concern that Mexican land trusts might be classified as true “trusts” for U.S. federal income tax purposes, thereby necessitating the filing of foreign trust informational returns—for example, Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts and Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner—in order to avoid significant penalties.
Although the IRS in late 2012 issued a private letter ruling—PLR 201245003 [PDF 62 KB]—that reaches the same conclusion as today’s revenue ruling, Rev. Rul. 2013-14 constitutes published guidance that all taxpayers can rely on.
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