Mexican land trust not a “trust” under Treasury regulations

Americans take Advantage for lifestyle seekers with IRS revision.

 June 2013. KPMG
The IRS today released an advance copy of Rev. Rul. 2013-14 which concludes that Mexican land trusts used by U.S. persons to hold an ownership interest in residential real estate in certain parts of Mexico are not “trusts” for purposes of Reg. section 301.7701-4(a).

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.

KPMG observation

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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About Marco Ehrenberg

Born and raised in Mexico City, he found his love for Baja California Sur in the late 70’s when he arrived in La Paz to work as a bellboy at one of the first hotels in the area. After a while he decided to travel and went to Europe.
He then returned to Baja helping in the management of three fishing boats with his father and brother; who had started the business in La Paz around the late 70’s and later moved the operation to Cabo in 1984. Pisces Sport fishing Fleet is now successfully managed by his wife Tracy.
Once in Cabo his entrepreneurial spirit kicked in with the opening of El Squid Roe and other ventures in the late 80’s. The Real Estate business came to be in 1989 when he founded Pisces Real Estate as a small and professional team of associates, with local knowledge and expertise.
The Pisces Real Estate team has gone on to sell more than 300 million dollars in the last two decades. He has also developed Rancho Paraiso Estates a 45 acre residential community in Cabo San Lucas. Marco recently completed building El Cielito a complex of 22 villas within Rancho Paraiso. In 2011-2012 alone, Marco has successfully accomplished over $20 million dollars in sales to date with 7 sales alone specializing in the Hacienda Beach Club & Residences property located on Medano Beach in Cabo San Lucas.
His accomplishments over the last twenty years have made Marco a trusted name in Cabo, let his experience, knowledge and ability help you in your Real Estate endeavors!
For over 30 years Los Cabos has been our home. It is truly paradise for my family and I… the Cabo lifestyle investment is the way to live and wouldnt change it for anything in the world

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