{"id":5538,"date":"2012-12-14T18:02:51","date_gmt":"2012-12-15T00:02:51","guid":{"rendered":"https:\/\/www.topmexicorealestate.com\/temp-blog\/?p=5538"},"modified":"2017-08-28T16:25:16","modified_gmt":"2017-08-28T21:25:16","slug":"do-you-own-mexico-real-estate-through-a-fideicomiso-important-tax-reporting-information","status":"publish","type":"post","link":"https:\/\/www.topmexicorealestate.com\/blog\/2012\/12\/do-you-own-mexico-real-estate-through-a-fideicomiso-important-tax-reporting-information\/","title":{"rendered":"Do You Own Mexico Real Estate Through a Fideicomiso? Important Tax Reporting Information – UPDATEDC\u00c3\u00b3mo gastar inteligentemente nuestros aguinaldos esta temporada decembrina."},"content":{"rendered":"

IMPORTANT UPDATE<\/span> (Dec. 18, ’12): The following article was written by Thomas C. Brown, as posted at Nuwire Investor, as indicated at the bottom of this post.\u00c2\u00a0 The information about reporting Mexico real estate<\/a> owned by means of a “fideicomiso” (“Bank Trust”) for U.S. taxes could be a useful consideration for owners; however, every owner should take steps to ensure that they are reporting according to the requirements of the IRS.\u00c2\u00a0 With proper caution, consulting with a professional accountant or the tax authorities, owners of property in Mexico may take the following information into consideration:<\/p>\n

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by Thomas C. Brown<\/p>\n

Anyone who has \u00e2\u20ac\u0153bought\u00e2\u20ac\u009d property in Mexico near its borders or near the water is familiar with the concept of the fideicomisos. Fideicomisos are trust arrangements with Mexican banks, where the banks holds title to a property on behalf of a foreign buyer.\u00c2\u00a0Since\u00c2\u00a0<\/em>foreigners can\u00e2\u20ac\u2122t legally own property in these restricted zones<\/em>, fideicomisos offer home buyers a way around this restriction. Paying taxes on these properties, however, can be complicated in the U.S., and the amount paid depends on the owner\u00e2\u20ac\u2122s ability to differentiate that property as a real estate fideicomiso, and not a trust. If successfully navigated, the tax burden can be minimized by a considerable amount without fear of losing title to the property or breaking the law.<\/em><\/p>\n

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A Rude Awakening<\/strong><\/div>\n

One Sunday in late February 2012, my wife walks into the home office and points me to a tax attorney\u00e2\u20ac\u2122s website about fideicomisos, foreign trusts, and Form 3520 \/ 3520-A\u00e2\u20ac\u201dand ruins my whole summer.<\/p>\n

A few years back, we bought a condo in Mexico. A Notaria Publica caused a Mexican bank to hold our property title \u00e2\u20ac\u0153in trust\u00e2\u20ac\u009d so that we could not petition like Texas settlers for the USA to annex beautiful Banderas Bay. I was perfectly happy with this limited understanding until that morning when I became suddenly aware of the possibility that the IRS could seize 35% of our Mexico paradise in penalties for\u00c2\u00a0never filing 3520[-A]s (since 2007).<\/p>\n

The problem stems from this: only a Mexican citizen or a business controlled by Mexican citizens is\u00c2\u00a0allowed by Mexico\u00e2\u20ac\u2122s constitution to directly own real estate in the so-called restricted zones, within 50 km of coastline or 100 km of a national border.\u00c2\u00a0So, to allow non-Mexicans to invest in these desirable zones, a legal arrangement known as a real estate fideicomiso (or trust, in English) was developed in the 1970s. It is a contract between an authorized Mexican bank (fiduciary or trustee) that holds legal title to the real estate, a (beneficial) owner of the real estate, and a grantor that transfers legal title to the trustee in exchange for fair market value paid by the new \u00e2\u20ac\u0153owner.\u00e2\u20ac\u009d Is this really a trust for which foreign-trust\u00c2\u00a0reporting is required?<\/p>\n

I briefly explain below why I have respectfully informed the IRS that I will not burden them with Forms\u00c2\u00a03520 and 3520-A in the future, and why I will not seek a Private Letter Ruling granting me permission not to file (for a mere $7,000 plus in IRS and attorney fees). Obviously, I\u00e2\u20ac\u2122m in no position to advise you; I\u00e2\u20ac\u2122m\u00c2\u00a0simply sharing my own experience and reasoning.<\/div>\n
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The Firm Encourages . . . Fees<\/strong><\/div>\n

For the past decade, a number of U.S. attorneys and law firms have advised that U.S. owners of real estate fideicomisos are subject to foreign trust reporting requirements and must file annual Forms 3520 and 3520-A.\u00c2\u00a0Penalty warnings are softened by assurance that the attorney or firm may be able to reduce\u00c2\u00a0penalties already \u00e2\u20ac\u0153owed\u00e2\u20ac\u009d for prior noncompliance.<\/p>\n

In March, we contacted several attorneys who advertise expertise in foreign trust reporting for\u00c2\u00a0fideicomiso owners. One offered an initial half-hour consultation for $300. Another offered to fill out our forms for $500 each, or $5,000 for the ten 3520[-A] forms that were due in mid-April.\u00c2\u00a0We declined.<\/p>\n

As I waded through Forms 3520, 3520-A, and related websites during the summer, I felt some of the resentments expressed by other real estate fideicomiso owners on websites and blogs:<\/p>\n<\/div>\n

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