IRS Concludes Mexican Land Trust Is Not A “Trust” For Tax Purposes

The IRS recently concluded that Mexican land trusts that areobtained by a U.S. citizen that have an ownership interest in certain parts ofMexico will not be considered “trusts” for regulation section 301.7701-4(a).Certain parts of Mexico are restricted. U.S. citizens may only own residentialproperty in the restricted parts of Mexico by a Mexican land trust called afideicomiso. The trust is essentially a relationship with a Mexican bank thatprovides the citizen with a permit that is granted by Mexico’s Ministry ofForeign Affairs. Now, tax professionals can inform their tax payer clients  that  Mexican land trusts are not “trusts” for U.S. federal incometax purposes, which eliminates the need to file foreign trust informationalreturns such as Form 3520.

See Rev. Rul. 2013-14- Mexican Land Trust Not A “Trust” Under Treasury Regulations, KPMG.com, Jun. 6, 2013.