Fideicomisos! A Private Letter Ruling for the Taxpayer

This post from this Texas lawyer is significant because it underscores that even if something is called a “trust” outside the U.S. it may not meet the definition of “trust” under U.S. law. If something is not a “trust” under U.S. law, it can’t be a “foreign trust” under U.S. law. See also this interesting Phil Hodgen post.
http://hodgen.com/is-an-isa-a-foreign-trust/

The Shape of Tax to Come

TL; DR. A soon-to-be released Private Letter Ruling holds that a fideicomiso is not a trust for federal tax purposes. As a result (though not stated in the PLR), the taxpayer does not need to file Forms 3520 and 3520-A to report his interest in the fideicomiso. Because this is a PLR, it may only be cited as precedent by the taxpayer who requested it. YMMV.

Each year, American taxpayers with assets held outside of the USA must file more and more forms with the IRS to disclose those assets. In many cases, these disclosures do not result in more tax, but will result in additional penalties if those forms are not filed. Given that the IRS wants to know everything about everyone, it was a bit surprising to see the IRS issue a Private Letter Ruling holding that a fideicomiso isn’t a trust.

Disclosures:

  • The IRS will publish…

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