Although the banks in Mexico do not report the information to the IRS in the USA the responsibility always rests on the taxpayer. It is hard for a taxpayer to explain that I forgot or did not know syndrome to an IRS agent in case of an audit. They will not buy it since the burden of proof lays ultimately with the taxpayer. As for the US to ask for this info from Mexico, unless they are looking for someone very specific, they will not ask. At the same time if the banks are asked for this from the US government, they will without a single though provide the information since there are no bank secrecy laws in Mexico say as in Switzerland or some other places. So gain note no matter what happens the burden is on the taxpayer and not the bank or anyone else to complete the form 3520 from the IRS which is a very complicated form in a sense for simple understanding since the IRS does all it can to make life more difficult vs. making it simple to understand.
Gabesz, I know all these forms and instructions are confusing, but spend enough time reading them and after a while they start to make sense. The trust as established in our case names us trustees of the property, but also provides that we have full rights to the present use and enjoyment of the property, including a right to rent the property to another, if we choose, making us beneficiaries of the trust, as well, I suppose. We can assign our rights under the trust to another, or name them as successors in the event of our deaths. Should we wish to sell the property, and close the trust, the bank is obligated to transfer the title to the buyer, if the buyer has a right under Mexican Law to hold legal title. In our case the duties the bank assumes are minimal, with the bank doing little more than offering its name to be used on the title document, and sending us an annual bill for the privilege. They refer to themselves merely as "fiduciary" in the documents. In that this trust was established at our request, and fully funded by us; and, in that we control it and benefit from it, we are the "owners" of the trust, it seems to me, as that phrase is used in U.S. Tax Law, making us fully responsible for all tax and reporting requirements that come with this form of ownership (Forms 3520 and 3520-A, among others). I believe in the parlance of the tax law, we have established a "grantor trust." Aside from the step of appointing a U.S. agent for the trust, the rest of the process of reporting seemed clear enough and relatively easy to do. (I will include a note which explains why I've taken the action of appointing an agent for service of process.)
As Gabesz mentions: "...it asks if you have a signatory authority for ANY foreign bank account." I do and even though the money in the account isn't mine, I am required to report the fact that I have aforesaid signatory authority. And I have--for over 10 years now. It doesn't ask about the trust and so I have not reported any properties that had (previously) been held in trust. All this after consultation with and approval by a reputable U.S. accounting firm that has prepared my rather complicated and confusing returns for many years.
Most taxpayers run across these reporting requirements in Schedule B, lines 7 (foreign bank accounts), and line 8 (foreign trusts), Form 1040. About reporting "signature" authority over any foreign bank account, the same $10,000 exception applies (see instructions to Schedule B, Form 1040), no reporting required, unless the balance of the account exceeded $10,000 USD at some point during the year. http://www.irs.gov/pub/irs-pdf/f1040sb.pdf In addition to the questions contained in line 8, the instructions to Schedule B include this note, alluding to the requirement to report foreign trusts, The actual requirement to report, and penalties associated with nonreporting, are more fully developed in other sections, with Schedule B acting more like a "reminder" of the requirements established elsewhere. Whether any given taxpayer is under a duty to report is up to them and their tax preparer to decide. ____________________
Windknot, what have you got that you could share with us about why you wish you'd never gotten involved in reporting your fideicomiso, if I may ask? _________________________ At least one commentator that I've found has said there may be an unresolved issue about the value of the use and enjoyment of the trust estate being taxable for income tax purposes (just as rental income would be). It seems the issue arises because of the property being placed in a trust, instead of owned outright, by those at whose request the trust was established (the foreign buyers). I doubt the IRS has pushed this, to this point in time, as there would be a great hue and cry, if it had, but changes to the tax law, introduced in 2010 by the H.I.R.E. Act, make the issue more urgent. In response to this suggestion, one commentator wrote as follows: "Under general trust tax law involving income and distrubutions from trusts to beneficiaries, unless the trust generates taxable income, the mere fact that personal use of foreign trust real property by a beneficiary is treated as a distribution to that beneficiary will not cause the personal use to be taxed to the owner or beneficiary of the fideicomiso because distributions from trusts are taxable to the extent of the trust's distributable net income, only." This, of course, is the way we'd like for the IRS to see it, too! _________________________ Here's the language from the instructions for Form 3520a that creates the doubt, under, "Distributions to U.S. Owners and Beneficiaries" (lines 17b and 17c), which incorporates important changes to the tax laws introduced by the H.I.R.E. Act, mentioned earlier in this thread, ________________________
Without knowing more, it would seem to me that a person who asserts full ownership of the trust and is, therefore, fully responsible for all obligations of the trust, including taxes and reporting obligations- more particularly, when the instrument establishing the trust makes it clear that the bank absolves itself of all responsibility, as ours does- that the uncompensated, personal use and enjoyment of the property is nothing more than that which the foreign buyer has already paid for, and has a right to, without further compensation to the trust. You can't go to the bank on this- it's just the way it strikes me. _______________________
You must report your fideicomiso on form 3520 and 3520-A I report mine and it is legally required to do so
BVG, do you do your own filings, or have someone else do it for you? How have you/they handled the reporting of "uncompensated use" by the grantor or others, now required since March, this year? The implication of the changes to the tax laws contained in the H.I.R.E. Act that grantors, for example, must now pay taxes on the FMV of their use of the trust property seems manifestly unfair, under the normal circumstances of the use of fideicomisos in Mexico. This definitely needs to be addressed by Congress but, given their unwillingness to do anything they think would further facilitate Americans moving abroad with their resources I'm not optimistic this will have a happy ending. (Oh, V, you're so negative....")
V I have an accountant do my filings. I do not see anything reported for uncompensated use, what line what that be on? And it would not really impact me other then some additional reporting. See I also run a rental management company and handle rentals for 15 units in my building. I report all the income on Ssched C, so I would be able to deduct any lodging expense anyway inasmuch as it is considered a business trip. So in other words if I stayed in my personal unit for 2 weeks at say $4000 uncompensated use I would be able to deduct that same $4000 on Sched C
BVG, I filed an extension of time for filing in order to give myself more time to ponder, so my conclusions are all preliminary at this point, and those commentators who've raised a concern, based on the 2010 changes to the law, may be missing something favorable to the trust owner, under the conditions of a fideicomiso. I want to fully satisfy myself on this, if possible, before filing. Since the changes occurred in 2010, they would not have affected prior year's filings. Uncompensated use could appear on the lines for "other income", with an annotation identifying it, if it applies. Under the conditions of a fideicomiso, it just doesn't seem logical to treat the trust owner's use of the property as taxable- when the owner has paid FMV for the property to begin with; in this sense, it hardly seems a use that is "uncompensated" to me, except in the narrow legal sense of the trust being a separate entity from the owner. (However, the code is treating it as one and the same entity, fully identified with the owner, in most other respects). More ruminations.... The only safe tax position is for the owner's use to NOT be treated as uncompensated use; or, to be otherwise exempt, if it is to be treated as uncompensated use.
