Thursday, January 6, 2011

Forms 3520 and 3520A Still Due for Fideicomisos Which Hold Title to your Mexican Real Estate

Though many commentators have written articles stating that Mexican Fideicomisos should not have to file the Foreign Trust US Tax  Forms 3520 and 3520A, the IRS has not in writing or any other manner accepted that position.  They apparently do not plan on making any announcement on the status of Fideicomisos.  Their  refusal to take a position clearly indicates that the Form should be filed.  A Fedeicomiso is worded like a foreign trust and does hold title to Mexican real estate on behalf of  the real owner.  It is administered by a Mexican Bank which acts as a Trustee.  The IRS obviously likes the fact  the these Forms will keep them fully informed of  all of the real estate owned by US Gringos in Mexico and therefore force those Gringos to report any income made from those properties. Failure to file these forms can result in a $10,000 per year penalty.  The Form 3520 A is due on 3/15 unless the due date is extended.

If you own non residential property  through a Mexican Corporation, you must file Form 5471 each year  or risk the same high penalty. This form is due on the extended due date of your personal tax return.

All rental income earned by your Mexican property must be reported on your US tax return but if it is held through a Fideicomiso you can claim a foreign tax credit for the taxes you pay on that income in Mexico.

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