Thursday, June 13, 2013

FATCA for Americans Living In Mexico and Required US Reporting Seminar on 6/21 in Los Cabos

Please be certain to confirm your reservation if you wish to attend.


Friday June 21st, 2013
From 5:00 PM to 9:00 PM

Hotel Playa Grande
Avenida. Playa Grande1
Plaza Nautica.
Cabo San Lucas 23450
Baja California

Dear Friend,

Intercam-Interbanco is pleased to invite you to our conference & cocktail on Tax Reporting for USA Tax Payers living abroad and the Foreign Account Tax Compliance Act (FATCA).
Each topic will be addressed under the Financial and Legal perspectives by two experts on the field, respectively.
Ing. Eduardo Garcia Lecuona
   Don D. Nelson Attorney at Law, CPA.  
We look forward to see you on Friday, June 21st at the Playa Grande Hotel, in Cabo San Lucas. Conference: 5:00pm. Cocktails and hors d'oeuvres will be served affter the conference.
"Don't forget to register and prepare your questions"

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Thursday, June 6, 2013

IRS Finally Make a Ruling that Benefits All Fideicomiso property Owners in Mexico and Eliminates Possible Filing Requirements

After 10 years of controversy and refusals to make a ruling, the IRS has finally ruled that most Fideicomiso's in Mexico are not foreign trusts required to file Forms 3520 and 3520A.

Revenue Ruling 2013-14 describes a typical fideicomiso or Mexican Land Trust (MLT) and concludes that the arrangement is not a trust within the meaning of § 301.7704-4(a)   You should read this ruling carefully since it only applies to the situations described therein. If you have Fideicomiso that falls outside the the ones described in this ruling, you may still be a foreign trust under US tax law and be required to file special forms.

Revenue Ruling 2013-14 will be in 2013-26, dated June 24, 2013.

Monday, June 3, 2013

A True Story of the Consequences of Not Reporting the Sale of Mexican Property to IRS

Individual X owned a property in Baja California along the coast for about 14 years. During that time he built it up and made lots of improvements. Never got receipts or kept records of the costs of the improvements  Several years ago he sold it for about 1.6 million US dollars, but since he was told no one every told the IRS about sales of property in Mexico he did not include that sale on his US tax returns.  Also due to a helpful notary when he sold the property he paid very little capital gains taxes to Mexico on his large gain.

A year following the sale the IRS decided to audit because  sale of his Mexican property  was not reported on his US.  No one has ever determined how they found out about that sale, but they did have a lot of information on it.  X could not blame his accountant because he never told him about the sale.  The auditor told X he thought he should report the sale to the IRS Criminal Investigation Division but continued to conduct the audit of his return.  X had many problems in that audit:

  • He did not have support for the cost of all improvements he made to the property and thus reduce his capital gain.
  • Due to the helpful Mexican Notary, he had paid only a small amount of capital gain taxes in Mexico and therefore had only a small amount of  foreign tax credits to  offset the $389,000 plus in US taxes, interest and penalty assessment resulting from the audit.
  • He had never filed the required form 3520 and 3520A which are required to be filed when you are a beneficiary and grantor of a foreign trust such as the Fideicomiso's which Mexico requires when foreigners own property along the coast in Mexico.
  • He did not have any explanation why the sale was not shown on his US tax return.
If X had kept good written records of the significant improvements made to the real estate, and paid the Mexican capital gain taxes which would normally be assessed (without the helpful Notary) he would have most likely owed no US taxes on the gain on sale.

At the conclusion of the audit, as a result of  innovative representation from X's attorney and CPA, and the good luck of have been assigned to a compassionate IRS auditor (this does not always happen) all he had to pay  were the taxes, interest and penalties. He did not get criminally prosecuted for tax fraud and go to jail for 5 years which would most likely happen to US taxpayers under these factual circumstances.

If you have failed to report real estates sales in Mexico, or rental income, or are purchasing real estate contact us to learn more about your options and how to solve past non-reporting problems.