Fideicomiso private letter ruling offers some hope

The IRS has issued a Private Letter Ruling that says a fideicomiso is not a trust.

If that’s so, then you don’t have to file Form 3520 and Form 3520-A every year.  Nor do you face the penalties for failing to do so. 

This is an immensely sane step in the right direction.  Fideicomisos are title-holding mechanisms required by the Mexican Constitution.  A Mexican bank holds title to your real estate but otherwise takes no responsibility whatsoever for anything.  Trustees are required to protect and preserve assets for the beneficiaries.  A fideicomiso does not behave like a trust at all.

Go see John Strohmeyer’s blog, where he has written about the PLR.  John’s a good guy.  Too bad he’s in Texas and doesn’t want to move to California.  :-)

(We are hiring.  If you’re looking for an international tax lawyer job, give us a call.) 


  1. Thanks, Phil!

  2. Many of us born, and/or living permanently outside the US, are being persecuted by the IRS and Treasury – not because the US has actually suffered any US tax loss from us (we often owe zero), but because the IRS is intent on generating revenue from penalties – and on obliterating our legal post-tax savings earned and held transparently and locally – where we live – which we already have to register with our actual country of permanent residence (and non-US citizenship) tax number. The US Treasury and the IRS uses the spiked club of the 3520 and 3520A (as well as the FBAR) to beat us bloody over our legal registered (and often post-tax) savings – which the US insists on penalizing as ‘foreign trusts’, but which were created by our own Canadian government, and and which Canada oversees, and actively markets to us (with no warnings or caveats to those who have inherited unwanted and unsought US taxable status).

    In light of your blog post about the IRS issuing a PLR ruling that a Mexican fideicomiso is not a ‘foreign trust’, and knowing that Canadian RRSPs also used to be considered ‘foreign trusts’, I was hoping that the info on the link *below held out some hope that the IRS might do the same for Canadian TFSAs and RESPs (favourite pet savings vehicles touted by the Canadian Finance Minsiter Jim Flaherty).

    Have you come across anyone else being approached to make a similar presentation?
    “NEW Development: 3520/3520A Filings and Penalties:

    We have recently been invited by IRS to present cases in which clients have been subjected to large penalties or other sanctions when filing compliance forms for TFSA and RESP accounts. We have been advised that IRS will take our position before congress to see if the foreign grantor trust rules can be streamlined in the same way that RRSP filings have been simplified. ”

    • Phil Hodgen says:

      I hope Congress acts on this.

      My suspicion is that the IRS could unilaterally say no penalties will be imposed. That is the correct analysis if you look at the authorities. So I call bullshit on the IRS if the Serbinski report is accurate.

      Someone with an RRSP should fear only FBAR penalties. Not the foreign trust requirements.

      And it will be a cold day in hell when the IRS assesses FBAR penalties on RRSPs. At that point the grownups enter the room and take over. Imagine the political blowback for Canadian politicians if they permit this to happen.