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March 24, 2011 - Phil Hodgen

Fideicomiso question and Form 3520

An inquiry from a reader:

Mr. Hodgen, After the release of both IRS forms 3520 & 3520-A instructions, is there a conclusion that a grantor of a trust using their own property (fideicomiso) has to treat the uncompensated use of trust property as a loan/distribution? After reading both forms instructions there appeared to be a note excluding this??? I guess I just have a hard time reading there instructions and what they mean. Thank you for your time, I appreciate your blogs and all your input! Would you reply on your blog to this?

Yes it is a trust distribution. Dumb result, right? Use your own property and have a trust distribution?

The bank that runs your fideicomiso does nothing, accepts responsibility for nothing, etc. This should more properly be ignored or treated as a nominee arrangement.

The IRS will be coming out with a pronouncement specifically about this. It will be coming in the “real soon now” time frame. My guess is you aren’t going to like what the IRS says.

Clean up your 3520 and 3520-A problems now.

Oh. And greetings from Kayenta, AZ. 🙂

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