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Mexican Land Trust Is Not a “Trust” to the IRS

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Many Arizona residents own vacation property in Mexico. Most Arizonans are at least somewhat familiar with Mexico’s land laws governing property ownership by U.S. citizens.

The Mexican Federal Constitution of 1917 prohibits non-citizens (of Mexico, that is) from owning property within 100 kilometers of the border or 50 kilometers of the coast. That includes all of the most-popular vacation areas, from Puerto Peñasco (Rocky Point, to the gringos) to Cancun. So how do American citizens manage to buy vacation properties in those restricted zones?

The answer, developed over a number of decades and now quite commonplace, is to put the property in what is often called a “bank trust.” Sometimes the mechanism is called a “Mexican Land Trust,” or by the Spanish word for “trust”: fideicomiso. It looks very much like the Anglo-American concept of a trust. The non-Mexican negotiates the purchase of the property with the seller, but rather than taking title directly pays a Mexican bank to hold title for the benefit of the buyer. The bank trust provides that all taxes, bills and insurance are the responsibility of the individual, and the bank charges an annual fee to hold title in its name.

But here’s an interesting American tax question: is the fideicomiso a “trust” within the meaning of our tax law? Because if it is, that will raise a host of other issues. Is it a “foreign trust” for U.S. tax purposes? That would require additional filings and possibly treat the use of the property (i.e.: staying in your Mexican vacation home) as a taxable distribution. It could be much more complicated if the American citizen were to rent out the property for some of the year, for instance.

This month the IRS gave some good news to U.S. owners of Mexican property. The fideicomiso is not a “trust” for IRS purposes, according to the agency. That means the property can be treated as if it were owned outright by the taxpayer, and the bank trust arrangement can be ignored.

That news came in what the IRS calls a “Private Letter Ruling” (usually referred to as a PLR). The PLR is a response to a particular question posed by a single taxpayer; it can not be cited as authority, but it does indicate the IRS’s thinking on a subject. PLRs are widely read as guidance for other taxpayers in similar situations. Of course, every situation is different and it can be risky to put too much reliance on a single PLR. But for the typical American participant in a Mexican Land Trust, Private Letter Ruling 201245003 (published November 9, 2012) gives both comfort and guidance.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.