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tonynico

Apr 4, 2011, 2:49 AM

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fatca

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It seems that the U.S. gov't is going to make things a lot harder fo expats.

The fatca act which was passed in 2009 I believe which went into effect in 2011 is going to create a lot of problems.

1 it holds back 30% of the institutions any instiution doing business through the U.S. until The bank, financial institution, or insurance co. gives all info on epats holding a financial position with there co. This includes trusts.
This will cause banks etc to comply and cost them much money in doing so. Or asking the customer to leave the institution.

2 This has always been I just found it out if you have a trust you are supposed and it is valued over 10k you are supposed to file form td f 90-22.1 and attach it to your 1040. I thought it was only for bank accounts over 10k but I read the instructions it includes trusts.

3 If you the grantor of the trust or your beneficary uses the property it is considered a distribution
and you have to report fair value.
Another words if you sleep in your own home you need to report the fair value and pay tax on the amount of days you slept in your home.

This is not a joke and I stayed up many hours reading about the fatca law. It was originally supposed to create jobs but congress put all this other things in effecting people living overseas.

This is not good at all. I was first alerted to this by reading another message board.
Do your own due diligence you will find I am correct.

Tony.

(This post was edited by tonynico on Apr 4, 2011, 5:48 AM)

Moisheh

Apr 4, 2011, 8:03 AM

Post #2 of 31 (2737 views)

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Re: [tonynico] fatca

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Your information is not correct. Have you contacted the IRS to get that in writing? The "trusts" you are referring to are income generating trusts not a trust that holds only a house and loses money each year! If your trust had to be reported one could claim all the associated expenses. This has been disussed on other forums.

tonynico

Apr 4, 2011, 8:35 AM

Post #3 of 31 (2721 views)

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Re: [Moisheh] fatca

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As upsetting as it is this law goes into effect this year and I can assure you I am not wrong.
I did speak to the IRS and I have read the law on the web and just a few hours ago I called an foreign trust lawyer.
If it comforts you to think how you are thinking that will not change the fact.
I think you should start reading up on fatca.
I wish I was wrong.

Tony

Rolly

Apr 4, 2011, 9:23 AM

Post #4 of 31 (2693 views)

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Re: [tonynico] fatca

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The law was signed 28 March 2010. It goes into effect 1 Jan 2013 -- 21 months from now. Why the panic now?

Read more here.
And here.

Rolly Pirate

E-visit me http://Rollybrook.com
On Facebook as Rolly Brook

tonynico

Apr 4, 2011, 10:03 AM

Post #5 of 31 (2675 views)

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Re: [Rolly] fatca

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Rolly
Your right and wrong.
for banks brokerage houses, insurance co. etc. the law goes into effect 2013 they need time to prepare. The U.S. is forcing them to comply (report) all people with financial interests by way of threat by holding 30% of all moneys that pass through the U.S. So the institutions have two choices one to comply at huge expense or two to loose 30% of all monies that pass through the U.S.
There is one other choice to ask foreigners to leave that would leave people form other countries with no bank etc.

But for people that hold trusts this is supposed to go into effect this year and be reported when you do the taxes for 2011 ( that is next year) 2012

One of the things that need to report is if you use your assets in the trust. It is considered a distribution and taxed at fair market value. That is right you pay for staying in your own home.

The other thing is if the trust is valued over 10k and you have bank accounts to boot you need to report it on form td f 90-22.1
And if it is over 50k you need to fill out form 8958 this form is only out in draft and has no instructions. But they say it will be ready soon.

This is all in addition to the 3520 and 3520A that you were supposed to have been filing all along.

This is not good. Fatca started out to be a jobs bill.

Tony

(This post was edited by tonynico on Apr 4, 2011, 10:09 AM)

Rolly

Apr 4, 2011, 10:17 AM

Post #6 of 31 (2667 views)

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Re: [tonynico] fatca

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Just to be clear, you are talking about financial activities OUTSIDE the USA.

Rolly Pirate

E-visit me http://Rollybrook.com
On Facebook as Rolly Brook

tonynico

Apr 4, 2011, 3:02 PM

Post #7 of 31 (2601 views)

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Re: [Rolly] fatca

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Hi Rolly
Just as I was replying to you I got a phone call from a cpa involved with foreign taxes. He said the bill goes into effect 2012 and you file in 2013. Which goes along with what you said. But other things I read state 2011 and in effect 2012
He said the law is new and there could be changes and everyone needs to wait to see how it will be enforced.
The way I layed it out in the above post is the way it is he agrees. He said it is a trust and if you get value out of it it is a distribution.
He suggested writing my congress person.
If this is not changed and it is held to the strictest standard. Then we will all be paying uncle Sam rent on our own homes.
I am talking about foreign bank accounts and foreign entities aka trusts.
The banking situation for expats can become very dire if asked to leave the banks since they may or may not want to pay the expense of tracking and reporting assets to the U.S.
Considering domestic trusts don't have the same restrictions this new law seems very unfair to say the least.

10yrs ago I was the only one I knew to file a trust 3520 and 3520A everyone blew it off until the Gov't went after foreign owned bank accounts and trusts.

It is the same deal all over but this time they will get the info do to their extortion of the foreign banks, with threats of withholding 30%. The difference this time there will be no amnesty .
Because he already ( already extended amnesty twice)
Dire indeed unless some exceptions are made.

I urge everyone to call their congress people (Republicans) and explain this is your home and it should not be taxed for use!!

Tony

panama john

Apr 5, 2011, 6:53 AM

Post #8 of 31 (2519 views)

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Re: [Rolly] fatca

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Rolly: Excellent advice.

panama john

Apr 5, 2011, 6:59 AM

Post #9 of 31 (2516 views)

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Re: [tonynico] fatca

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Sounds very complicated. Maybe it's time to look for another passport.

hunteradvisor

Apr 5, 2011, 6:00 PM

Post #10 of 31 (2444 views)

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Re: [tonynico] fatca

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We met with both of our accountants yesterday in PV, one is for our Mexican interests and the other is American living here and taking care of our US issues. They both reported that the Fidecomiso is considered a trust and therefore will be included in the provision now required by the US IRS that you must report the time you spend in your Mexican property which is held in Fide Trust and that you will pay taxes on the fair market value of the time spent. The irony is many US citizens, (myself included) hold US properties in Revocable Living Trusts and we are not required to report the time we spend in those homes. Yes you must report all of your bank accounts held in Mexico. And we learned any rent you receive, even if it never comes to Mexico and is paid in the US in USD, but is for a Mexican property you must report it to the Mexican Hacienda and pay tax here. Being a libertarian, I would love to just go under cover and off radar, but it's way to late for that. Last interesting item yesterday, our Mexican accountant who is also a lawyer explained that holding property in Presta Nombre is not illegal and considered a misrepresentation to the Mexican Gov't. So should someone have an issue not with their Presta Nombre or their POA, but and issue with the family of the Presta Nombre for instance on the death of the PN, then there is no recourse in the Mexican courts. This happened to a friend's sister, all was well until her Presta Friend died and the family came and cleaned the house out and took it, her POA was useless.
Isabel
www.RanchoSolyMar.com

tonynico

Apr 5, 2011, 6:58 PM

Post #11 of 31 (2420 views)

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Re: [panama john] fatca

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If you want to give up being a u.s citizen and have over I am not sure 500,000 or 600,000 then you are taxed on your way out the door for your entire worth. If under the amount you go fee.

When I die I want my tomb stone to read
At least I don't have to pay any more taxes

tonynico

Apr 6, 2011, 6:24 AM

Post #12 of 31 (2349 views)

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Re: [tonynico] fatca

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Are there any CPA on the board I think I found the answer to the problem presented by the new Fatca law but before I mention it I would like to talk with a cpa

Tony

morgaine7

Apr 6, 2011, 8:27 AM

Post #13 of 31 (2308 views)

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Re: [tonynico] fatca

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It will be interesting to see how they propose to determine "fair market value" for rent if the property is the owner's primary home and is never rented.

One tax professional's opinion is that "personal use" of fideicomiso property is unlikely to be taxed unless the "trust" generates income:
http://usexpatriate.blogspot.com/...-early-2010-has.html
"Under general trust tax law involving income and distributions from trusts to beneficiaries, unless the trust generates taxable income, the mere fact that personal use of foreign trust real property by a beneficiary is treated as a distribution to that beneficiary, will not cause the personal use to be taxed to the owner or beneficiary of the Fideicomiso because distributions from trusts are only taxable to the extent of the trusts DNI (Distributable Net Income)."

Kate

panama john

Apr 6, 2011, 8:52 AM

Post #14 of 31 (2295 views)

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Re: [tonynico] fatca

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Tontnico; That's now. In a couple more years you may not be able to take any assets out of the country period. In reality the USA is bankrupt and going further in the hole daily. As the government becomes more desperate in their search for dollars, they could become much more repressive.

tonynico

Apr 6, 2011, 9:13 AM

Post #15 of 31 (2286 views)

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Re: [morgaine7] fatca

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I actually read that. Like you say this is an opinion who knows how it will all turn out.
As far as fair market value
They will look at what other houses rent for in your area and that is how it will be determined.
I called Switzerland yesterday to talk with the ACA they are the ones that are meeting in Washington with congress to discuss Fatca. In the course of explaining what this new law could mean to everyone in Mexico. She said in Switzerland that is exactly what they do. For some reason I had to look this up found it hard to believe. Sure enough if you have a home or if you have two homes they tax it. Not property tax but in addition to. There logic is it could be renting out so they charge. The way they determine it is by what others are renting for. That being said they are looking to drop the use tax on the first home but leaving the tax for the vacation home.

I just got off the phone with two lawyers both foreign tax lawyers dealing with corps trusts
One said he will look into it and get back to me He said he does not think there is a problem.

The other is more reasurring. He said you are the grantor of the trust therefore you own the trust.
Being the owner of the trust there is no distributions on the use of the trust.
I don't know if he is right or wrong.
The rules that are printed for foreign trust say something different they say if the grantor or the beneficiary use the trust it is a distribution.

But as I said earlier if the trust is taxed then I think i have found a work around I would love to talk with a cpa if there is one on this board.

Actually I spoke to a third lawyer who said wait and see for how they will rule on these matters

tonynico

Apr 7, 2011, 2:39 AM

Post #16 of 31 (2190 views)

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Re: [tonynico] fatca

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Please view this video
http://www.youtube.com/watch?v=TT2zzBacHEg

Tony

tonynico

Apr 7, 2011, 6:16 AM

Post #17 of 31 (2167 views)

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Re: [tonynico] fatca

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On another board someone stated that they will not pay tax on living in their own home
I replied
The penalties will far out way the price you have to pay.
I am in contact with several tax lawyers got several opinions
one said you are the owner of the trust(Grantor) so it does not apply to you. WRONG
If he would have read the instructions on the IRS website he would not have said that
The other said it is to new wait and see how it is applied
Another said they will call me back this A.M.

I have several ideas two I cannot one I cannot get into because I don't know if it will work. I am trying to find out.
The other is this. The IRS welcomed comments on the fatca act. I read the responses from several groups.
They listed who to write the responses to.

The main purpose of this law is to catch tax cheats.
I suggest that a coalition be formed not just on this board but try to get all boards involved.( I have limited knowledge of all the boards) But if it can be done, get all names op people that are full time residents living with a trust.

Right a letter to the people what were listed as contact to give comments to.

And explain the following.
The sole purpose of the facta act is to stop people from evading taxes. There are U.S. citizens living abroad full time who due to the countries laws that they live under had no choice but to open a foriegn trust to purchase property in the countries that they reside in Mexico being one.
These citizens are a very low threat of avoiding taxes in the U.S. Almost none at all.
These U.S. citizens for personal reasons have chosen to make a foreign country their home.
These U.S. citizens who live full time in there homes produce no income. Therefore if it can be demonstrated that these U.S. citizens have no other residence other then their home that happens to reside with in the trust and that they live in their home full time we recommend that an exemption be granted under the facta law for these citizens.

Now I am not good at all at organizing and maybe people would not want to get involved for fear.
But what is the other choice. fines can range for 10k to 50k

All comments and in put welcome

(This post was edited by tonynico on Apr 7, 2011, 6:44 AM)

tonynico

Apr 7, 2011, 8:22 AM

Post #18 of 31 (2140 views)

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Re: [tonynico] fatca

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Good News
In one of the posts that I removed I stated I was waiting to here from an attorney..

This guy was wonderful. He took time to research this situation.
We Do Not repeat Do Not have a problem!!!
I heard something similar from another lawyer yesterday but it did not sound right.
AS the grantor of the trust. You are the owner of the trust.
The gov't deems you to have a distribution but in itself a distribution is not income.
If you have no income from the property and owe no taxes on income from the property.
Then there is no income and the distribution does not mean anything in itself.
If you had income from the property and you reported it then the the gov't deemed you to have a distribution but it is meaningless since it wss reported and paid. If not paid then it is deemed to have income. But the fact that you use your property in itself is deemed to have a distribution does not mean income and therefore there is not a problem.

Now I am not a lawyer and might not have explained it well. But this is coming from a foreign tax attorney who took the time to look this up. Plus it is similar to another answer I got.

So I will go along with what both had to say.

Tony

Reefhound

Apr 7, 2011, 8:33 AM

Post #19 of 31 (2139 views)

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Re: [tonynico] fatca

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As you stated, they are trying to close loopholes and the offshore tax havens so often used by the wealthy to evade taxes. Sucks when it hits the little guy as well. Typically, such trusts are funded with pre-tax income like windfall profits, inheritances, non-domestic income, corporate revenues, and illegal income. The feds want their bite always and if they don't get it on the way in then they get it on the way out. Sorta like retirement IRAs that are funded with untaxed or tax deductible income but gets taxed on disbursement. If your fideicomiso was funded with taxable but untaxed income then they have legitimate grounds to tax use of the property. If you can prove it was not then you shouldn't have to pay tax again.

donemry

Apr 7, 2011, 8:53 AM

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Re: [tonynico] fatca

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It seems the whole key to this issue is the definition of the fideicomisos that Mexico forces us to use to own property in the exclusion zones. We tend to call it a trust, but that may be using NOB thinking too describe something in Mexico. There appears to be some ambiguity within the IRS. It is clear from perusing the IRS reporting forms for a trust that calling a fideicomiso a "trust" is a stretch. So when is a duck a duck?

mazbook1

Apr 7, 2011, 1:45 PM

Post #21 of 31 (2079 views)

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Re: [donemry] fatca

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donemry, I think you have hit the nail right on the head. Nearly all U.S. foreigners who have a Mexican fideicomiso allowing them to be the owner in fact of real property in the exclusion zone call it a "trust", but only because that happens to be the U.S. legal document that it resembles, but it really is something different.

The same thing happens with Mexican companies that are called Sociedad Anónima de Capital Variable or S.A. de C.V. Foreigners from the U.S. call them corporations, but the reality is that they only resemble a U.S. corporation and in reality have some very major differences.

Another thing that is different is a personally owned company, which in the U.S. is shown as a person dba His Company, yet for legal purposes the name of the company is meaningless and all income, assets, expenses, etc., etc. are treated as if they were completely the owner's. Although this type of business in México is similar to a "dba" in the U.S., there are some very major differences, so it is incorrect to label them "dba".

bournemouth

Apr 7, 2011, 2:10 PM

Post #22 of 31 (2069 views)

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Re: [mazbook1] fatca

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I agree with you - but - try explaining this to the IRS.

mazbook1

Apr 7, 2011, 2:52 PM

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Re: [bournemouth] fatca

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Fortunately, I no longer have to explain ANYTHING to the IRS, but I know what you mean, as there have been a number of times in the past when I have been spectacularly unable to explain something to them…even with the help of a tax-specialist lawyer and a tax-specialist CPA. The only time I ever won one was clear back in 1967, and that was a fluke, i.e., the examiner believed me—a miracle, my experts told me—when I told him the truth and the only amount left in disagreement was so small it fell below their level of interest…at that time. Those guys are TOUGH!

arbon

Apr 7, 2011, 3:01 PM

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Re: [mazbook1] fatca

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¿Is "Capital Gains Tax" paid in Mexico? .......(or is that still NOB jargon?)
~~~~~~~~~~~~~~~~~~~~~~~

mazbook1

Apr 7, 2011, 3:37 PM

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Re: [arbon] fatca

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There sure is something similar to capital gains tax paid in México—sorry I don't know what it is called in legal, Mexican Spanish—but as far as I know—not ever having had to pay it ¡Gracias a Dios!—there are HUGE differences between it and what is called capital gains tax by IRS NOB.

Trying to relate Mexican tax and business laws and regulations to those NOB is a terrible error for any NOB foreigner trying to be in business in México. It's just like the linguistic "false friends" that all of us who try to learn Spanish have to deal with and so many of the other cultural differences that we inadvertently stumble over. The best way to learn is to FORGET what you THINK you know from a lifetime of experience and start all over again.

I was fortunate when I started up my business here, I got some good advice and hired a really, really good L.C.P. who spoke excellent English. He never let me fall into that trap, as he would sit me down and explain, writing it all out as he did so, exactly what was meant IN MÉXICO by whatever Mexican-Spanish-language law or regulation we were dealing with WITHOUT using any reference to a similar NOB law or regulation. I paid him a LOT of money, but the education I received was worth every penny! It's really just the same as learning how to use those "false friends" in Spanish. Forget what English word they sound or look like, just learn the correct meaning of the word so you can use it properly when speaking Spanish.

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