IRS pronouncements: guidance: information document requests & Mexican Land Trusts.

• Author: Josephs, Stuart R.
• Position: Fed Tax

The IRS Large Business & International Division issued a directive June 18 (LB&I-04-0613-004) on IDRs which states that LB&I examiners and specialists should have completed IDR training reinforcing best practices for information gathering.

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This training prescribes the following steps that must be performed in issuing IDRs:

1. All IDRs issued during and LB&I exam must be focused. The examiner must identify and state issue that has led the examiner to request the information included in the IDR;

2. The examiner must discuss the IDR with the taxpayer before it is issued; and

3. Both parties must discuss and determine a reasonable timeframe for response.

When all of these steps are followed, it is expected that the IDR process will be more efficient and result in less need to enforce IDRs through summonses.

Planning and Examination Guidance

This directive's purpose is to announce the requirement that all IDRs issued after June 30, 2013, must comply with the steps above. Existing Memorandums of Understanding relating to IDR management that do not comply with these steps are no longer effective.

In the coming months, LB&I believes the need for an enforcement process may be limited once IDRs meet these new requirements, it is important to have an effective and swift enforcement process when necessary. However, before the new enforcement process is implemented, it is essential that all IDRs issued during an LB&I exam meet these new requirements.

Mexican Land Trust Arrangements (MLTs)

Issue in Rev. Rul. 2013-14: Is the fideicomiso or MLT described below a trust under Regs. Sec. 301.7701-4(a)?

Facts: The Mexican Federal Constitution prohibits non-Mexican persons from directly holding title to residential real property in certain areas of Mexico ("restricted zones"). However, non-Mexican persons may hold residential real property located in these zones through an MLT with a Mexican bank after obtaining a permit from the Mexican Ministry of Foreign Affairs.

Situation 1: A U.S. citizen is the sold owner of X, a domestic LLC, treated as a disregarded entity. A, through X, wanted to purchase Greenacre, a Mexican residential real property located in a restricted zone.

X obtained a permit for the Mexican Ministry of Foreign Affairs and signed an MLT agreement with B, a Mexican bank. X negotitated Greenacre's purchase directly with the seller and paid the seller directly. The seller had no interactions with B regarding this sale. At...