Usufructs: U.S. Taxation and Information Reporting, Minimizing Inheritance Tax in Other Countries

A usufruct is a grant of legal rights made by a now "bare" or "naked" owner to another party, to temporarily live in, derive income, or otherwise benefit from the use of real property. Usufructs play a significant role in the estate plans of individuals in Europe and Latin American countries, specifically in civil law jurisdictions.  These types of structures can create issues in the United States, a primarily common law country, for the classification, reporting, and taxation under the Internal Revenue Code.  

Many Usufruct structures also include foreign entities that create issues under the U.S. controlled foreign corporation, controlled foreign partnership, or passive foreign investment company rules. Lastly, the lack of clear guidance in this area can lead to non-reporting and compliance issues. This presentation will provide options for potential remedies on how to clean up prior year reporting and potential planning for future year efficiencies with these structures. 

Listen as our international tax expert explains income and transfer tax issues with Usufruct structures and offers advice for correcting past noncompliance.

    I.       Usufructs in General

    II.       Civil Law vs. Common Law

   III.       European Usufructs

a.    France

b.    Austria

  IV.       South American Usufructs

a.    Brazil

b.    Colombia

c.    Argentina

d.    Peru

    V.       Central American Usufructs

a.    Guatemala

b. Other usufructs

  VI.       Classification of Usufructs under US Tax Law

 VII.       US International Informational Reporting of Usufructs

a.    Beneficial Interest or Bare Title Ownership in a Usufruct and IRS Form 8938

b.    Foreign Grantor Trust and Forms 3520/3520-A

c.    Foreign Non-Grantor Trust and Form 3520, Part III

d.    Foreign Gift and Bequest Reporting and Form 3520, Part IV

e.    Underlying Assets in a Usufruct (Foreign Corporations and Partnerships)

 VIII.       US Taxation of Usufructs

   IX.     Issues with Non-Reporting of Usufructs and potential IRS remedies

The panel will cover these and other critical issues:

• What to look for in Usufruct documents to assist with US classification, reporting, and taxation

• How to understand the application of IRS Form 8938 reporting vs. Foreign Grantor and Non-Grantor Trust reporting

• How to understand reporting of foreign entities and investments within a Usufruct

• How to understand foreign estate reporting when Usufructs are involved and the application of IRC 6039F for foreign gifts and bequests

• Remedies available for late and missed required U.S. reporting requirements

Learning Objectives

After completing this course, you will be able to:

• Identify taxpayers who could benefit from a usufruct arrangement
• Determine Form 3520 reporting requirements for usufructs
• Decide how usufructs are used in specific countries to lessen inheritance taxes
• Ascertain how streamlined procedures can be used to mitigate noncompliance penalties for U.S. reporting obligations for usufructs

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of international taxation including residency determination, foreign entity classifications, application of treaty benefits, as well as GILTI, Subpart F, and the related Section 250 deductions.

  
  

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).