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 are an integral part of estate plans in France, as well as other European and Latin American countries. 

In France, for example, when a parent gifts a property ownership interest to a child, the distribution value of the transfer is determined based on a scale the uses the age of the usufructuary, the grantee, resulting in a much lower gift value than the property's market value. The real estate then receives a basis step-up at the grantor's death and is not included in the deceased's estate. 

Even though usufructs can provide significant inheritance tax savings in other countries, the U.S. tax consequences may differ. A donor's retained interest or powers could cause Section 2036 inclusion of the asset in the estate at death. And, failure to meet required U.S. reporting obligations can lead to substantial penalties for unwary taxpayers. 

Listen as our astute foreign tax adviser addresses the tax treatment of usufructs in the U.S. and offers advice on complying with reporting obligations, including steps to absolve past noncompliance. 

I. Usufructs: introduction

II. Treatment for U.S. tax purposes

III. Gift and estate tax

IV. French usufructs

V. Usufructs in other countries

VI. FBAR, FACTCA, and Form 3520 reporting requirements

VII. Late-filing remedies

The panel will cover these and other critical issues:

• When a usufruct holder might be considered a controlled foreign corporation
• How usufructs operate to mitigate inheritance tax in specific countries
• When a usufruct might trigger Form 3520 and FBAR reporting obligations
• 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).