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Unit Trusts & Expats - What You Need to Know

Unit Trusts & Expats - What You Need to Know
Ines Zemelman, EA
05 December 2017

Tax advice - not financial advice

There are many ways you can invest your money. We are not investment advisors, but we are tax preparers, and just like we won’t wash your car, we will also not provide investment advice as that is outside of our core competency. However, we will provide you with information as to how your investments will be treated by Uncle Sam for the purposes of tax reporting.

Although not the same as a mutual fund in investment terms, for the purpose of the IRS you can think of a Unit Trust as a mutual fund. Similarly, a non-U.S. mutual fund (where most unit trusts lie) - would be subject to the same reporting requirements as a non-U.S. mutual fund --- namely PFIC regime.

For simplicity sake - any non-U.S. pooled investment would be subject to PFIC reporting requirements. Similar to a mutual fund, a unit trust fund is an investment by a group - which own the assets underlying the trust.

Ignore the ‘trust’ in Unit Trust

Although the name may imply as such, they are not ‘foreign trusts’ in the eyes of the IRS. As discussed above - Non-U.S. Unit Trusts are PFICs (Passive Foreign Investment Companies) and require the filing of Form 8621, just like non-U.S. mutual funds do.

An actual foreign trust, common in New Zealand & the UK (amongst others), would require the filing of Form 3520-A. Disbursals from the trust would precipitate the need to file Form 3520.

Ines Zemelman, EA
Founder of TFX