Recalde Law Firm, P.A. is a Florida law firm with an office in Miami, Florida. We advise on United States law only. We do not practice Mexican law, and we do not give Mexican tax or succession advice. We do not practice the law of any other country. Formation of a non-U.S. entity, and the local law of that jurisdiction, are matters for local counsel. We handle the U.S. architecture: classification, the documents a U.S. custodian and a U.S. court will read, and coordination with the family's tax adviser.
Almost every U.S. consequence of a trust or a holding entity turns on whether someone is a U.S. person. The Code defines “United States person” in section 7701(a)(30): a citizen or resident, a domestic partnership, a domestic corporation, a domestic estate, and a trust that meets both the court test and the control test. Section 7701(b) is only the individual residence test — the green card and substantial presence — that feeds “resident” in section 7701(a)(30). A domestic corporation, a domestic partnership, or a domestic trust is a U.S. person in its own right. Citizenship, a green card, and substantial presence are the three income-tax paths for an individual. This note is those paths in general terms. It is classification for planning. It is not immigration advice, and it is not a way to count a particular family's days.
The Spanish article already on the site, which we are not rewriting, is cuándo se convierte usted en residente fiscal. Planning before a status change is pre-immigration planning. The trust is Foreign Trusts.
Citizen, and lawful permanent resident
A U.S. citizen is a U.S. person. A lawful permanent resident — a green card holder — is a U.S. resident for income tax under section 7701(b)(1)(A), with the statutory rules on when that status starts and when it is treated as surrendered or rescinded. Holding the card is the fact. Living outside the United States does not, by itself, turn it off. A child born a U.S. citizen is a U.S. person from birth, including a child born to parents who are not. Families from Mexico, Argentina, or Ecuador meet that fact in a delivery room. Families from Colombia, Brazil, or Chile meet it the same way. The citizenship is an immigration fact. The tax classification follows it. We do not advise on either the acquisition or the renunciation of citizenship.
Substantial presence, including a year that was not meant to be one
A person who is not a citizen and not a green card holder can still be a U.S. resident under the substantial presence test. In general, the test looks at days of presence in the current year and a weighted count of days in the two preceding years, and it requires a minimum number of days in the current year before the formula can be met. The IRS publishes the day count. We are not repeating a worksheet. The planning point is that the test does not ask whether the person intended to move. A season spent in a Miami apartment, or a series of long visits, can change the count. A student year in F, J, M, or Q status often does not count, for a limited number of years and subject to the conditions in section 7701(b)(5). Closer-connection relief, and the exceptions for certain students and teachers, are real, and they have their own forms and their own facts. They are for the tax adviser. They are not a conclusion a family should reach from a blog post.
Income-tax residence is not domicile for the federal estate tax, and neither is a visa category. Someone can be a resident for income tax and a non-domiciliary for estate tax, or the reverse. See estate and gift tax treaties and situs. Treating "I have a tourist visa" as an answer to either question is how the classification is missed.
What changes in the trust and the entities
Once a person is a U.S. person, a foreign corporation the family holds can be a CFC or a PFIC as to that person, a transfer to a foreign trust can be a section 679 transfer, and distributions can be Form 3520 events. See sections 679 and 684 and when a family member becomes a U.S. person. The review belongs before the status changes, if there is still time, and immediately after, if there is not. We coordinate that reading. The tax adviser prepares the returns. Home-country residence rules stay with home-country counsel.