TAXPAYER PREVAILS IN F.B.A.R. CASE
Aroeste v. United States1 is a court case
that previously drew attention because the court, based on a plain
reading of statutory language, overturned I.R.S. policy that
residency under tax treaty does not affect F.B.A.R. filing
obligations. The taxpayers were U.S. permanent residents, which
would subject them to the F.B.A.R., but qualified as Mexican
residents under the tiebreaker provision in the Mexico-U.S. tax
treaty. The I.R.S.'s long-standing position is that treaty
tiebreakers do not create an exemption from F.B.A.R. filing.
Earlier in the case, the I.R.S. attempted to block discovery of
evidence related to the treaty, arguing that it was irrelevant to
F.B.A.R. considerations.2 The court overruled the I.R.S.
and pointed out that the F.B.A.R. regulations directly
cross-reference the residency provisions in the Internal Revenue
Code, which in turn take treaty tiebreakers into account. The case
has now moved onto summary
