Section 11.20 Only United States Situs Property Subject to Tax

• Library: Estate Administration 2014 Supp

1. (§11.20) Only United States Situs Property Subject to Tax

Generally, only property with a United States situs is deemed to be within the United States and therefore subject to the federal estate tax if owned by a nonresident alien. Real property located in the United States is considered United States situs property. Treas. Reg. § 20.2104-1(a)(1). To the extent the property is subject to a mortgage, only the decedent’s equity of redemption in the real property may be included in a nonresident alien’s gross estate. Estate of Johnstone v. Comm’r, 19 T.C. 44, 44 (1952); Treas. Reg. § 20.2106-1(a)(1). But a decedent’s interest in United States property subject to a mortgage for which the decedent was liable is included in the decedent’s gross estate at its full value, with the estate allowed a deduction for the decedent’s portion of the mortgage, subject to the proportion requirement of I.R.C. § 2106(a)(1). Estate of Fung v. Comm’r, 117 T.C. 247, 257 (2001), aff’d, 58 Fed. Appx. 328 (9^th Cir. 2003). Fung is distinguishable from the Estate of Johnstone, 19 T.C. 44, decision because the decedent in Johnstone was not personally liable for the mortgage. Estate of Johnstone, 19 T.C. at 46.

Personal property merely in transit, with only a temporary situs in the United States, will not be subject to the federal estate tax. See:

· Delaney v. Murchie, 177 F.2d 444, 448 (1^st Cir. 1949)

· William K. Norman, International Estate Tax Planning for the Multinational Family, 53 N.Y.U. Inst. on Fed. Tax’n § 23.02[1] (1995)

· Gerard John Mene, Estate Planning for Nonresident...