Section 11.23 Estate Taxation of Expatriates

• Library: Estate Administration 2014 Supp

4. (§11.23) Estate Taxation of Expatriates

An expatriate of the United States is one who abandons the country and becomes a citizen or subject of another country. Previously, if a United States citizen lost their United States citizenship and died a nonresident within ten years after losing their citizenship, that nonresident alien’s gross estate was taxed at a rate schedule used for United States citizens or residents under I.R.C. § 2001, but the AJCA, Pub. L. No. 108-357, 118 Stat. 1418, has amended this provision, as discussed below. I.R.C. § 2107(a). When nonresident aliens were generally taxed at lower rates, this section had a punitive effect. But now that aliens are taxed at the same rates as citizens or residents, the only significant difference for expatriates to whom I.R.C. § 2107 applies is in potentially adding foreign corporation stock to the alien’s taxable estate, as discussed below.

To prevent an expatriate from using a foreign corporation to hold United States property, if the deceased expatriate owned 10% or more of the voting stock of a foreign corporation, including shares owned beneficially through foreign trusts, partnerships, and...