IRS Provides Guidance On Gifts From US Expatriates
Monday, September 14, 2015
The United States Internal Revenue Service has issued proposed regulations to give guidance
under section 2801 of the US tax code that imposes a tax (at the highest applicable gift or estate tax rates) on US residents and
citizens receiving gifts and bequests from expatriates.
As provided for in the Heroes Earnings Assistance and Relief Tax Act of 2008,
the regulations impose a gift and/or estate tax on gifts or bequests received
from "covered expatriates" who relinquished US citizenship or ceased
to be lawful permanent residents of the United States on or after June 17, 2008.
"Covered expatriate" is defined as an individual who expatriated
on or after that date, and who, on the expatriation date, had an average annual
net income tax liability greater than USD124,000 (indexed for inflation) for
the previous five taxable years, had a net worth of at least USD2m (not indexed),
or had failed to certify that he or she had complied with all US tax obligations
for the five preceding taxable years.
The tax will be payable by US residents and citizens who receive gifts or bequests
from such individuals, but is reduced by any estate or gift tax paid to a foreign
jurisdiction. For the purposes of section 2801, domestic trusts and foreign
trusts electing to be treated as domestic trusts are treated as US citizens.
In addition, section 2801 tax applies with regard to any property transferred
to a US citizen or resident which qualifies as a gift or bequest, regardless
of whether the property transferred was acquired by the donor or decedent covered expatriate before or after expatriation.
Its value is its fair market value at the time the gift or bequest is received.
However, a gift or bequest to a covered expatriate's US citizen spouse is excepted
from the provisions of section 2801, if such a gift or bequest would, if given
by a US citizen or resident, qualify for the US gift or estate tax marital deduction.
Charitable donations that would qualify for the US gift or gift tax charitable
deduction are also excepted.