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  1. #1
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    Default Does a Foreign Person Owning Us Assets Who Bequests the Assets to Only Foreign

    persons pay any estate and gift taxes upon death?

    I know a US resident receiving money from foreign persons does and I know foreign persons receiving money or gifts from US person pays, but what about the above scenario, and what is the reference?

  2. #2
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    Default Re: Does a Foreign Person Owning Us Assets Who Bequests the Assets to Only Foreign

    Huh?

    You're post is largely incoherent. If you can't write better than that, you'll need to enlist assistance from someone who can.

    Are you simply looking for a general explanation of how gift tax works in the U.S.?

  3. #3
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    Default Re: Does a Foreign Person Owning Us Assets Who Bequests the Assets to Only Foreign

    No the OP is asking if US assets owned by a non-USA citizen or resident and bequeathed or gifted to another non-USA citizen or resident are subject to any US tax law.


    While I don't know the answer, the question is pretty clear.

  4. #4
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    Default Re: Does a Foreign Person Owning Us Assets Who Bequests the Assets to Only Foreign

    Quote Quoting PayrolGuy
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    No the OP is asking if US assets owned by a non-USA citizen or resident and bequeathed or gifted to another non-USA citizen or resident are subject to any US tax law.


    While I don't know the answer, the question is pretty clear.
    Correct. I believe I know the answer, but wanted confirmation. I am surprised by the hostile commentary coming from the first responder.

  5. #5
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    Default Re: Does a Foreign Person Owning Us Assets Who Bequests the Assets to Only Foreign

    Quote Quoting Original
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    Correct. I believe I know the answer, but wanted confirmation. I am surprised by the hostile commentary coming from the first responder.
    It depends on different factors. For example, if the estate is less than 11 million plus, currently, there is no estate tax. That figure changes from year to year but it is always a substantial amount. Gift tax would not apply to an estate.

    Therefore, you will never have a hard and fast answer to that question, until the time comes that the person passes away, the full value of the estate is known, and what laws are in place at that time are known.

  6. #6
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    Default Re: Does a Foreign Person Owning Us Assets Who Bequests the Assets to Only Foreign

    Quote Quoting Original
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    persons pay any estate and gift taxes upon death?

    I know a US resident receiving money from foreign persons does and I know foreign persons receiving money or gifts from US person pays, but what about the above scenario, and what is the reference?
    First, understand that the person receiving the gift (the donee) is not the one who is liable for the gift tax. It is the person who gives the gift (the donor) who is liable for the gift tax. The only way the donee pays is if the donor fails to do so, in which case the tax lien that attaches to the gift would allow the IRS to come after the donee to collect the tax from the gift he/she received.

    Second, the gift tax rules are different for nonresident alien donors than they are for citizen and resident alien donors. For a nonresident alien donor the gift tax will apply only to gifts that the nonresident alien makes of property that is situated within the U.S. (regardless of who the donee is). In addition to that, gifts a nonresident alien makes of most intangible personal property are not subject to the tax either. With this in mind, a nonresident alien wishing to make a gift of cash to a person in the U.S. merely needs to ensure that the gift passes outside the United States to avoid any liability for federal gift tax. The easiest (and safest) way to do that is to electronically transfer money from the nonresident alien's bank account in his own country to the U.S. person's bank account. Doing that will allow the nonresident alien donor to make the gift free of gift tax regardless of the size of the gift made. Where the nonresident alien will have the most trouble in avoiding the gift tax is when making a gift of real estate located in the U.S.

    The rules for the estate tax are similar. For a nonresident alien, the tax only applies to the portion of his/her estate that consists of property situated in the U.S. and will exclude most intangible property.


    Quote Quoting llworking
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    For example, if the estate is less than 11 million plus, currently, there is no estate tax. That figure changes from year to year but it is always a substantial amount.
    You've stated the unified credit amount that applies when the donor is a U.S. citizen or resident. A nonresident alien does not get nearly so large a credit. For a nonresident alien donor, the unified credit is just $13,000 and this credit is not adjusted for inflation like the credit that U.S. citizens and residents get. See IRC 2102. Because of this, it is important for nonresident aliens to ensure, to the extent possible, that they make their gifts of property that is not situated in the U.S. or make gifts of intangible personal property that is exempt from the tax in order to ensure that the gift tax will not apply to the gift at all.

  7. #7
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    Default Re: Does a Foreign Person Owning Us Assets Who Bequests the Assets to Only Foreign

    Quote Quoting Taxing Matters
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    First, understand that the person receiving the gift (the donee) is not the one who is liable for the gift tax. It is the person who gives the gift (the donor) who is liable for the gift tax. The only way the donee pays is if the donor fails to do so, in which case the tax lien that attaches to the gift would allow the IRS to come after the donee to collect the tax from the gift he/she received.

    Second, the gift tax rules are different for nonresident alien donors than they are for citizen and resident alien donors. For a nonresident alien donor the gift tax will apply only to gifts that the nonresident alien makes of property that is situated within the U.S. (regardless of who the donee is). In addition to that, gifts a nonresident alien makes of most intangible personal property are not subject to the tax either. With this in mind, a nonresident alien wishing to make a gift of cash to a person in the U.S. merely needs to ensure that the gift passes outside the United States to avoid any liability for federal gift tax. The easiest (and safest) way to do that is to electronically transfer money from the nonresident alien's bank account in his own country to the U.S. person's bank account. Doing that will allow the nonresident alien donor to make the gift free of gift tax regardless of the size of the gift made. Where the nonresident alien will have the most trouble in avoiding the gift tax is when making a gift of real estate located in the U.S.

    The rules for the estate tax are similar. For a nonresident alien, the tax only applies to the portion of his/her estate that consists of property situated in the U.S. and will exclude most intangible property.




    You've stated the unified credit amount that applies when the donor is a U.S. citizen or resident. A nonresident alien does not get nearly so large a credit. For a nonresident alien donor, the unified credit is just $13,000 and this credit is not adjusted for inflation like the credit that U.S. citizens and residents get. See IRC 2102. Because of this, it is important for nonresident aliens to ensure, to the extent possible, that they make their gifts of property that is not situated in the U.S. or make gifts of intangible personal property that is exempt from the tax in order to ensure that the gift tax will not apply to the gift at all.
    Are you saying that if the heir to an estate is located outside of the US that there is estate taxes on any estate that exceeds 13k?

  8. #8
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    Default Re: Does a Foreign Person Owning Us Assets Who Bequests the Assets to Only Foreign

    Quote Quoting llworking
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    Are you saying that if the heir to an estate is located outside of the US that there is estate taxes on any estate that exceeds 13k?
    No. I'm saying that if the decedent of an estate is a nonresident alien and has assets that are situated in the U.S. when he or she died then the estate only gets a unified credit of $13,000 to cover those U.S. assets in his/her estate. IRC 2102(b)(1). That credit then effectively covers the transfer of $60,000 of assets (as opposed to the unified credit that U.S. citizens get that effectively covers the transfers of $11,580,000 of assets). In short, the estate of a nonresident alien may only pass up to $60,000 of assets situated in the U.S. without paying any estate tax. If the value of estate assets situated in the U.S. exceeds $60,000 then there will be estate tax for the estate to pay.

    I should note, which I did not make clear earlier, that the nonresident alien does not get the benefit of the unified credit towards gift tax for gifts made during his/her lifetime. For the nonresident alien, the unified credit only applies to the estate tax, not gift tax.

    The nonresident alien does get the benefit of the annual gift tax exclusion that citizens and residents get, however, and which now stands at $15,000. Putting this all together then, we have the following results for the nonresident alien:

    For gifts made during the nonresident alien's lifetime, he or she may give up to $15,000 each year of property situated in the U.S. to as many persons as he or she wants without any gift tax consequence. But if he or gives gifts of property situated in the U.S. to any one person during the year that total more than $15,000 then the nonresident donor will pay gift tax on the amount of the gifts that exceeds $15,000. So, for example if Amy, a nonresident alien, in 2020 makes gifts totaling $37,000 of property situated in the U.S. to Bart (who is not her spouse), she will will have made taxble gifts to Bart in the amount of $22,000. Because Amy does not get any unified credit for gift tax, she will have to actually pay gift tax on the $22,000 of taxable gifts she made to Bart. Note that this is true regardless of whether Bart is a citizen/resident of the U.S. or whether Bart is a nonresident alien.

    After Amy dies, her taxable estate for federal estate tax purposes will be determined by the value of the property she had situated in the U.S. at the time she died. In computing the tax, the estate will get a $13,000 unified credit, which allows the first $60,000 of assets to pass free of estate tax. So, suppose that Amy, who was still a nonresident alien when she died in 2021, had $110,000 of assets situated in the U.S. Because the unified credit effectively allows the first $60,000 of the estate to pass tax free, the estate will end up paying estate tax on $50,000 of estate assets. Again, it doesn't matter whether the beneficiaries receiving the assets are citizens/residents of the U.S. or nonresident aliens unless the beneficiary was the spouse of the decedent at the time of death.

    Thus, the nonresident alien donor may pass only a relatively very small amount of assets situated in the U.S. tax free compared to the U.S. citizen/resident donor. But the nonresident alien in many cases can avoid or at least reduce this problem by ensuring as much as possible that the gifts made, whether during life or at death, are not of property situated in the U.S.

    Note that the citizenship/residency of the donee does not matter for federal estate and gift tax except if the donee is the spouse of the donor. So, to circle back to something that Original seemed to be asking that I didn't directly address before, if a nonresident alien gives a gift to another person (other than his spouse) the same rules apply whether the person receiving the gift (the donee) is a citizen, resident, or nonresident alien. So, as I pointed out with my examples above, it is quite possible for a gift made by a donor who is a nonresident alien and that is made to a nonresident alien donee to still end up being subject to estate or gift tax. The key is whether the property given is property situated in the U.S.

  9. #9
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    Default Re: Does a Foreign Person Owning Us Assets Who Bequests the Assets to Only Foreign

    Quote Quoting Taxing Matters
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    No. I'm saying that if the decedent of an estate is a nonresident alien and has assets that are situated in the U.S. when he or she died then the estate only gets a unified credit of $13,000 to cover those U.S. assets in his/her estate. IRC 2102(b)(1). That credit then effectively covers the transfer of $60,000 of assets (as opposed to the unified credit that U.S. citizens get that effectively covers the transfers of $11,580,000 of assets). In short, the estate of a nonresident alien may only pass up to $60,000 of assets situated in the U.S. without paying any estate tax. If the value of estate assets situated in the U.S. exceeds $60,000
    then there will be estate tax for the estate to pay.

    I should note, which I did not make clear earlier, that the nonresident alien does not get the benefit of the unified credit towards gift tax for gifts made during his/her lifetime. For the nonresident alien, the unified credit only applies to the estate tax, not gift tax.

    The nonresident alien does get the benefit of the annual gift tax exclusion that citizens and residents get, however, and which now stands at $15,000. Putting this all together then, we have the following results for the nonresident alien:

    For gifts made during the nonresident alien's lifetime, he or she may give up to $15,000 each year of property situated in the U.S. to as many persons as he or she wants without any gift tax consequence. But if he or gives gifts of property situated in the U.S. to any one person during the year that total more than $15,000 then the nonresident donor will pay gift tax on the amount of the gifts that exceeds $15,000. So, for example if Amy, a nonresident alien, in 2020 makes gifts totaling $37,000 of property situated in the U.S. to Bart (who is not her spouse), she will will have made taxble gifts to Bart in the amount of $22,000. Because Amy does not get any unified credit for gift tax, she will have to actually pay gift tax on the $22,000 of taxable gifts she made to Bart. Note that this is true regardless of whether Bart is a citizen/resident of the U.S. or whethe Bar is a nonresident alien.

    After Amy dies, her taxable estate for federal estate tax purposes will be determined by the value of the property she had situated in the U.S. at the time she died. In computing the tax, the estate will get a $13,000 unified credit, which allows the first $60,000 of assets to pass free of estate tax. So, suppose that Amy, who was still a nonresident alien when she died in 2021, had $110,000 of assets situated in the U.S. Because the unified credit effectively allows the first $60,000 of the estate to pass tax free, the estate will end up paying estate tax on $50,000 of estate assets. Again, it doesn't matter whether the beneficiaries receiving the assets are citizens/residents of the U.S. or nonresident aliens unless the beneficiary was the spouse of the decedent at the time of death.

    Thus, the nonresident alien donor may pass only a relatively very small amount of assets situated in the U.S. tax free compared to the U.S. citizen/resident donor. But the nonresident alien in many cases can avoid or at least reduce this problem by ensuring as much as possible that the gifts made, whether during life or at death, are not of property situated in the U.S.

    Note that the citizenship/residency of the donee does not matter for federal estate and gift tax except if the donee is the spouse of the donor. So, to circle back to something that Original seemed to be asking that I didn't directly address before, if a nonresident alien gives a gift to another person (other than his spouse) the same rules apply whether the person receiving the gift (the donee) is a citizen, resident, or nonresident alien. So, as I pointed out with my examples above, it is quite possible for a gift made by a donor who is a nonresident alien and that is made to a nonresident alien donee to still end up being subject to estate or gift tax. The key is whether the property given is property situated in the U.S.
    This confirms my research but I couldn't nail down the Code Section for it. Thank you.

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