Frequently Asked Questions
Who is eligible for the Expatriate Foreign Death Tax Credit?
Applies to 'covered expatriates' subject to section 877(b) whose foreign assets are pulled into the U.S. estate tax net.
How does the Expatriate Foreign Death Tax Credit work?
Provides a credit against U.S. estate tax for foreign death taxes paid on property included in the U.S. estate solely due to expatriation rules.
What law authorizes the Expatriate Foreign Death Tax Credit?
The Expatriate Foreign Death Tax Credit is authorized under IRC §2107(c)(2) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §2107
Source: Internal Revenue Code, Title 26, United States Code
§ 2107. Expatriation to avoid tax(a) Treatment of expatriatesA tax computed in accordance with the table contained in section 2001 is hereby imposed on the transfer of the taxable estate, determined as provided in section 2106, of every decedent nonresident not a citizen of the United States if the date of death occurs during a taxable year with respect to which the decedent is subject to tax under section 877(b).
(b) Gross estateFor purposes of the tax imposed by subsection (a), the value of the gross estate of every decedent to whom subsection (a) applies shall be determined as provided in section 2103, except that—(1) if such decedent owned (within the meaning of section 958(a)) at the time of his death 10 percent or more of the total combined voting power of all classes of stock entitled to vote of a foreign corporation, and
(2) if such decedent owned (within the meaning of section 958(a)), or is considered to have owned (by applying the ownership rules of section 958(b)), at the time of his death, more than 50 percent of—(A) the total combined voting power of all classes of stock entitled to vote of such corporation, or
(B) the total value of the stock of such corporation,
then that proportion of the fair market value of the stock of such foreign corporation owned (within the meaning of section 958(a)) by such decedent at the time of his death, which the fair market value of any assets owned by such foreign corporation and situated in the United States, at the time of his death, bears to the total fair market value of all assets owned by such foreign corporation at the time of his death, shall be included in the gross estate of such decedent. For purposes of the preceding sentence, a decedent shall be treated as owning stock of a foreign corporation at the time of his death if, at the time of a transfer, by trust or otherwise, within the meaning of sections 2035 to 2038, inclusive, he owned such stock.
(c) Credits(1) Unified credit(A) In generalA credit of $13,000 shall be allowed against the tax imposed by subsection (a).
(B) Limitation based on amount of taxThe credit allowed under this paragraph shall not exceed the amount of the tax imposed by subsection (a).
(2) Credit for foreign death taxes(A) In generalThe tax imposed by subsection (a) shall be credited with the amount of any estate, inheritance, legacy, or succession taxes actually paid to any foreign country in respect of any property which is included in the gross estate solely by reason of subsection (b).
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