Are US mutual funds subject to US estate tax for a nonresident alien?

September 15, 2006

Date:  Thu, 31 Aug 2006
From:  Po-Fu

Hi,

  1. Are US mutual funds (invested in US stocks) or cash savings in a US bank account subject to US estate tax for a non-resident alien?
  2. What are the gift tax rules for a non-resident alien? Is a gift of US mutual funds subject to US tax? Is a gift of international mutual funds subject to US tax? Is a cash transfer between non-resident aliens subject to US gift tax?

Thank you!!
Po-Fu

Answer

Date:  Wed, 06 Sep 2006

Hello Po-Fu,

  1. Stock of US domestic corporations are subject to US estate tax. Funds deposited by or for a nonresident alien in a US bank (including a domestic banking branch of a foreign corporation) are not subject to US estate tax unless they are effectively connected with the conduct of a trade or business within the US by the decedent.
  2. Gifts of intangible property by non-resident aliens are generally exempt from US gift tax. (Internal Revenue Code Section 2501(a)(2).) There is an exception for former citizens or long-term residents of the US who expatriate after June 3, 2004 for transfers made during the 10-year period following relinquishment of citizenship or long-term residency.

You should also consult with a tax advisor about any tax treaty between your country and the US, which can supercede US tax law.

Good luck!


Mike Gray

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