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,

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?
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

Date: Wed, 06 Sep 2006

Hello Po-Fu,

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.
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

Michael Gray, CPA

2482 Wooding Ct.

San Jose, CA 95128

(408) 918-3162

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