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Tax
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Detailed Analysis
I. Introduction
A. Overview
B. The Nature of U.S. Transfer Taxes
C. The Future of Transfer Taxes
D. The Reach of Transfer Taxes to Nonresident Non-Citizens
E. Terms Used in This Portfolio
F. References to Other Portfolios
II. Constitutions and the Legislative Power to Tax Non-Citizens
A. Overview
B. The U.S. Constitution and Taxation - General Principles and Concepts
1. In General
2. "Direct Taxes"
3. Indirect "Taxes, Duties, Imposts, and Excises"
4. Taxing "Incomes" Under the 16th Amendment
C. Transfer Taxation and the U.S. Constitution
1. Estate, Inheritance and Legacy Taxes
2. Gift Taxes
3. Generation-Skipping Transfer Taxes
4. Conclusion
D. Transfer Taxes, Non-Citizens and the U.S. Constitution
1. In General
2. Taxation of Non-Citizens' Property Transfers
3. Conclusion
E. Transfer Taxes, Non-Citizens and State Constitutions
III. Determining Citizenship, Residency and Domicile
A. Overview
B. Citizenship
1. In General
2. Powers Granted to Congress
3. Acquisition of Citizenship
a. Citizenship by Birth in the United States
b. Exception for Children of Diplomats
c. Children of Non-Citizens, and Other Situations
d. Statutory Citizenship
e. Proving Citizenship
f. Citizenship by Naturalization
(1) In General
(2) Summary of Requirements
(3) Secondary Derivative Citizenship (Spouses, Etc.)
4. Loss or Renunciation of Citizenship
a. Background
b. Theories of the Power and Right to Expatriate
c. Loss of Citizenship Under the Immigration and Nationality Act
d. Philosophical Issues, and the Permanence of Expatriation
5. Citizens and U.S. Possessions
6. Effect of Treaties
C. Residency
1. In General
2. Residence Means Domicile
a. Background
b. Regulatory Definition of Domicile
c. Domicile Is a Question of Fact - Discussion of Major Cases
3. The Distinction Between Income and Transfer Tax Definitions
4. Establishing Domicile - Factors
a. Weighing the Factors
b. An Attempt to List the Factors
(1) Visas, Work Permits and Similar Official Documents
(2) The Number and Location of Business and Property Interests
(3) Family Immigration History
(4) Residential Property Comparisons
(5) Testimony, and Statements of the Individual
(6) Motivations
(7) Travel and Duration of Stays in the United States
(8) Community Affairs and Group Affiliations
5. Special Situations (Diplomats, Etc.)
6. Effect of Treaties
IV. Determining Property Situs
A. Overview
B. Estate Tax - Property Deemed Within the United States
1. Real Property Located in the United States
a. In General
b. Buildings, Improvements, Etc.
c. Indirect Interests - Mortgages, Leases, Etc.
2. Personalty Located in the United States
a. In General
b. Domestic and Foreign Currency
c. Intangible Personal Property - A General Rule
d. Exception - Tangible Personalty in Transit
e. Exception - Works of Art on Loan, Exhibition to Galleries, Museums
f. Exception - Personalty of Diplomatic Personnel
3. Stock in Companies Incorporated in the United States
4. Debt Obligations of U.S. Persons
a. In General
b. Convertible Debentures
5. Certain Deposits in U.S. Banks
6. Transfers With Retained Interests
C. Estate Tax - Property Deemed Without the United States
1. Real Property Located Outside the United States
2. Stock in Companies Incorporated Outside the United States
3. Proceeds of Life Insurance
4. Certain Debt Obligations of U.S. Persons, and Foreign Debt Obligations
5. Certain Deposits in U.S. Banks and Deposits in Foreign Banks
6. Interests in Certain Foreign Partnerships
7. Stock in RICs
D. Estate Tax - Properties with Unsettled Situs Rules
1. Interests in Domestic and Foreign Partnerships
2. Beneficial Interests in Trusts and Estates
3. Stock Options and Retirement Plans
4. Commercial Annuities Issued by U.S. Insurers
5. Community Property
6. Goodwill
7. Licenses
8. Sole Proprietorships
9. Intellectual Property
10. Causes of Action for Torts
E. Gift Tax - Properties Subject to Gift Tax
1. Real Property Located in the United States
2. Tangible Personalty Located in the United States
3. Traps for the Unwary
F. Generation-Skipping Transfer Tax - Situs Rules
G. Special Situs Rules for Certain Former U.S. Citizens
1. Special Estate Tax Situs Rules
2. Special Gift Tax Situs Rules
3. Inapplicability of Normal Treaty Rules
H. Summary of Treaty Variations to the Situs Rules
V. Special Rules Regarding Former U.S. Citizens and Long-Term U.S. Residents
A. Overview
B. The Constitutional Right to Expatriate
C. Summary of the Expatriation Process
D. The Special Tax Rules Concerning Expatriates
1. The Impact of HIPAA
2. The Effects of EGTRRA
3. After the AJCA
a. Summary of the AJCA
b. Tax Planning After the AJCA
c. Constitutionality of the AJCA
4. The Threshold Rules of Pre-AJCA § 877
a. Preliminary Issues
b. The Thresholds in General
c. The Tax Liability Test
d. The Net-Worth Test
e. Exception to the Tax Liability and Net-Worth Tests
(1) Overview
(2) Elements of the Exception
(a) Described Persons Element
(b) Ruling Request Element
f. Regulations Interpreting the Objective Tests
g. Cases Interpreting the Objective Tests
h. IRS Rulings Interpreting the Objective Tests
i. Tables of Adjusted Test Thresholds for 1997â€"2004
5. The Alternative Income Tax Rules Under § 877
6. The Special Estate Tax Rules Under § 2107
a. General Imposition of Tax and Threshold Rules
b. Special Situs Rules in General
c. Computational Rules
d. Temporary Change in Situs of Interests in Certain Foreign Corporations
e. Unified Credit and Other Credits
f. Credit for Foreign Death Taxes
g. Cases Under § 2107
h. IRS Rulings Under § 2107
i. Useful Planning Techniques
7. The Special Gift Tax Rules Under § 2501
a. General Rule - Removal of Exclusion for Gifts of Intangible Property
b. Removal of Exclusion for Gifts of Stock in Certain Foreign Corporations
c. Credit for Foreign Gift Taxes Paid
d. Useful Planning Techniques
8. Special GST Tax Rules
9. Information Reporting and Ruling Requests
a. Overview
b. Initial Reporting
c. Ruling Requests Under Former § 877(c)(1)(B)
d. Subsequent Income Tax Reporting
e. Transfer Tax Reporting
10. Constitutionality of § § 877, 2107, and 2501(a)(3) and (5)
11. The Heroes Act Amendments
E. Special State Transfer Taxation Rules
F. Effect of Treaties on Former Citizens and Long-Term Residents
VI. Transfer Taxation and Nonresident Non-Citizens
A. Overview - Calculating the Transfer Taxes
B. The Gross Estate
C. Taxable Gifts
D. Credits
1. Credits Against the FET - NRNCs in General
2. Credits Against the FET - Certain Expatriates of the United States
3. Credits Against the FET - Residents of U.S. Possessions
4. Credits Against the FGT - NRNCs in General
5. Credits Against the FGT - Certain Expatriates of the United States
6. Credits Against the FGT - Residents of Possessions
7. Credits Against the GST Tax - NRNCs in General
E. Deductions
1. FET Deductions - NRNCs in General
2. FET Deductions - Certain Expatriates of the United States
3. FET Deductions - Residents of U.S. Possessions
4. FGT Deductions
F. Transfers Includible
G. Rates of Tax
H. Treaty Variations
I. Basis of Property in Hands of Heir/Donee
J. A Summary Example
K. Presidential Reciprocation
VII. Transfer Taxation and Resident Non-Citizens
A. Overview
B. Summary of Estate Tax Rules Applicable to Resident Non-Citizens and U.S. Citizens
C. Summary of Gift Tax Rules Applicable to Resident Non-Citizens and U.S. Citizens
D. Summary of Generation-Skipping Transfer Tax Rules Applicable to Resident Non-Citizens and U.S. Citizens
E. Special Issues Common To Resident Aliens
1. Transfers to (Resident and Nonresident) Non-Citizen Spouses
2. Changing Domicile
3. Expatriation of Long-Term Residents
4. Expatriation of Children
5. Pre-Residency Planning
6. Asset Protection Planning
VIII. Transfer Tax Planning for Nonresident Non-Citizens
A. Overview
B. Foreign Holding Companies
C. Foreign or Domestic Partnerships
D. Foreign or Domestically Issued Insurance Products
E. Foreign Trusts
F. Other (Overlooked) Planning Tools
G. Pre-Immigration or Residency Planning
H. Matching Archetype Clients or Assets to Planning Techniques
1. Foreign Holding Companies - Typical Assets/Clients
2. Partnerships - Typical Assets/Clients
3. Foreign and Domestic Insurance Products - Typical Assets/Clients
4. Foreign Trusts - Typical Assets/Clients
5. Other Techniques - Typical Assets/Clients
IX. Non-Citizens' Transfer Tax Returns and Other Filings
Introductory Material
A. Estate Tax Returns
1. FET Returns for RNCs
2. FET Returns for NRNCs
B. Gift Tax Returns
C. Generation-Skipping Transfer Tax Returns
D. QDOT Returns
E. A Summary Example
F. Qualified Intermediary Filings
G. Income and Related Tax Filings
H. Other Financial Filings
I. Tax Crimes
X. Important Non-Tax Matters for Non-Citizens
A. Overview
B. Asset Protection and Asset Protection Planning
C. Securities Regulations and Restrictions
D. Preserving Financial Privacy
E. Indirect U.S. Tax Reporting - Qualified Intermediaries and NRNCs
F. Probate in the United States
G. Non-Traditional (Unmarried) Couples
H. Immigration and Naturalization
Working Papers
Table of Worksheets
Other Sources
Worksheet 1 EGTRRA Transfer Tax Timeline
Worksheet 2 State Transfer Taxes
Worksheet 3 List of Transfer Tax Treaties and Information Exchange Agreements
Worksheet 4 Table - Property Situs Rules
Worksheet 5 Sample Client Intake Questionnaire - Citizenship and Domicile
Worksheet 6 Sample Client Letter to Establish Domiciliary Intent
Worksheet 7 Sample Oath of Renunciation of U.S. Citizenship
Worksheet 8 Sample Statement of Understanding of Renunciation of U.S. Citizenship
Worksheet 9 Sample Will of NRNC for Disposition of Property with U.S. Situs
Worksheet 10 Sample Will with Qualified Domestic Trust Under § 2056A
Worksheet 11 Checklist - Drafting/Reviewing Articles of Association for Shareholders of Foreign Corporation
Worksheet 12 Checklist - Drafting/Reviewing Share Certificate Provisions for Shareholders of Foreign Corporation
Worksheet 13 Planning Diagram - Foreign Holding Corporation Technique
Worksheet 14 Sample Memorandum and Articles of Association for Foreign Holding Company (CLS)
Worksheet 15 Sample Memorandum and Articles of Association for Foreign Holding Company (CLG)
Worksheet 16 Sample Agreement to Establish Foreign Corporation (CLS)
Worksheet 17 Sample Appointment of Directors of Foreign Corporation
Worksheet 18 Sample Minutes of First Meeting of Board of Directors of Foreign Corporation
Worksheet 19 Sample Minutes of First Meeting of Shareholders of Foreign Corporation
Worksheet 20 Sample Agreement for Transferring Property to Foreign Corporation (CLS)
Worksheet 21 Sample Deed of Gift of Shares of Foreign Corporation
Worksheet 22 Checklist - Matters Needed to Assess Compliance of Offshore Insurance Products
Worksheet 23 Sample Offshore Annuity Contract
Worksheet 24 Sample Offshore Life Insurance Contract
Worksheet 25 Planning Diagram - Expatriation Planning Technique A
Worksheet 26 Planning Diagram - Expatriation Planning Technique B
Worksheet 27 Sample Operating Agreement for Limited Liability Company (LLC)
Worksheet 28 General Explanation of the Revenue Provisions of the Deficit Reduction Act of 1984 (P.L. 98â€"369), Prepared by the Staff of the Joint Committee on Taxation, 387â€"398 (Dec. 31, 1984)
Worksheet 29 Conference Report on the Technical and Miscellaneous Revenue Act of 1988 (H.R. 4333) H.R. Rep. No. 1104 (Vol. II), 100th Cong., 2d Sess. 113â€"116 (1988)
Worksheet 30 H.R. Rep. No. 586, House Ways and Means Committee Report on the Small Business Job Protection Bill of 1996 (H.R. 3448), 104th Cong., 2d Sess. 169â€"170 (1996)
Worksheet 31 H.R. Rep. No. 736, Conference Report to Accompany the Health Insurance Portability and Accountability Act of 1996 (H.R. 3103), 104th Cong., 2d Sess. 322â€"338 (1996)
Worksheet 32 H.R. Rep. No. 220, Conference Report to the Taxpayer Relief Act of 1997 (H.R. 2014), 105th Cong., 1st Sess. 710 (1997)
Worksheet 33 H.R. Conf. Rep. No. 108-755, Statement of Managers from House-Senate Conference Report on American Jobs Creation Act of 2004 (H.R. 4520) at 568â€"580 (2004)
Bibliography
OFFICIAL
Statutes and Legislative History:
Regulations:
Treasury Rulings:
Cases:
Domestic Cases:
Foreign Statutes and Cases:
Proclamations:
Rulings of Other Agencies:
UNOFFICIAL
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