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Posted by atytler on September 12, 2007, 10:05 pm
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> atyt...@gmail.com wrote:
>> Hi all, my dad is a greencard holder with Australian
>> citizenship, but he's thinking of giving up his greencard
>> just before he has a chance to become a citizen of the US
>> because he wants to avoid paying estate taxes on his
>> real-estate portfolio (probably worth about 4M) in
>> Australia.
>>
>> He thinks if he turns in his greencard and returns to
>> australia, he can give his estate to me (I'm a US citizen)
>> at the time of his death without me incurring any taxes in
>> the US (Australia has no death tax).
>>
>> Is he correct that giving the estate of a non-resident to a
>> US citizen does not incur the estate tax, or any other form
>> of gift or inheritance tax?
> Generally speaking, a person who is both a non-citizen and
> non-resident of the U.S. and who does not have any U.S.
> property will not owe U.S. estate taxes. There is a
> possible wrinkle to your proposed scenario because of the
> application of Internal Revenue Code section 877. Under
> that Code section, a person who expatriates from the U.S.
> for tax purposes will remain subject to the U.S. estate tax
> for 10 years after the date of expatriation. This section
> also applies to a person who was a green card holder for at
> least 8 of the 15 years immediately prior to the year in
> which the person gives up a green card. The estate tax tie
> in to section 877 can be found in Code section 2107.
>
> Expatriation (or giving up a green card) is presumed to be
> for tax purposes if the person's average annual net income
> tax is at least $136,000 for the 5 years prior to
> expatriation or if the person's net worth is more than $2
> million. There is a mechanism to apply for a ruling that
> the expatriation was not for tax purposes--these provisions
> would not apply if a ruling were granted.
The crucial point is the 8 years. My dad hasn't yet had a
green card for 8 years (only 6 and a half), which is why
he's considering leaving. So if I get this right, if he
abandons his greencard and leaves to Australia, he could
leave an unlimited amount in his estate to me and I'd have
to pay absolutely no tax?
This seems really strange, especially since it encourages
wealthy people to leave the country which is just silly.
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