Rev. Rul. 58-232

Advice has been requested whether the gain, from the sale or exchange of the capital assets of a deceased nonresident alien's estate, is taxable to the extent provided in section 871(a)(2) of the Internal Revenue Code of 1954 where the ancillary and/or the domiciliary representative of such estate are present in the United States during the taxable year in which such gain is realized.

At the time of his death the decedent was a resident and citizen of a foreign country. His widow, also a citizen and resident of such foreign country, was appointed the domiciliary administratrix of her husband's estate. Neither the decedent nor his widow was engaged in trade or business in the United States. An ancillary administrator, a citizen and resident of the United States, was appointed by a state court to dispose of stock in several United States corporations held in the estate.

During the taxable year in which such stock was disposed of, the domiciliary administratrix was present in the United States for one period of over 90 days while the ancillary administrator was present during the year.

Section 871(a)(2) of the Code provides, in part, as follows:

(2) CAPITAL GAINS OF ALIENS TEMPORARILY PRESENT IN THE UNITED STATES.--In the case of a nonresident alien individual not engaged in trade or business in the United States, there is hereby imposed for each taxable year, in addition to the tax imposed by paragraph (1)--

(A) if he is present in the United States for a period or periods aggregating less than 90 days during such taxable year--a tax of 30 percent of the amount by which his gains, derived from sources within the United States, from sales or exchanges of capital assets effected during his presence in the United States exceed his losses, allocable to sources within the United States, from such sales or exchanges effected during such presence; or

(B) if he is present in the United States for a period or periods aggregating 90 days or more during such taxable year--a tax of 30 percent of the amount by which his gains, derived from sources within the United States, from sales or exchanges of capital assets effected at any time during such year exceed his losses, allocable to sources within the United States, from such sales or exchanges effected at any time during such year.

The appointment of an ancillary administrator is merely one of several means by which parties interested in the decedent's estate secure recognition of rights under local law and an administration consonant therewith. Appointment of an ancillary administrator within the United States for the estate of a nonresident alien decedent subject to domiciliary administration in a foreign country does not create a new taxable entity which may be treated as a domestic estate.

Accordingly, it is held that gains from the sale or exchange of the capital assets of the estate of a deceased nonresident alien, not engaged in trade or business in the United States, are not subject to the tax imposed by section 871(a)(2) of the Code, irrespective of the presence in the United States of the ancillary and/or the domiciliary representative of the estate during the year in which such gains were realized.