4.25.4. International Estate and Gift Tax Examinations

(1) This IRM provides internal estate, gift and generation-skipping transfer tax examination guidance, relating to international issues, returns and claims. This guidance applies when:

1. The decedent or donor is not a citizen or domiciliary of the United States for transfer tax purposes.

2. The decedent or donor was a United States citizen but was domiciled outside of the United States.

3. A donor or decedent transferred property located outside of the United States by gift or testamentary transfer.

(1) Estate and gift tax examiners and managers assigned to examine and oversee the examination of international estate and gift tax returns and issues are responsible for complying with servicewide policies and authorities set forth in IRM 1.2.1.5, Servicewide Policies and Authorities, Policy Statements for the Examining Process.

(2) Examination of estate and gift tax returns should be conducted in a manner that will promote public confidence as stated in the Mission of the Service. See IRM 1.2.1.2.1, Policy Statement 1-1.

(3) Policy Statement 4-52 established a general guideline that examination and processing of returns should be completed within 18 months of the filing date. See IRM 1.2.1.5.18, Policy Statement 4-52.

(4) Estate and gift tax examiners and managers assigned to examine and oversee the examination of international estate and gift tax returns and issues are responsible for complying with all applicable servicewide examination delegation orders and SB/SE delegation orders. A table summarizing estate and gift delegation orders is available at IRM 4.25.14.8, Estate and Gift Tax, Miscellaneous Procedures, Signature Authority.

(5) Section 3504 of RRA 98, Public Law 105-206 requires the Service to include an explanation of the examination and collection process, as well as information about assistance from the Taxpayer Advocate with any first report/notice of proposed deficiency. Pub 3498, The Examination Process, must be used for this purpose.

(6) Statement of Procedural Rules 26 CFR 601.506 requires that examiners must forward any correspondence (or copy), discussions, reports and/or other material to the taxpayer at the same time it is sent to the representative.

(7) The Form 706 and 706-NA return instructions and 26 CFR 20.6018-4, 26 CFR 25.6019-3, and 26 CFR 25.6019–4 list required filing documents.

(1) The National Quality Review System (NQRS) is a web-based review system used by Estate and Gift Tax Policy, Estate and Gift Tax Examination Management and Estate and Gift Tax Quality Measures and Analysis (QMA) to generate and review reports analyzing national quality performance based upon standardized quality attributes set forth in Document 12499, Estate and Gift Tax Examination Embedded Quality Job Aid. NQRS report data is compiled by QMA on a quarterly basis, but ad hoc reports may be obtained monthly. The use of NQRS is explained in additional detail in IRM 4.25.1.11, Manager Embedded Quality Review and Specialty Exam National Embedded Quality Review Programs.

(2) Operational Reviews and related NQRS reports are conducted by Territory Managers and the Chief of Estate and Gift to measure national adherence to quality standards and managerial performance and/or oversight.

(3) Customer (i.e., taxpayer) satisfaction reports are generated by SB/SE Operation Support Research on a quarterly basis. These reports provide masked taxpayer narratives that are responsive to a pre-defined set of survey questions. The quarterly survey reports are to be used to identify areas for examination quality improvement.

(4) Front-line manager reviews are conducted under the Examination Quality Review System (EQRS), with the frequency based on annual personnel requirements.

(1) The following table sets forth Estate and Gift Tax program specific terms and definitions:

(2) The following table sets forth common Estate and Gift Tax program acronyms:

(1) The Estate and Gift Tax program is required to follow all servicewide examination procedures and those set forth in the SBSE examining process IRM. The following IRM subsections provide additional information relating to the processing, classification and examination of Estate and Gift Tax program returns and claims:

• IRM 4.25.1, Estate and Gift Tax, Estate and Gift Tax Examinations

• IRM 4.25.2, Campus Estate and Gift

• IRM 4.25.3, Planning, Classification, and Selection

• IRM 4.25.5, Technical Guidelines for Estate and Gift Tax Issues

• IRM 4.25.6, Report Writing Guide for Estate and Gift Tax Examinations

• IRM 4.25.7, Estate and Gift Tax Penalty and Fraud Procedures

• IRM 4.25.8, Delinquent Returns and SFR Procedures

• IRM 4.25.9, Requests for Abatement, Claims for Refund and Doubt as to Liability Offer in Compromise in Estate and Gift Tax Cases

• IRM 4.25.10, Case Closing Procedures

• IRM 4.25.11, Special Examination Procedures

• IRM 4.25.12, Valuation Assistance

• IRM 4.25.13, Appeals, Mediation and Settlement Procedures

• IRM 4.25.14, Miscellaneous Procedures

• IRM 3.21, International Returns and Documents Analysis

• IRM 25.6, Statute of Limitations

• IRM 4.60.1, Exchange of Information

• IRM 5.5.7, Collecting Estate Tax

(1) The term "resident" in the transfer tax context is different from the definition of "resident" in the income tax context. Residence in the transfer tax context is based on the individual’s "domicile." Domicile is defined as living within a country with no definite present intent of leaving. Determining domicile for estate and gift tax purposes is fact specific. Once a noncitizen establishes the United States as their domicile, they remain a United States domiciliary until a new domicile is established. If there is doubt as to the location of domicile, there is a rebuttable presumption that the decedent was domiciled within the country where he or she resided. See 26 CFR 20.0-1, paragraph (b)(1).

(2) If an examiner is examining a return of a decedent who was not a United States citizen, residence for estate tax purposes must be established by determining the decedent's domicile at the time of death. The examiner will need to research current United States and foreign laws, and applicable estate tax treaties, to determine the correct transfer tax treatment for the decedent.

(3) If there is a question about the decedent's domicile at the time of death and the decedent was a resident of a U.S. possession, the examiner may contact International Accounts at the Philadelphia Service Center to determine whether Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, was filed by the decedent prior to death.

(1) The estate tax liability of a U.S. citizen who lived and/or died abroad is considered "international." Regardless, the decedent's estate is required to file Form 706, report the decedent's world-wide assets, and pay tax on the decedent's world-wide assets.

(2) If at the time of death, the decedent was a U.S. citizen but not a resident of the United States for estate tax purposes, the following must be submitted with Form 706:

1. An inventory of property and a schedule of liabilities, claims against the estate, and expenses of administration filed with any foreign court of probate jurisdiction. These documents must be certified by the foreign court.

2. A copy of any return filed under foreign inheritance, estate, legacy, succession, or other death tax laws, that is certified by an official of the foreign tax department.

3. A certified copy of the decedent's will.

4. Death Certificate. State Department Form DS-2060, Report of the Death of an American Citizen Abroad, or death certificate issued by the foreign country and a copy of the decedent's current passport or other proof of US citizenship.

(3) A transfer certificate is a release of the Federal estate tax lien on a decedent’s property. If an estate needs information or assistance with a request for a transfer certificate, refer the estate to the instructions located on the transfer certificate page on IRS.gov.

(1) Generally, an expatriate is someone who relinquished U.S. citizenship or ceases to be treated as a lawful permanent resident. There are special expatriation regimes that generally apply to U.S. citizens who relinquish U.S. citizenship and long-term residents who cease to be treated as a U.S. lawful permanent resident (a long-term resident is defined as U.S. green card holder who has had a green card for at least 8 out of the last 15 years ending with the year residency is terminated).

(2) Special rules under IRC 2107 apply to a noncitizen nonresident decedent who expatriated from the United States prior to June 17, 2008, no more than 10 years prior to death, and who was subject to tax under IRC 877(b).

(3) If a decedent to whom IRC 877(b) applies expatriated from the United States within 10 years of death, the estate is required to file Form 706-NA to report estate tax liability as set out under IRC 2107.

(4) A decedent who is subject to tax under IRC 2107 is generally subject to estate tax as any other nonresident noncitizen decedent, except that the decedent is also deemed to own and will be taxed on a prorated share of U.S. property of any foreign corporation in which they directly or indirectly owned 10 percent or more of voting stock, and with related interests, controlled over 50 percent of the corporation (either through voting power or value of stock). There are also special crediting rules under IRC 2107 that apply to expatriates subject to IRC 2107.

(5) If a decedent to whom IRC 877(b) applies expatriated more than 10 years prior to death, IRC 2107 does not apply, and Form 706-NA would be filed to report estate tax liability on property situated in the United States in the same manner as any other nonresident noncitizen decedent.

(6) United States citizens and long-term residents who relinquished citizenship or residency on or after June 17, 2008, are not subject to IRC 2107 and are not considered expatriates for purposes of Form 706-NA. These individuals are generally treated in the same manner as any other nonresident noncitizen decedent. U.S. persons receiving gifts or bequests from individuals who expatriated on or after June 17, 2008, and are treated as “covered expatriates” under IRC 877A, may have tax consequences under IRC 2801.

(1) The examiner should conduct a complete factual and legal analysis of each case where the decedent and/or donor are identified as a non-domiciled, non-United States citizen. Verifying the domicile of the decedent and/or donor is critical since all foreign situs property owned by a nonresident, noncitizen is not subject to U.S. gift or estate tax.

(2) The examiner should also verify when a decedent and/or donor is identified as a resident of a possession of the United States. A decedent who was a U.S. citizen and a resident of a U.S. possession at the time of death will be treated as a U.S. citizen for estate tax purposes unless such individual acquired U.S. citizenship solely by being a citizen of the possession or by birth or residence within such possession. See IRC 2209.

(1) Article XXIX B (Taxes Imposed by Reason of Death) of the U.S.-Canada Income Tax Treaty ("Treaty") provides special rules that may reduce taxes for U.S. citizen or resident decedents with Canadian property and Canadian residents with U.S. property. These rules were first incorporated into the Treaty under the 1995 Protocol to the Treaty.

(2) If the decedent was a Canadian resident but not a U.S. citizen at the time of death, the estate can take a "pro rata" unified credit to compute U.S. estate tax. The pro rata credit under the Canadian treaty is determined by multiplying the exclusion amount available to a U.S. citizen decedent by a fraction of the value of the decedent’s U.S. assets over the value of the decedent’s world-wide assets. A statement invoking the right under the Treaty described above and showing the tax calculation must be attached to Form 706-NA. See paragraph 2 of Article XXIX B of the Treaty.

(3) The estates of certain decedents transferring property to a U.S. resident or Canadian resident surviving spouse that meet the five conditions described in the Treaty may be entitled to a nonrefundable marital credit against U.S. estate tax when the executor elects the Treaty benefit and waives the benefit of the estate tax marital deduction allowed under U.S. law. This credit is generally limited to the lesser of:

• The allowable unified credit under paragraph 2 of Article XXIX B, or

• The amount of estate tax that would otherwise be imposed on the transfer of qualifying property to the surviving spouse under U.S. law. See paragraphs 3 and 4 of Article XXIX B of the Treaty.

(4) A small estate exemption is available when the world-wide gross estate of a Canadian resident decedent does not exceed $1.2 million. It applies to U.S. securities and certain other property located in the United States. See Paragraph 8 of Article XXIX B of the Treaty.

(1) The U.S.-U.K. Estate Tax Treaty contains various rules that may reduce taxes for U.S. citizen or U.S. resident decedents with respect to U.K. property and may reduce taxes for U.K. citizen or U.K. resident decedents with respect to U.S. property.

(2) A special exemption rule under Article 8 (Deductions, Exemptions, Etc.) of the Treaty allows a U.K. citizen, who was neither a U.S. resident nor a U.S. citizen, who has taxable property in the United States to limit U.S. estate tax to the amount of tax that the U.S. could impose on such decedent if such decedent were treated as a U.S. resident immediately before death.

(3) A statement invoking the right under the Treaty described above and showing the tax calculation must be attached to Form 706-NA. See paragraph 5 of Article 8 (Deductions, Exemptions, Etc.) of the Treaty.

(1) The Foreign Account Tax Compliance Act (FATCA), generally requires that foreign financial institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on payments. The HIRE Act also contains legislation requiring U.S. persons to report, depending on the value, their foreign financial accounts and foreign assets.

(2) When requesting a taxpayer’s FATCA data, Estate and Gift Tax examiners must observe the applicable use restrictions compiled by Automatic Exchange of Information (AEOI). Procedures for requesting FATCA data, as well information on the FATCA Data Use Restrictions Chart, are in the FATCA folder on the E&G SharePoint.

(3) Before requesting FATCA data for Estate and Gift Tax examinations, examiners must review the FATCA workshop, Obtaining FATCA Data, located on the E&G SharePoint in the FATCA Workshop subfolder.

(1) An estate of a U.S. citizen or U.S. resident decedent for estate tax purposes may face double taxation as a result of the decedent's ownership of foreign property because the United States generally taxes the world-wide property of a U.S. decedent and the foreign country may tax property situated within such foreign country. The credit for foreign death taxes authorized under IRC 2014 may relieve the burden from double taxation by allowing the estate of a U.S. citizen or resident decedent to claim a credit against the U.S. estate tax for foreign death taxes actually paid to another country with respect to property located in that country. The credit specifically applies to taxes that are the equivalent to a death, estate, inheritance, legacy, succession tax or similar transfer tax.

(2) Under the statute, the credit is allowable for all death taxes (national and local) imposed by a foreign jurisdiction.

(3) If the situs of the property subject to the foreign death tax credit is in question, it is determined according to the terms of the applicable treaty or by using the same principles used to determine the situs of property owned by a nonresident, noncitizen of the United States. See the instructions for Form 706-NA.

(4) The credit allowable under the statute will be calculated on Schedule P of Form 706. Tax paid to foreign jurisdictions on property not situated in that country or property not included in the gross estate should not be included as part of the calculation.

(1) If an estate tax treaty provides more favorable terms than the statute to the estate of a U.S. citizen or resident decedent and the executor of such estate elects to claim the benefits of the applicable treaty, the treaty provisions apply (rather than the IRC statute). The Form 706 should indicate the treaty provision being invoked.

(2) For a list of countries with current estate and gift tax treaties, see the instructions for Form 706 or Estate and Gift Tax Treaties.

(3) A credit claimed under a treaty is also figured on Schedule P (similar to statutory credits) with the following exceptions:

1. The situs rules of the treaty determine whether the property is located in one or the other treaty country.

2. Credit is only allowed for taxes specified in the treaty. Local taxes may not be eligible for the credit unless specifically stated in the treaty.

3. If allowed under the treaty, credit may be apportioned among properties deemed situated outside or within both countries.

4. The amount entered on line 4, Schedule P is the amount from Part 2, line 12 on page 1 of Form 706, less any amounts claimed as credit for pre-1977 gifts or credit for tax on prior transfers.

(4) If the credit is authorized by treaty, it is equal to the most beneficial of:

1. The credit figured under the treaty provisions, or

2. The credit figured under the statute, or

3. A combination of the credit figured under the treaty plus the credit figured under the statute in the case of death taxes paid to a political subdivision or possession not covered by the treaty.

(1) The estate must complete Schedule P of Form 706 and attach a copy of Form 706-CE, Certificate of Payment of Foreign Death Tax, to support any credit claimed.

(2) Generally, Form 706-CE should be certified by the foreign jurisdiction to which tax was paid. If the foreign jurisdiction refused to certify Form 706-CE, it should be filed directly with the IRS along with a statement explaining why the foreign government refused to certify, a copy of the foreign death tax return, and proof of tax payment.

(3) If tax has been paid to more than one foreign jurisdiction, separate computations for each jurisdiction must be attached to Form 706, Schedule P.

(4) Taxes paid to a foreign jurisdiction should be converted to United States dollars (USD) using the rate of exchange in effect at the time the foreign tax is paid.

(5) The examiner may verify or recalculate the applicable foreign death tax credit using the Estate and Gift Tax Notebook Job Aid. A foreign death tax credit adjustment may be made manually or by using the Foreign Death Tax Credit (FDTC) Worksheet.

1. The FDTC Worksheet adjustments correspond to lines 16 and 18 of Form 1273, Report of Estate Tax Examination Changes. If the credit is limited to a fixed dollar amount, use a manual entry. See IRM 4.25.6.6.3, Foreign Death Tax Credit (Statutory)/Foreign Death Tax Credit (Treaty/Canadian Marital Credit) Worksheet.

2. The FDTC Worksheet will generate a Form 886-A, Explanation of Items, for both statutory and treaty-based adjustments. Do not remove the credit that does not result in an adjustment. Doing so will negatively impact the computations and result.

3. The FDTC Worksheet must be used in cases that have either an interrelated marital or charitable computation or an IRC 6166 installment election.

(1) If the decedent was a resident of the United States and a citizen of another country, the credit is only allowed to the extent that the decedent's country of citizenship allows a corresponding credit for United States citizens who were residents of that country at the time of death.

(2) The foreign death tax credit allowable may not exceed the total federal estate tax attributable to the property.

(3) The foreign death tax credit is limited to amounts actually paid and for which a credit is claimed within the later of:

1. Four years after the filing date of Form 706,

2. The expiration of any extension of time for payment of federal estate tax, or

3. Sixty days after a final decision of the Tax Court on a timely filed petition for redetermination of deficiency.

(4) The foreign death tax credit cannot be finally allowed until the foreign tax is actually paid and evidence of payment is submitted to the IRS.

(5) The estate is required to file notice with the Service if any foreign tax for which a foreign death tax credit has been allowed is recovered. See 26 CFR 20.2016-1.

(1) If the decedent owned property with a surviving spouse who is not a citizen of the United States, the value of that property must be reported in full on Schedule E, Part 2 of Form 706.

(2) Jointly-held property may be listed on Form 706 at less than full value if the estate can prove that the property:

1. Originally belonged to the surviving spouse

2. Was not acquired from the decedent for less than full and adequate consideration in money or money's worth

3. Was acquired with consideration belonging to the surviving spouse, or

4. Was acquired by the decedent and the surviving spouse by gift, bequest, devise or inheritance as joint tenants

(3) To establish the right to report the lesser value of jointly-held property, the estate must include proof of the extent, origin and nature of the decedent's and surviving spouse's interest in the property with Form 706.

(1) The unlimited marital deduction is generally not available for property passing to a surviving spouse who is not a United States citizen. See IRC 2056(d)(1).

(2) Under IRC 2056A, bequeathing property to a noncitizen surviving spouse through a qualified domestic trust (QDOT) allows an estate to take a marital deduction. For the marital deduction to apply, property must be transferred to the QDOT prior to the death of the decedent or the filing of the Form 706.

(3) A QDOT is any trust that is eligible for the estate tax marital deduction under IRC 2056 and meets all of the following requirements:

1. At least one trustee is a United States citizen or domestic corporation;

2. No distribution of corpus can be made unless the United States trustee has the right to withhold from the distribution the tax imposed on the QDOT;

3. Meets the requirements of all applicable regulations, and

4. The executor has made an election on Form 706.

(4) The QDOT election must be made on a Form 706, filed no more than one year after the due date (including extensions) and include:

1. The name and address of every trustee;

2. A description of each transfer from the decedent that is a source of trust property;

3. The employer identification number (EIN) of the trust, and

4. Schedule M lists the entire value of the QDOT or the entire value of the trust property

(5) There is a presumption of election if the trust or property is deducted on Schedule M. Once made, the election is irrevocable. The election is considered made for the entire trust, unless a portion of the trust is specifically identified as not subject to the election.

(6) Based on the value of the assets passing to the QDOT, the trust instrument must contain certain provisions indicating the trust's ability to pay the tax.

(7) If the value passing to the QDOT exceeds $2 million, the trust must meet at least one of the following conditions at all times:

1. At least one U.S. trustee must be a bank;

2. The U.S. trustee must furnish a bond to the IRS for 65 percent of the fair market value of trust assets, or

3. The U.S. trustee must furnish a letter of credit issued by a bank in an amount equal to 65 percent of the fair market value of trust assets.

(8) If the value passing to the QDOT is $2 million or less, the trust must meet at least one of the following conditions at all times:

1. No more than 35 percent of the fair market value of trust assets, as determined on the last day of the taxable year, will consist of real property located outside of the U.S., or

2. The trust will meet the above requirements for QDOTs with assets in excess of $2 million.

(9) If the trust decides to file a bond or letter of credit, the bond or letter of credit must be filed with the return on which the QDOT election is made. The U.S. trustee must include a written statement listing the assets that will fund the QDOT, the values of those assets, and disclosing whether the personal residence exclusion (see below) is being claimed.

(10) If there is more than one QDOT, the values of all trusts are aggregated for purposes of determining whether the $2 million threshold is exceeded.

(11) The executor may elect to exclude up to $600,000 in real property value (including furnishings) from the value of the QDOT if the real property is used by or held for the use of the surviving spouse as a personal residence; is owned directly by the QDOT; and if the real property passed or was treated as passing to the QDOT under the marital deduction rules when the surviving spouse was not a United States citizen.

(12) The examiner is responsible for determining whether the trust qualifies as a QDOT in accordance with IRC 2056A and applicable regulations. The determination will be made as of the filing date for Form 706. If judicial proceedings are commenced before the due date (including extensions) for Form 706 to have the trust reformed to meet QDOT requirements, the determination will not be made until any court-ordered changes are made. The QDOT Lead Sheet provides recommended audit steps and reminders for use in examining qualified domestic trusts. The QDOT Lead Sheet also provides suggestions for the types of documents and information needed to determine the validity and deduction allowable as a result of the IRC 2056A(d) election. The QDOT Lead Sheet is available in the Estate and Gift Tax Notebook Job Aid.

(1) In addition to certain other credits, the treaty between the United States and Canada allows for a marital credit against U.S. estate tax with respect to certain bequests by a decedent to a surviving spouse who is a resident of the United States or Canada at the time of decedent’s death. See paragraphs 3 and 4 of Article XXIX B (Taxes Imposed by Reason of Death) of the United States-Canada Income Tax Convention.

(2) The credit will be included in the total on line 15 of page 1 of Form 706. A notation, "Canadian marital credit" should be to the left of the entry space.

(3) The amount of the marital credit is limited to the lesser of the amount of the unified credit allowed to the estate under paragraph 2 of Article XXIX B of the treaty and the amount of U.S. estate tax that would otherwise be imposed under U.S. law on the transfer of the qualifying property to the surviving spouse.

(4) In order to claim the Canadian marital credit under the U.S.-Canada Income Tax Treaty, the executor of the decedent's estate must elect the benefits of the treaty and must waive any estate tax marital deduction benefit allowed under United States domestic law.

(5) The estate must meet one of the following treaty requirements before claiming the Canadian marital credit:

1. At death, the decedent must have been a U.S. citizen or resident of either the United States or Canada;

2. The surviving spouse was a resident of the United States or Canada at the time of decedent's death; or

3. If both the decedent and the surviving spouse were residents of the United States, one or both was a citizen of Canada.

(1) Unless a treaty provides otherwise, apply the following rules to determine whether assets owned at death by a nonresident noncitizen decedent are located in the United States:

1. Real estate is deemed U.S. situs property if situated in the United States.

2. Tangible personal property is deemed to be U.S. situs property if physically present in the United States on the date of death. There is an exception for works of art which are imported solely for public exhibition, on loan to a non-profit gallery or museum, or on exhibition or en route to or from an exhibition.

3. Stock of U.S. corporations is considered property in the United States.

4. Generally, debt obligations are property located in the United States if they are debts of a U.S. citizen or resident, a domestic partnership or corporation, a domestic estate or trust, the United States, a state, or a political subdivision of a state or the District of Columbia.

5. Deposits with a U.S. branch of a foreign corporation that is engaged in the commercial banking business are treated as property located in the United States.

(2) If an asset is includible in the decedent's gross estate solely due to one of the transfer provisions of IRC 2035, IRC 2036, IRC 2037 or IRC 2038, the asset transferred is considered located in the United States if the above rules apply to situate the asset in the United States either at the time of the transfer or at the time of the decedent's death.

(1) In general, a unified credit against estate tax of $13,000 is available to estates filing Form 706-NA.

(2) If the decedent was a resident of a United States possession, the unified credit is the greater of $13,000 or $46,800 multiplied by the ratio of U.S. situs property to the gross world-wide estate.

(3) Treaty provisions and any unified credit previously allowed against gift tax can change the amount of available unified credit.

(4) The Canadian Marital Credit (IRM 4.25.4.6.3) may be allowed in addition to the unified credit.

(1) The marital deduction may only be taken if the surviving spouse is a United States citizen or if the property passes to a qualified domestic trust (QDOT), unless otherwise allowed by treaty. Schedule M of Form 706 must be attached.

(2) Unless otherwise provided by treaty, a charitable deduction may only be taken if the transfer is to a domestic entity or for use in the United States. Schedule O of Form 706 must be attached.

(3) A credit for federal gift taxes paid is allowable. A computation of the credit must be attached to Form 706-NA.

(4) A deduction for estate, inheritance, legacy, or succession taxes paid to a state or the District of Columbia is allowable. This deduction must, generally, be claimed within four years of filing the return and a certification from the appropriate official of the taxing state must be submitted, showing:

• The total tax charged,

• Any discount allowed,

• Any penalties and/or interest imposed,

• The amount of tax actually paid, and

• Each payment date.

(1) The term "resident" in the transfer tax context is different from the definition of "resident" in the income tax context. Residence in the transfer tax context is based on the individual’s "domicile." Domicile is defined as living within a country with no definite present intent of leaving. Determining domicile for gift tax purposes is the same inquiry as for estate tax purposes described above in IRM 4.25.4.2.1, and is very fact specific. Once a noncitizen establishes the United States as their domicile, they remain a United States domiciliary until a new domicile is established. If there is doubt as to the location of domicile, there is a rebuttable presumption that the decedent was domiciled within the country where they resided at the time the gift was made. A person is considered a nonresident, not a citizen of the United States for gift tax purposes if, at the time of the gift, they are not a United States resident or citizen or hold United States citizenship or residency solely due to birth or domicile in a United States possession. See 26 CFR 25.2501-1.

(2) Nonresident, non-U.S. citizens are subject to gift and GST taxes for transfers of property situated in the United States.

(3) Nonresident, non-U.S. citizens must file Form 709 if they:

1. Make a gift of a future interest of a U.S. situs tangible asset

2. Make a gift of a present interest of a U.S. situs tangible asset that exceeds the annual exclusion amount for the year of the gift to any donee other than a spouse

3. Make a gift to a non-U.S. citizen spouse exceeding the spousal exclusion amount for the year of the gift ($100,000 indexed for inflation; $164,000 in 2022 and $175,000 and 2023). See IRC 2523(i)(2).

(4) Nonresident, non-U.S. citizen donors may not claim the unified (applicable) credit against the gift tax. See IRC 2505(a).

(5) A nonresident, non-U.S. citizen donor may not split gifts.

(6) A nonresident, non-U.S. citizen donor may not take into account the deceased spousal unused exclusion (DSUE) amount of a predeceased spouse, except to the extent authorized by treaty with the donor's country of domicile. For a current list of countries with gift tax treaties see Estate and Gift Tax Treaties.

(1) Gifts to non-U.S. citizen spouses (regardless of whether the donor is a U.S. donor or a nonresident noncitizen donor) are not eligible for the unlimited gift tax marital deduction. See IRC 2523(i)(1).

(2) An increased annual exclusion ($157,000 for 2020), adjusted for inflation is available for gifts of present interests, made to non-U.S. citizen spouses, provided such gifts would otherwise qualify for the gift tax marital deduction.

(3) If the value of gifts made to a non-U.S. citizen spouse exceeds the gift tax annual exclusion for the year in which they are made, Form 709 must be filed for that year.

(4) Gifts of future interests to spouses that are not U.S. citizens must be reported on Form 709, Schedule A. The 2020 Form 709 instructs taxpayers that, "if all gifts to your spouse were present interests, do not report on Schedule A any gifts to your spouse if the total of such gifts for the year does not exceed $157,000 and all gifts in excess of $15,000 would qualify for a marital deduction if your spouse were a U.S. citizen (see the instructions for Schedule A, Part 4, line 4). If the gifts exceed $157,000, you must report all of the gifts even though some may be excluded."