26 U.S.C. § 2107 — Expatriation to avoid tax

Page 2624 TITLE 26—INTERNAL REVENUE CODE § 2107 the amendments made by section 5033 of Pub. L. 100–647 shall not apply to the extent such amendments would be inconsistent with the provisions of such treaty re- lating to estate, inheritance, or gift tax marital deduc- tions, but that in the case of the estate of an individual dying before the date 3 years after Dec. 19, 1989, or a gift by an individual before the date 3 years after Dec. 19, 1989, the requirement of the preceding provision that the individual not be a citizen or resident of the United States shall not apply, see section 7815(d)(14) of Pub. L. 101–239, set out as a note under section 2056 of this title. § 2107. Expatriation to avoid tax (a) Treatment of expatriates A tax computed in accordance with the table contained in section 2001 is hereby imposed on the transfer of the taxable estate, determined as provided in section 2106, of every decedent non- resident not a citizen of the United States if the date of death occurs during a taxable year with respect to which the decedent is subject to tax under section 877(b). (b) Gross estate For purposes of the tax imposed by subsection (a), the value of the gross estate of every dece- dent to whom subsection (a) applies shall be de- termined as provided in section 2103, except that— (1) if such decedent owned (within the mean- ing of section 958(a)) at the time of his death 10 percent or more of the total combined vot- ing power of all classes of stock entitled to vote of a foreign corporation, and (2) if such decedent owned (within the mean- ing of section 958(a)), or is considered to have owned (by applying the ownership rules of sec- tion 958(b)), at the time of his death, more than 50 percent of— (A) the total combined voting power of all classes of stock entitled to vote of such cor- poration, or (B) the total value of the stock of such cor- poration, then that proportion of the fair market value of the stock of such foreign corporation owned (within the meaning of section 958(a)) by such decedent at the time of his death, which the fair market value of any assets owned by such for- eign corporation and situated in the United States, at the time of his death, bears to the total fair market value of all assets owned by such foreign corporation at the time of his death, shall be included in the gross estate of such decedent. For purposes of the preceding sentence, a decedent shall be treated as owning stock of a foreign corporation at the time of his death if, at the time of a transfer, by trust or otherwise, within the meaning of sections 2035 to 2038, inclusive, he owned such stock. (c) Credits (1) Unified credit (A) In general A credit of $13,000 shall be allowed against the tax imposed by subsection (a). (B) Limitation based on amount of tax The credit allowed under this paragraph shall not exceed the amount of the tax im- posed by subsection (a). (2) Credit for foreign death taxes (A) In general The tax imposed by subsection (a) shall be credited with the amount of any estate, in- heritance, legacy, or succession taxes actu- ally paid to any foreign country in respect of any property which is included in the gross estate solely by reason of subsection (b). (B) Limitation on credit The credit allowed by subparagraph (A) for such taxes paid to a foreign country shall not exceed the lesser of— (i) the amount which bears the same ratio to the amount of such taxes actually paid to such foreign country as the value of the property subjected to such taxes by such foreign country and included in the gross estate solely by reason of subsection (b) bears to the value of all property sub- jected to such taxes by such foreign coun- try, or (ii) such property’s proportionate share of the excess of— (I) the tax imposed by subsection (a), over (II) the tax which would be imposed by section 2101 but for this section. (C) Proportionate share In the case of property which is included in the gross estate solely by reason of sub- section (b), such property’s proportionate share is the percentage which the value of such property bears to the total value of all property included in the gross estate solely by reason of subsection (b). (3) Other credits The tax imposed by subsection (a) shall be credited with the amounts determined in ac- cordance with subsections (a) and (b) of sec- tion 2102. For purposes of subsection (a) of sec- tion 2102, sections 2012 and 2013 shall be ap- plied as if the credit allowed under paragraph (1) were allowed under section 2010. (d) Burden of proof If the Secretary establishes that it is reason- able to believe that an individual’s loss of United States citizenship would, but for this section, result in a substantial reduction in the estate, inheritance, legacy, and succession taxes in respect of the transfer of his estate, the bur- den of proving that such loss of citizenship did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle A shall be on the executor of such individual’s estate. (e) Cross reference For comparable treatment of long-term lawful permanent residents who ceased to be taxed as resi- dents, see section 877(e). (Added Pub. L. 89–809, title I, § 108(f), Nov. 13, 1966, 80 Stat. 1573; amended Pub. L. 94–455, title XIX, §§ 1902(a)(6), 1906(b)(13)(A), title XX, § 2001(c)(1)(E)(ii), Oct. 4, 1976, 90 Stat. 1805, 1834, 1851; Pub. L. 104–191, title V, § 511(e)(1), (f)(2)(A), Aug. 21, 1996, 110 Stat. 2097, 2099; Pub. L. 105–34, title XVI, § 1602(g)(6), Aug. 5, 1997, 111 Stat. 1095; Pub. L. 107–16, title V, § 532(c)(7)(C), June 7, 2001, Page 2625 TITLE 26—INTERNAL REVENUE CODE § 2108 115 Stat. 75; Pub. L. 108–357, title VIII, § 804(a)(3), Oct. 22, 2004, 118 Stat. 1570.) Editorial Notes AMENDMENTS 2004—Subsec. (a). Pub. L. 108–357 reenacted heading without change and amended text of subsec. (a) gen- erally, substituting provisions relating to imposition of tax on the transfer of the taxable estate of every dece- dent nonresident not a citizen of the United States if the date of death occurs during a taxable year with re- spect to which the decedent is subject to tax under sec- tion 877(b), for provisions relating to imposition of tax on the transfer of the taxable estate of every decedent nonresident not a citizen of the United States if, within the 10-year period ending with the date of death, such decedent lost United States citizenship, unless such loss did not have for one of its principal purposes the avoidance of taxes, and provisions describing individ- uals to be treated as having a principal purpose to avoid taxes. 2001—Subsec. (c)(3). Pub. L. 107–16 substituted ‘‘2012 and 2013’’ for ‘‘2011 to 2013, inclusive,’’. 1997—Subsec. (c)(2)(B)(i). Pub. L. 105–34, § 1602(g)(6)(A), substituted ‘‘such foreign country as the value of the property subjected to such taxes by such foreign coun- try and’’ for ‘‘such foreign country in respect of prop- erty included in the gross estate as the value of the property’’. Subsec. (c)(2)(C). Pub. L. 105–34, § 1602(g)(6)(B), amend- ed heading and text of subpar. (C) generally. Prior to amendment, text read as follows: ‘‘For purposes of sub- paragraph (B), a property’s proportionate share is the percentage of the value of the property which is in- cluded in the gross estate solely by reason of sub- section (b) bears to the total value of the gross estate.’’ 1996—Subsec. (a). Pub. L. 104–191, § 511(e)(1)(A), sub- stituted ‘‘Treatment of expatriates’’ for ‘‘Rate of tax’’ in heading and amended text generally. Prior to amendment, text read as follows: ‘‘A tax computed in accordance with the table contained in section 2001 is hereby imposed on the transfer of the taxable estate, determined as provided in section 2106, of every dece- dent nonresident not a citizen of the United States dying after November 13, 1966, if after March 8, 1965, and within the 10-year period ending with the date of death such decedent lost United States citizenship, unless such loss did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle A.’’ Subsec. (b)(2). Pub. L. 104–191, § 511(e)(1)(C), sub- stituted ‘‘more than 50 percent of—’’ for ‘‘more than 50 percent of the total combined voting power of all class- es of stock entitled to vote of such foreign corpora- tion,’’ and added subpars. (A) and (B). Subsec. (c)(2), (3). Pub. L. 104–191, § 511(e)(1)(B), added par. (2) and redesignated former par. (2) as (3). Subsec. (d). Pub. L. 104–191, § 511(f)(2)(A), redesignated subsec. (e) as (d) and struck out former subsec. (d) which read as follows: ‘‘(d) EXCEPTION FOR LOSS OF CITIZENSHIP FOR CERTAIN CAUSES.—Subsection (a) shall not apply to the transfer of the estate of a decedent whose loss of United States citizenship resulted from the application of section 301(b), 350, or 355 of the Immigration and Nationality Act, as amended (8 U.S.C. 1401(b), 1482, or 1487).’’ Subsec. (e). Pub. L. 104–191, § 511(f)(2)(A), added sub- sec. (e). Former subsec. (e) redesignated (d). 1976—Subsec. (a). Pub. L. 94–455, § 1902(a)(6), sub- stituted ‘‘November 13, 1966’’ for ‘‘the date of enact- ment of this section’’ after ‘‘dying after’’. Subsec. (c). Pub. L. 94–455, § 2001(c)(1)(E)(ii), sub- stituted provisions relating to unified credit for ‘‘The tax imposed by subsection (a) shall be credited with the amounts determined in accordance with section 2102.’’ Subsec. (e). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Secretary’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108–357 applicable to individ- uals who expatriate after June 3, 2004, see section 804(f) of Pub. L. 108–357, set out as a note under section 877 of this title. EFFECTIVE DATE OF 2001 AMENDMENT Amendment by Pub. L. 107–16 applicable to estates of decedents dying, and generation-skipping transfers, after Dec. 31, 2004, see section 532(d) of Pub. L. 107–16, set out as a note under section 2012 of this title. EFFECTIVE DATE OF 1997 AMENDMENT Amendment by Pub. L. 105–34 effective as if included in the provisions of the Health Insurance Portability and Accountability Act of 1996, Pub. L. 104–191, to which such amendment relates, see section 1602(i) of Pub. L. 105–34, set out as a note under section 26 of this title. EFFECTIVE DATE OF 1996 AMENDMENT Amendment by Pub. L. 104–191 applicable to individ- uals losing United States citizenship on or after Feb. 6, 1995, and to long-term residents of the United States with respect to whom an event described in section 877(e)(1)(A) or (B) of this title occurs on or after Feb. 6, 1995, with special rule for certain individuals who per- formed an act of expatriation specified in section 1481(a)(1)–(4) of Title 8, Aliens and Nationality, before Feb. 6, 1995, see section 511(g) of Pub. L. 104–191, set out as a note under section 877 of this title. EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 1902(a)(6) of Pub. L. 94–455 ap- plicable in the case of estates of decedents dying after Oct. 4, 1976, see section 1902(c)(1) of Pub. L. 94–455, set out as a note under section 2012 of this title. Amendment by section 2001(c)(1)(E)(ii) of Pub. L. 94–455 applicable to estates of decedents dying after Dec. 31, 1976, see section 2001(d)(1) of Pub. L. 94–455, set out as a note under section 2001 of this title. EFFECTIVE DATE Section applicable with respect to estates of dece- dents dying after Nov. 13, 1966, see section 108(i) of Pub. L. 89–809, set out as an Effective Date of 1966 Amend- ment note under section 2101 of this title. § 2108. Application of pre-1967 estate tax provi- sions (a) Imposition of more burdensome tax by for- eign country Whenever the President finds that— (1) under the laws of any foreign country, considering the tax system of such foreign country, a more burdensome tax is imposed by such foreign country on the transfer of estates of decedents who were citizens of the United States and not residents of such foreign coun- try than the tax imposed by this subchapter on the transfer of estates of decedents who were residents of such foreign country, (2) such foreign country, when requested by the United States to do so, has not acted to re- vise or reduce such tax so that it is no more burdensome than the tax imposed by this sub- chapter on the transfer of estates of decedents who were residents of such foreign country, and (3) it is in the public interest to apply pre- 1967 tax provisions in accordance with this sec- tion to the transfer of estates of decedents who were residents of such foreign country,