Estate taxes between non-resident and a citizen

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? Is there a better way to handle this, because I'd really prefer my dad to become a US citizen so he can spend more time here Thanks!

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Reply to
atytler
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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.

--Chris

Reply to
cballard

I knew about this but thought that it was passed only for political show. Has this ever been prosecuted?

Reply to
John Kulp

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