Internal Revenue Code:Sec. 2107. Expatriation to avoid tax
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle B - Estate and Gift Taxes
CHAPTER 11 - ESTATE TAX
Subchapter B - Estates of Nonresidents Not Citizens
Statute
Sec. 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 nonresident 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 decedent to whom subsection (a) applies
shall be determined as provided in section 2103, except that -
(1) if such decedent owned (within the meaning of section
958(a)) at the time of his death 10 percent or more of the total
combined voting power of all classes of stock entitled to vote of
a foreign corporation, and
(2) if such decedent owned (within the meaning of section
958(a)), or is considered to have owned (by applying the
ownership rules of section 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 corporation, or
(B) the total value of the stock of such corporation,
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 foreign 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 imposed 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, inheritance, legacy, or succession taxes
actually 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 subjected
to such taxes by such foreign country, 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 subsection (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 accordance with subsections (a) and (b) of
section 2102. For purposes of subsection (a) of section 2102,
sections 2011 to 2013, inclusive, shall be applied as if the
credit allowed under paragraph (1) were allowed under section
2010.
(d) Burden of proof
If the Secretary establishes that it is reasonable 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 burden 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 residents, see section
877(e).
Sources
(Added Pub. L. 89-809, title I, Sec. 108(f), Nov. 13, 1966, 80
Stat. 1573; amended Pub. L. 94-455, title XIX, Sec. 1902(a)(6),
1906(b)(13)(A), title XX, Sec. 2001(c)(1)(E)(ii), Oct. 4, 1976, 90
Stat. 1805, 1834, 1851; Pub. L. 104-191, title V, Sec. 511(e)(1),
(f)(2)(A), Aug. 21, 1996, 110 Stat. 2097, 2099; Pub. L. 105-34,
title XVI, Sec. 1602(g)(6), Aug. 5, 1997, 111 Stat. 1095; Pub. L.
107-16, title V, Sec. 532(c)(7)(C), June 7, 2001, 115 Stat. 75.)
Amendment of Section
AMENDMENT OF SUBSECTION (C)(3)
Pub. L. 107-16, title V, Sec. 532(c)(7)(C), (d), title IX, Sec.
901, June 7, 2001, 115 Stat. 75, 150, provided that, applicable
to estates of decedents dying, and generation-skipping transfers,
after Dec. 31, 2004, subsection (c)(3) of this section is
temporarily amended by substituting ''2012 and 2013'' for ''2011
to 2013, inclusive,''. See Effective and Termination Dates of
2001 Amendment note below.
Miscellaneous
AMENDMENTS
2004 - Pub.L.108-357 Sec 804(a)(3). Section 2107(a) is amended
to read as follows: "(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 nonresident 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)."
1997 - Subsec. (c)(2)(B)(i). Pub. L. 105-34, Sec. 1602(g)(6)(A),
substituted ''such foreign country as the value of the property
subjected to such taxes by such foreign country and'' for ''such
foreign country in respect of property included in the gross estate
as the value of the property''.
Subsec. (c)(2)(C). Pub. L. 105-34, Sec. 1602(g)(6)(B), amended
heading and text of subpar. (C) generally. Prior to amendment,
text read as follows: ''For purposes of subparagraph (B), a
property's proportionate share is the percentage of the value of
the property which is included in the gross estate solely by reason
of subsection (b) bears to the total value of the gross estate.''
1996 - Subsec. (a). Pub. L. 104-191, Sec. 511(e)(1)(A),
substituted ''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 decedent
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, Sec. 511(e)(1)(C), substituted
''more than 50 percent of - '' for ''more than 50 percent of the
total combined voting power of all classes of stock entitled to
vote of such foreign corporation,'' and added subpars. (A) and (B).
Subsec. (c)(2), (3). Pub. L. 104-191, Sec. 511(e)(1)(B), added
par. (2) and redesignated former par. (2) as (3).
Subsec. (d). Pub. L. 104-191, Sec. 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, Sec. 511(f)(2)(A), added subsec.
(e). Former subsec. (e) redesignated (d).
1976 - Subsec. (a). Pub. L. 94-455, Sec. 1902(a)(6), substituted
''November 13, 1966'' for ''the date of enactment of this section''
after ''dying after''.
Subsec. (c). Pub. L. 94-455, Sec. 2001(c)(1)(E)(ii), substituted
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, Sec. 1906(b)(13)(A), struck out ''or
his delegate'' after ''Secretary''.
EFFECTIVE AND TERMINATION DATES 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
2011 of this title.
Amendment by Pub. L. 107-16 inapplicable to estates of decedents
dying, gifts made, or generation skipping transfers, after Dec. 31,
2010, and the Internal Revenue Code of 1986 to be applied and
administered to such estates, gifts, and transfers as if such
amendment had never been enacted, see section 901 of Pub. L.
107-16, set out as a note under section 1 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 individuals 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 performed 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 applicable 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 2011 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 decedents dying
after Nov. 13, 1966, see section 108(i) of Pub. L. 89-809, set out
as an Effective Date of 1966 Amendment note under section 2101 of
this title.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 877, 2101 of this title.
