IRS Issues Proposed Regs on Gifts + Bequests from Expatriates

The IRS has issued proposed regulations on September 9, 2015,  addressing taxation of US  citizens and residents receiving gifts/bequests from individuals who previously expatriated from the US.

The proposed regulations are broken into seven parts, which are as follows:

  • Section 28.2801-1 of the proposed regulations sets forth the general rules of liability for the tax imposed by section 2801(a).
  • Section 28.2801-2 of the proposed regulations defines terms for purposes of new chapter 15.
  • Section 28.2801-3 addresses the rules in section 2801(e) and includes rules and several exceptions applicable to the definitions of covered gift and covered bequest.
  • Section 28.2801-4 provides specific rules regarding who is liable for the payment of the section 2801 tax.
  • Section 28.2801-5 of the proposed regulations provides guidance on the treatment of foreign trusts under section 2801.
  • Section 28.2801-6(a) addresses how the basis rules under sections 1014, 1015(a), and 1022 impact the determination of the U.S. recipient’s basis in the covered gift or covered bequest.  Section 28.2801-6(b) clarifies the applicability of the GST tax to certain section 2801 transfers and cross-references the GST rules. Section 28.2801-6(c) discusses the interaction of section 2801 and the information reporting provisions of sections 6039F and 6048(c).  Finally, section 28.2801-6(d) addresses the section 6662 accuracy-related penalties on underpayments of tax, the section 6651 failure to file and pay penalties, and the section 6695A penalty on substantial and gross valuation misstatements attributable to incorrect appraisals.
  • Section 28.2801-7 provides guidance on the responsibility of a U.S. recipient, as defined in section 28.2801-2(e), to determine if tax under section 2801 is due.

See proposed regulations and submit comments here.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.