Category Archives: Estate Tax

Considering renouncing US citizenship? #citizide – There are times when US citizenship can save you from foreign taxes!

Should other nations be permitted to impose taxation on U.S. citizens or corporations?
At first blush, the question sounds absurd. Is there something about being a U.S. citizen that should exempt individuals from taxation in or by a another country? Some time ago, this question was explored in a discussion on a Facebook group. Interestingly, most participants thought the discussion was absurd and did not take it seriously. But truth can be stranger than fiction. When it comes to taxation there can be some benefits to being a U.S. citizen. In fact, in certain cases, U.S. citizenship can act as a “cloaking device” – a device that shields you from taxation in another country.

The two certainties are “death and taxes” …

It’s in the area of “death” where U.S. citizenship can be helpful. Sometimes it can be to your benefit to die as a U.S. citizen. Sometimes U.S. citizenship can be helpful when somebody dies leaving you part of their estate.
What follows are some categories where U.S. citizenship can protect you from taxation. These possibilities should be considered prior to renouncing U.S. citizenship.
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"Tax residence" for US Estate and Gift and "tax treaty tiebreakers with overlapping domicile

Introduction – Two kinds of tax systems – Two kinds of “tax residency”
Title 26, the Internal Revenue Code of the United States is composed of twelve subtitles. Subtitle A deals with “Income Taxes”. Subtitle B deals with “Estate and Gift Taxes” AKA the “transfer tax regime”. The two subtitles are administered separately. They also have different definitions of “tax residence”.
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Domicile as a basis for tax residency: How to have @taxresidency where you may not live

What is domicile?
About domicile …
Domicile is an old “common law” concept. Domicile is NOT the same as “residency” (although it might include residency). Domicile is NOT the same as “citizenship” (although one could be a citizen of the country where one is domiciled). Domicile is a concept that refers to one’s permanent home and point of reference. Different jurisdictions might have differing definitions of domicile. It is also a concept that is relevant for a variety of purposes.
Why might domicile matter?


Domicile 101 – Different kinds of domicile …


Learning about domicile …
Much has been written about domicile. Here is a fantastic article written on domicile that was presented in 2011 at an ABA convention. It doesn’t get better than this:
domicile ABA Meeting 2011
Let me offer 5 key points from this article:


Can a person have domicile in more than one place for tax purposes?
Of course you can be domiciled in more than one place for tax purposes! In fact:


Domicile as the definition of “tax residency” for U.S. Estate and Gift tax purposes
How do we know that “residence” for Estate and Gift Tax purposes means “domicile”?
The answer is found in the Treasury Regulations – Specifically Reg. 25.2501-1(b) which defines “residency” for Estate and Gift Tax purposes as follows:

(b)Resident. A resident is an individual who has his domicile in the United States at the time of the gift. For this purpose the United States includes the States and the District of Columbia. The term also includes the Territories of Alaska and Hawaii prior to admission as a State. See section 7701(a)(9). All other individuals are nonresidents. A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of moving therefrom. Residence without the requisite intention to remain indefinitely will not constitute domicile, nor will intention to change domicile effect such a change unless accompanied by actual removal.

Please note that different jurisdictions may define “domicile” differently.
Conclusion …
“Domicile” is largely a “subjective” concept that is proven by “objective” evidence.
Domicile matters!
John Richardson