This week, we will start with a simple issue.  Say you invested in Treasury Bonds.  Did you know that it property within the US for estate tax purposes, even if you are a nonresident noncitizen of the US?  Debt obligations of a US person are categorized as property within the US for estate tax purposes.[1]  A US person in this case includes individuals, corporations, partnerships, trusts and estates.

There are several categories of debt obligation – notes, bonds, loans, leases, or some other instrument (is this a technical term?) owed by one party to another.  The Internal Revenue Service looks to the issuer to determine if the obligation is property within the US.

The Internal Revenue Code states  that a debt obligation is property within the US if it is issued by the US government,  the United States, the District of Columbia or any political subdivision thereof.[2]

For example, Sam, our foreign citizen, invests in US Treasury Bonds.  Before the bonds mature, Sam dies.  As you look through Sam’s records, you discover Sam’s investment.  Since the US Treasury issued the Treasury Bonds, Sam has property within the US for estate tax purposes.  However, if Foreign Country had issued the Treasury Bonds, you do not have property within the US.

Okay, you may think that this is simple enough.  Debt issued by US government equal US property for estate tax purposes.   However,  there are exceptions to the rule – one for deposits and one for domestic corporations.

[1] IRC §2104(c).

[2] Id.


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