I’m a non-resident alien that have in the US a joint bank account with rights of survivorship. One of the other beneficieries of this account (also a non-resident alien) recently passed away and I have a couple of questions regarding the relevant estate taxes.
1. IRS Instruction for Form 706 state (on the section ‘Schedule E—Jointly Owned Property’) Schedule E—Jointly Owned Property state:
"If you are required to file Form 706, complete Schedule E and file it with the return if the decedent owned any joint property at the time of death, whether or not the decedent's interest is includible in the gross estate [ …] Generally, you must include the full value of the jointly-owned property in the gross estate. However, the full value should not be included if you can show that a part of the property originally belonged to the other tenant or tenants and was never received or acquired by the other tenant or tenants from the decedent for less than adequate and full consideration in money or money's worth. Full value of jointly-owned property also does not have to be included in the gross estate if you can show that any part of the property was acquired with consideration originally belonging to the surviving joint tenant or tenants. In this case, you may exclude from the value of the property an amount proportionate to the consideration furnished by the other tenant or tenants."
In our case, all the assets in the account (which included money in a checking account and the US Treasury Bonds) originally belonged to another tenant of the joint account (the father of the joint tenant of the account that passed away). Would this mean that if we can proof this, we should exclude all the assets in the account from the gross estate subject to estate tax?
2. We were told that we need to pay US Estate Tax for those assets in our bank account that were in US Treasury bonds at the time the co-beneficiary of our account passed away. But from what I read at the IRS website (http://ift.tt/1Ei3Hp9 ), “Assets that are exempt from U.S. estate tax include securities that generate portfolio interest”. And from what I read elsewhere, it seems that US Treasury securities (our were issued in 2008) generate portfolio interest and therefore would be exempted from US Estate tax. Is this interpretation correct? I tried to read section 871(h) of the IRC (which apparently is the relevant legal reference on this issue) but – being a layman – I must say I got lost in all the technicalities. So, just to make sure I understand, do Treasury bonds issued on 2008 qualify as ‘securities that generate portfolio interest” and therefore would not be subject to to federal estate or inheritance taxes? If so, are you familiar with any IRS document (or alternatively another document of well known source) that says this in plain language (that could be understood by a layman like myself)?
Thank you very much,
Hopper
1. IRS Instruction for Form 706 state (on the section ‘Schedule E—Jointly Owned Property’) Schedule E—Jointly Owned Property state:
"If you are required to file Form 706, complete Schedule E and file it with the return if the decedent owned any joint property at the time of death, whether or not the decedent's interest is includible in the gross estate [ …] Generally, you must include the full value of the jointly-owned property in the gross estate. However, the full value should not be included if you can show that a part of the property originally belonged to the other tenant or tenants and was never received or acquired by the other tenant or tenants from the decedent for less than adequate and full consideration in money or money's worth. Full value of jointly-owned property also does not have to be included in the gross estate if you can show that any part of the property was acquired with consideration originally belonging to the surviving joint tenant or tenants. In this case, you may exclude from the value of the property an amount proportionate to the consideration furnished by the other tenant or tenants."
In our case, all the assets in the account (which included money in a checking account and the US Treasury Bonds) originally belonged to another tenant of the joint account (the father of the joint tenant of the account that passed away). Would this mean that if we can proof this, we should exclude all the assets in the account from the gross estate subject to estate tax?
2. We were told that we need to pay US Estate Tax for those assets in our bank account that were in US Treasury bonds at the time the co-beneficiary of our account passed away. But from what I read at the IRS website (http://ift.tt/1Ei3Hp9 ), “Assets that are exempt from U.S. estate tax include securities that generate portfolio interest”. And from what I read elsewhere, it seems that US Treasury securities (our were issued in 2008) generate portfolio interest and therefore would be exempted from US Estate tax. Is this interpretation correct? I tried to read section 871(h) of the IRC (which apparently is the relevant legal reference on this issue) but – being a layman – I must say I got lost in all the technicalities. So, just to make sure I understand, do Treasury bonds issued on 2008 qualify as ‘securities that generate portfolio interest” and therefore would not be subject to to federal estate or inheritance taxes? If so, are you familiar with any IRS document (or alternatively another document of well known source) that says this in plain language (that could be understood by a layman like myself)?
Thank you very much,
Hopper
Federal Taxes: U.S. Estate Taxes for Non-Resident Aliens
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