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Internal Revenue Code, § 2107. Expatriation To Avoid Tax

I.R.C. § 2107(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).
I.R.C. § 2107(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—
I.R.C. § 2107(b)(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
I.R.C. § 2107(b)(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—
I.R.C. § 2107(b)(2)(A)
the total combined voting power of all classes of stock entitled to vote of such corporation, or
I.R.C. § 2107(b)(2)(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.
I.R.C. § 2107(c) Credits
I.R.C. § 2107(c)(1) Unified Credit
I.R.C. § 2107(c)(1)(A) In General
A credit of $13,000 shall be allowed against the tax imposed by subsection (a).
I.R.C. § 2107(c)(1)(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).
I.R.C. § 2107(c)(2) Credit For Foreign Death Taxes
I.R.C. § 2107(c)(2)(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).
I.R.C. § 2107(c)(2)(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.R.C. § 2107(c)(2)(B)(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
I.R.C. § 2107(c)(2)(B)(ii)
such property's proportionate share of the excess of—
I.R.C. § 2107(c)(2)(B)(ii)(I)
the tax imposed by subsection (a), over
I.R.C. § 2107(c)(2)(B)(ii)(II)
the tax which would be imposed by section 2101 but for this section.
I.R.C. § 2107(c)(2)(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).
I.R.C. § 2107(c)(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 2012 and 2013 shall be applied as if the credit allowed under paragraph (1) were allowed under section 2010.
I.R.C. § 2107(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.
I.R.C. § 2107(e) Cross Reference
For comparable treatment of long-term lawful permanent residents who ceased to be taxed as residents, see section 877(e).
(Added by Pub. L. 89-809, title I, 108(f), Nov. 13, 1966, 80 Stat. 1573, and amended Pub. L. 94-455, title XIX, 1902(a)(6), 1906(b)(13)(A), title XX, 2001(c)(1)(E)(ii), Oct. 4, 1976, 90 Stat. 1805, 1834, 1851; Pub. L. 104-191, title V, 511(e), (f), Aug. 21, 1996, 110 Stat. 1936; Pub. L. 105-34, title XVI, Sec. 1602(g)(6)(A), 1602(g)(6)(B), Aug. 5, 1997, 111 Stat 788; Pub. L. 107-16, title V, 532(c)(7)(C), June 7, 2001, 115 Stat. 38; Pub. L. 108-357, title VIII, 804(a)(3), Oct. 22, 2004, 118 Stat. 1418.)
BACKGROUND NOTES
AMENDMENTS
2004 - Subsec. (a). Pub. L. 108-357, Sec. 804(a)(3), amended subsec. (a). Before amendment it read as follows:
“(a) Treatment of expatriates
“(1) Rate of tax
“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, within the 10-year period ending with the date of death, such decedent lost United States citizenship, unless such loss did not have for 1 of its principal purposes the avoidance of taxes under this subtitle or subtitle A.
“(2) Certain individuals treated as having tax avoidance purpose
“(A) In general
“For purposes of paragraph (1), an individual shall be treated as having a principal purpose to avoid such taxes if such individual is so treated under section 877(a)(2).
“(B) Exception
“Subparagraph (A) shall not apply to a decedent meeting the requirements of section 877(c)(1).”
2001-Subsec. (c)(3). Pub. L. 107-16, Sec. 532(c)(7)(C), amended par. (3) by substituting “2012 to 2013” for “2011-2013, inclusive,”.
1997--Subsec. (c)(2)(B)(i). Pub. L. 105-34, Sec. 1602(g)(6)(A), amended clause (i) by substituting “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 subpar. (C). Prior to amendment it read as follows:
“(C) Proportionate share
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), amended subsec. (a). Before amendment, subsec. (a) read as follows:
“(a) Rate of tax
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), substituted “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,” for “more than 50 percent of the total combined voting power of all classes of stock entitled to vote of such foreign corporation,”.
Subsec. (c)(2), (3). Pub. L. 104-191, Sec. 511(e), redesignated par. (2) as par. (3), and added a new par. (2).
Subsec. (d)-(e). Pub. L. 104-191, Sec. 511(f), struck subsec. (d), redesignated subsec. (e) as subsec. (d), and added a new subsec. (e). Before amendment, subsec. (d) 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 “
1976--Subsec. (a). Pub. L. 94-455, 1902(a)(6), substituted “November 13, 1966” for “the date of enactment of this section” after “dying after”.
Subsec. (c). Pub. L. 94-455, 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, 1906(b)(13)(A), struck out “or his delegate" after “Secretary”.
EFFECTIVE DATE OF 2004 AMENDMENT
Amendment by Sec. 804(a) of Pub. L. 108-357 effective for individuals who expatriate after June 3, 2004.
EFFECTIVE DATE OF 2001 AMENDMENTS
Amendment by Sec. 532(c)(7)(C) of Pub. L. 107-16 effective for estates of decedents dying, and generation-skipping transfers, after December 31, 2004.
Section 901 (Sunset of Provisions of Act) of Pub. L. 107-16, as amended by Pub. L. 107-358 and Pub. L. 111-312, Sec. 101(a), and struck by Pub. L. 112-240, Sec. 101(a)(1) (effective for taxable, plan, or limitation years beginning after Dec. 31, 2012, and estates of decedents dying, gifts made, or generation skipping transfers after Dec. 31, 2012), provided that:
“(a) IN GENERAL.--All provisions of, and amendments made by, this Act shall not apply--
“(1) to taxable, plan, or limitation years beginning after December 31, 2012, or
“(2) in the case of title V, to estates of decedents dying, gifts made, or generation skipping transfers, after December 31, 2012.
“(b) APPLICATION OF CERTAIN LAWS.--The Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 shall be applied and administered to years, estates, gifts, and transfers described in subsection (a) as if the provisions and amendments described in subsection (a) had never been enacted.
“(c) EXCEPTION.-Subsection (a) shall not apply to section 803 (relating to no federal income tax on restitution received by victims of the Nazi regime or their heirs or estates).”
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendments by Sec. 1602(g)(6) of Pub. L. 105-34 effective as if included in the provisions of the Health Insurance Portability and Accountability Act of 1996 to which such amendments relate.
EFFECTIVE DATE OF 1996 AMENDMENTS
Amendment by Sec. 511(e)-(f) of Pub. L. 104-191 effective generally for:
(A) individuals losing United States citizenship (within the meaning of section 877 of the Internal Revenue Code of 1986) on or after February 6, 1995, and
(B) long-term residents of the United States with respect to whom an event described in subparagraph (A) or (B) of section 877(e)(1) of such Code occurs on or after February 6, 1995.
(2) Ruling requests.--In no event shall the 1-year period referred to in section 877(c)(1)(B) of such Code, as amended by this section, expire before the date which is 90 days after the date of the enactment of this Act [Aug. 21, 1996].
(3) Special rule.--
(A) In general.--In the case of an individual who performed an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349 (a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)-(4)) before February 6, 1995, but who did not, on or before such date, furnish to the United States Department of State a signed statement of voluntary relinquishment of United States nationality confirming the performance of such act, the amendments made by this section and section 512 shall apply to such individual except that the 10-year period described in section 877(a) of such Code shall not expire before the end of the 10-year period beginning on the date such statement is so furnished.
(B) Exception.--Subparagraph (A) shall not apply if the individual establishes to the satisfaction of the Secretary of the Treasury that such loss of United States citizenship occurred before February 6, 1994.
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 the 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.
REINSTATEMENT OF ESTATE TAX; REPEAL OF CARRYOVER BASIS
Section 301 of Pub. L. 111-312 provided:
“(a) IN GENERAL.—Each provision of law amended by subtitle A or E of title V of the Economic Growth and Tax Relief Reconciliation Act of 2001 is amended to read as such provision would read if such subtitle had never been enacted.
“(b) CONFORMING AMENDMENT.—On and after January 1, 2011, paragraph (1) of section 2505(a) of the Internal Revenue Code of 1986 is amended to read as such paragraph would read if section 521(b)(2) of the Economic Growth and Tax Relief Reconciliation Act of 2001 had never been enacted.
“(c) SPECIAL ELECTION WITH RESPECT TO ESTATES OF DECEDENTS DYING IN 2010.—Notwithstanding subsection (a), in the case of an estate of a decedent dying after December 31, 2009, and before January 1, 2011, the executor (within the meaning of section 2203 of the Internal Revenue Code of 1986) may elect to apply such Code as though the amendments made by subsection (a) do not apply with respect to chapter 11 of such Code and with respect to property acquired or passing from such decedent (within the meaning of section 1014(b) of such Code). Such election shall be made at such time and in such manner as the Secretary of the Treasury or the Secretary's delegate shall provide. Such an election once made shall be revocable only with the consent of the Secretary of the Treasury or the Secretary's delegate. For purposes of section 2652(a)(1) of such Code, the determination of whether any property is subject to the tax imposed by such chapter 11 shall be made without regard to any election made under this subsection.
“(d) EXTENSION OF TIME FOR PERFORMING CERTAIN ACTS.—
“ (1) ESTATE TAX.—In the case of the estate of a decedent dying after December 31, 2009, and before the date of the enactment of this Act, the due date for—
“(A) filing any return under section 6018 of the Internal Revenue Code of 1986 (including any election required to be made on such a return) as such section is in effect after the date of the enactment of this Act without regard to any election under subsection (c),
“(B) making any payment of tax under chapter 11 of such Code, and
“(C) making any disclaimer described in section 2518(b) of such Code of an interest in property passing by reason of the death of such decedent, shall not be earlier than the date which is 9 months after the date of the enactment of this Act.
“(2) GENERATION-SKIPPING TAX.—In the case of any generation-skipping transfer made after December 31, 2009, and before the date of the enactment of this Act, the due date for filing any return under section 2662 of the Internal Revenue Code of 1986 (including any election required to be made on such a return) shall not be earlier than the date which is 9 months after the date of the enactment of this Act.
“(e) EFFECTIVE DATE.—Except as otherwise provided in this section, the amendments made by this section shall apply to estates of decedents dying, and transfers made, after December 31, 2009.”
TERMINATION
Section 501(a) (Estate Tax Repeal) of Pub. L. 107-16 added Code Sec. 2210, which states that chapter 11 of subtitle B shall not apply to the estates of decedents dying after December 31, 2009.
Note, however, that Section 901 (Sunset of Provisions of Act) of Pub. L. 107-16, as amended by Pub. L. 107-358 and Pub. L. 111-312, and struck by Pub. L. 112-240, Sec. 101(a)(1) (effective for taxable, plan, or limitation years beginning after Dec. 31, 2012, and estates of decedents dying, gifts made, or generation skipping transfers after Dec. 31, 2012), provided that:
“(a) IN GENERAL.--All provisions of, and amendments made by, this Act shall not apply--
“(1) to taxable, plan, or limitation years beginning after December 31, 2012, or
“(2) in the case of title V, to estates of decedents dying, gifts made, or generation skipping transfers, after December 31, 2012.
“(b) APPLICATION OF CERTAIN LAWS.--The Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 shall be applied and administered to years, estates, gifts, and transfers described in subsection (a) as if the provisions and amendments described in subsection (a) had never been enacted.
“(c) EXCEPTION.-Subsection (a) shall not apply to section 803 (relating to no federal income tax on restitution received by victims of the Nazi regime or their heirs or estates).”