Proposed regulations: Tax on gifts, bequests from U.S. expatriates

Regulations: Tax on gifts, bequests from US expatriates

The Treasury Department and IRS today released for publication in the Federal Register a notice of proposed rulemaking (REG-112997-10) concerning the tax imposed under Code section 2801 on U.S. citizens and residents who receive “covered gifts or covered bequests” (including distributions from foreign trusts) from individuals who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States—“covered expatriates”—on or after June 17, 2008.

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The proposed regulations [PDF 312 KB] are being released to implement measures under section 2801, as added to the Code by the Heroes Earnings Assistance and Relief Tax Act of 2008, Pub. L. 110-245 (enacted June 17, 2008).

Section 2801 imposes a tax on each U.S. citizen or resident who receives a “covered gift or bequest” on or after June 17, 2008, from a “covered expatriate” whose expatriation date was also on or after June 17, 2008. The proposed regulations include definitions of the terms “covered expatriate,” a “covered gift,” and a “covered bequest.” 

Deferral measures

Payment of tax due under section 2801, however, is deferred until such time as the proposed regulations are issued as final regulations and the IRS has issued Form 708—a new form to be used for reporting receipt of covered gifts and bequests. 

U.S. persons who receive covered gifts and bequests on or after June 17, 2008, will be given a reasonable period of time after the publication of the final regulations to file Form 708 and pay any tax due under section 2801 on such gifts or bequests.

Comments, public hearing

A public hearing concerning the proposed regulations has been scheduled for January 6, 2016. Comments about these proposed regulations or requests to speak that the public hearing are due by a date that is 90 days after September 10, 2015 (the scheduled publication date of the proposed regulations in the Federal Register).

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