To determine the deductions available to reduce the U.S. Estate Tax for a nonresident not a citizen, we need to consider several provisions from the Internal Revenue Code and Treasury Regulations.
- Expenses, Losses, Indebtedness, and Taxes:
- Funeral Expenses: Deductible as per § 2053.
- Administration Expenses: Deductible as per § 2053.
- Claims Against the Estate: Deductible as per § 2053, provided they are bona fide and for adequate consideration.
- Unpaid Mortgages and Indebtedness: Deductible as per § 2053, but only to the extent they were contracted bona fide and for adequate consideration.
- Losses: Deductible as per § 2054, including uncompensated losses incurred during the settlement of the estate from theft or casualties such as fires, storms, or shipwrecks.
- Charitable Contributions:
- Transfers for Public, Charitable, and Religious Uses: Deductions are allowed for bequests, legacies, devises, or transfers to or for the use of the United States, any State, any political subdivision thereof, or the District of Columbia for exclusively public purposes. Additionally, transfers to domestic corporations organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes are deductible, provided they meet the requirements of § 501(c)(3).
- Marital Deduction:
- Property Passing to a Surviving Spouse: If the surviving spouse is a U.S. citizen, the marital deduction is allowed for property passing outright to the spouse. If the surviving spouse is not a U.S. citizen, the marital deduction is only allowed if the property passes to a Qualified Domestic Trust (QDOT) as per § 2056A.
- Proportional Deductions:
- Proportion of Deductions: The deductions for expenses, losses, indebtedness, and taxes are allowed in proportion to the value of the decedent's gross estate situated in the United States relative to the value of the entire gross estate wherever situated.
- Documentation Requirements:
- Disclosure of Entire Gross Estate: No deduction is allowed unless the executor discloses the value of the entire gross estate, including the part not situated in the United States, in the estate tax return.
- Special Rules and Limitations:
- Limitations on Certain Deductions: Certain taxes, such as income taxes on income received after the decedent's death and property taxes not accrued before death, are not deductible.
- Claims by Remaindermen: No deduction is allowed for claims by remaindermen relating to property described in § 2044.
- Interest on Deferred Tax Payments: No deduction is allowed for interest payable under § 6601 on any unpaid portion of the tax imposed by § 2001 during the period of an extension under § 6166.
In summary, the deductions available to reduce the U.S. Estate Tax for a nonresident not a citizen include funeral expenses, administration expenses, claims against the estate, unpaid mortgages and indebtedness, losses, charitable contributions, and certain marital deductions, all subject to specific conditions and proportional limitations.
Sources:
§ 2106. Taxable estate
§ 2102. Credits against tax
§ 20.2106-1. Estates of nonresidents not citizens; taxable estate; deductions in general.
§ 20.2106-2. Estates of nonresidents not citizens; deductions for expenses, losses, etc.
§ 2053. Expenses, indebtedness, and taxes
