U.S. Citizen Resident in US Possession Was A Nonresident/Noncitizen For Estate, Gift, GST Purposes

A taxpayer who was born outside the U.S. and its possessions, whose parents were not U.S. citizens at the time of his birth, and who became a U.S. citizen after residing in a U.S. possession was a "nonresident not a citizen of the U.S." for estate, gift, and generation skipping transfer tax (GST) purposes. PLR 201924009

Various estate, gift, and GST rules apply to a nonresident not a citizen of the U.S. IRC Sec. 2101(a) imposes a tax, in general, on the transfer of the taxable estate of every "decedent nonresident not a citizen of the U.S." Code Sec. 2209 provides that a decedent who was a citizen of the U.S. and a resident of a possession thereof at the time of his death is considered, for purposes of the estate tax, a "nonresident not a citizen of the U.S." but only if that person acquired his U.S. citizenship solely by reason of (1) his being a citizen of the U.S. possession, or (2) his birth or residence within that U.S.

The taxpayer was born in Country A, which was not the U.S. or one of its possessions. At the time of his birth, neither of taxpayer's parents were citizens, nationals, or residents of the U.S. nor any of its possessions or territories. And neither of taxpayer's parents were born in the U.S. nor any of its possessions or territories.

Taxpayer relocated to Possession, a possession of the U.S. under Code Sec. 7701(d), with a student visa. After graduating from college, taxpayer began working in Possession with a work visa. Taxpayer has continuously resided in Possession since college. A few years later, taxpayer became a citizen of the U.S. through naturalization proceedings in the U.S. District Court for the district of Possession.

Taxpayer was (1) not born in the U.S. or one of its possessions, and (2) not born of parents at least one of whom was a citizen of the U.S. Therefore, under the 1940 Act, Taxpayer did not acquire citizenship on account of his birth.

Taxpayer became a U.S. citizen under the 1952 Act's naturalization provision based on his continuous residency in Possession. As discussed above, taxpayer did not become a U.S. citizen under the 1940 Act based on his birth. Accordingly, IRS concluded, based on the facts presented and representations made, that taxpayer acquired his U.S. citizenship solely by reason of residence within a possession of the U.S.

Thus, taxpayer met one of the requirements of Code Sec. 2209 and therefore was a nonresident not a citizen of the U.S.

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Robert S. Blumenfeld  - 

 Estate Tax Counsel

Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.