The person giving a gift, not the one receiving it, normally is liable for any gift tax. However, under Section 2801 of the tax code, gifts and bequests from covered expatriates are taxable to recipients, unless a special exception applies. Now the IRS has issued new proposed regulations clarifying these rules. (Prop. Reg. 28.2801-1, 9/9/15)
The new regs define “covered gifts” the same way that most other gifts are defined by the tax code but consider “covered bequests” to be property that generally would have been included in the expatriate’s estate if he or she was a U.S. citizen or resident.
Exceptions are available for amounts reported on an expatriate’s gift tax or estate tax return. Certain other exceptions may be available under the new regs. Contact your tax pro for more details.
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