I am looking to find a definitive source (preferably an IRS document
or a legal opinion from a qualified tax attorney) that spells out the
terms under which a non-American who lives outside of the U.S. will be
subject to U.S. estate tax when he dies.  There are many different
types of assets a person may own in the U.S., from real estate to
stocks, from bonds to bank deposits, and many more. I would like to
know which assets are subject to estate tax and at what rates.  Also,
if assets are held in joint name (for example, with a spouse), and one
of the spouse's die, are the assets subject to U.S. estate tax? I am
curious if there are legitimate techniques to avoid this tax so that
non-resident aliens (NRAs) can invest in the U.S. without worrying
about their principal being taxed when they die.

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Request for Question Clarification by richard-ga on 08 Jun 2004 20:08 PDT

You raise three questions:

1.  Which assets of a non-resident alien are subject to estate tax and
at what rates?

2.  If assets are held in joint name (for example, with a spouse), and one
of the spouses dies, are the assets of the non-resident alien decedent
subject to U.S. estate tax?

3.  Are there legitimate techniques to avoid this tax so that
non-resident aliens can invest in the U.S. without worrying about
their principal being taxed when they die?

May I suggest that you consider closing this question (it will cost
you only the 50 cent listing fee) and replacing it with three separate
questions?
You may also wish to think about what price to set for each question,
in order to properly compensate the Researcher for the quality answers
that you seek.

You will find the Google Answers pricing guidelines at:
http://answers.google.com/answers/pricing.html

Sincerely,
Google Answers Researcher
Richard-ga

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Clarification of Question by 161tat-ga on 09 Jun 2004 03:20 PDT

Thank you for your comment.  For my purposes, the different parts of
this question all make up one general answer, so I do not wish to
separate them into three different queries.

Property subject to United States estate taxes "...includes real
estate (vacation homes, condos, etc.) situated in the US, tangible
personal property physically located in the United States, or stock in
any US corporation.  Cash, bonds, partnership interests and other
intangibles are generally not subject to the tax."

"How the US Estate Tax Applies to Nonresident Aliens" by Jeffrey A.
Baskies, Smart Pros (2000) http://www.smartpros.com/x22102.xml

"If the surviving spouse is not a U.S. citizen before the estate tax
return is due; or where the property is [not] transferred to a
Qualified Domestic Trust

Joint-owned property is treated differently for aliens than for U.S. citizens:

-where the surviving spouse is an alien, the entire value of the
property is presumed to be included in the decedent's gross estate for
estate tax purposes;

-there is an exclusion only for the portion that the survivor can
demonstrate their actual contribution to the purchase price or
acquisition."

"Estate Planning" by Albert W. Ferreira http://www.a-fera.com/en_estplan.html

"Marital deduction. Unless a treaty allows otherwise, you may only
take a marital deduction if the surviving spouse is a U.S. citizen or
if the property passes to a qualified domestic trust (QDOT)...."

"Instructions for Form 706-NA" Internal Revenue Service (2003)
http://www.irs.gov/pub/irs-pdf/i706na.pdf

The estate tax can be avoided by investing only in assets not subject
to it, or by avoiding ownership of US situs taxable property by
employing trusts, corporations, or partnerships.  You would most
likely need an attorney to accomplish the latter.

A tax rate table can be found in the first reference above.  However,
tax treaties between your country and United States may alter the
amount of tax owed.

For additional information, see "Form 706-NA" Internal Revenue Service
(2003) http://www.irs.gov/pub/irs-fill/f706na.pdf

Sincerely,

Wonko