Domicile – Defining Resident Status For U.S. Estate Tax Purposes

The alien must also be a nonresident to avoid global U.S. estate taxation. For U.S. estate tax purposes, the term “nonresident decedent” means a person who, at the time of death, had his domicile outside the United States. (Reg. § 20.0- 1(b)(2). This regulation specifies that domicile is determined by application of the principles prescribed in Reg. § 20.0- l(b)(1).) The statutory term utilized is “resident,” but the import of this term really contemplates domicile, often a very different concept. (Even an illegal alien, though subject to deportation if discovered by immigration authorities, may be domiciled in the United States for estate tax purposes if the facts indicate an intention to remain in the United States ‘indefinitely. Rev. Rul. 80-209, 1980-2 CB 248. The ruling involved an illegal alien living in the United States for nineteen years, who owned property in the United States, was a member of social clubs, and participated in community activities.)

A person acquires a domicile in a location by living there, even for a brief period, with “no definite present intention” of later removing from that location. (Reg. § 20.0-1(b)(1). Physical presence is an important factor but is not controlling. See Estate of Paquette, 46 TCM 1400 (1983), where a Canadian citizen who had spent the winter months in Florida for twenty-five years and had purchased a home in Florida that was his sole residence was held to be a nondomiciliary of the United States. He had filed with the State of Florida a “Revocation of Declaration of Domicile and Citizenship.”)

Residence without the requisite intention to remain indefinitely will not suffice to constitute domicile, however. (Because this is a question of fact, the Service will not rule on the status of residency or domicile. See Rev. Proc. 95-3, 1995-1 IRB 85, § 4.02(1). Revenue Procedure 95-7, 1995-1 IRB 185.) If domicile exists in the United States, an intention to change domicile does not actually effect such a change unless accompanied by an actual removal from the United States. (See Rev. Rul. 58-70, 1958-1 CB 341, where an alien was planning to terminate domicile in a foreign country and establish domicile in the United States but did not accomplish this objective prior to death and was not treated as a resident for U.S. estate tax purposes.)

The Section 7701(b) definition of “resident alien” applies only for purposes of the income tax provisions. These rules do not apply for purposes of the U.S. estate tax, gift tax, and generation- skipping transfer (GST) tax provisions. Consequently, an alien holding a “green card” is a resident for U.S. income tax purposes, but this status is not determinative for U.S. estate tax purposes if his domicile is actually outside the United States.


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