U.S. Property for estate tax purposes includes:
(a) Real property located in the United States;
(b) Tangible personal property located in the United States (except works of art on loan for an exhibition);
(c) Stock of domestic corporations;
(d) Debt obligations of U.S. persons except obligations which qualify as “portfolio interest” obligations under § 871(h)(4).
In addition, a general power of appointment over U.S. Property will be subject to U.S. estate tax.
U.S. Property can also be subject to estate tax at death if it was transferred during lifetime in a manner which would render it includable under IRC §§ 2035 through 2038 IRC § 2104(b);
(a) So, for example, U.S. real property or stock of a domestic corporation in a trust which is deemed to be a grantor trust for income tax purposes because the non-resident alien had a right to revoke or amend the trust during lifetime would be subject to estate tax at the non-resident alien settlor’s death.
(b) Also, U.S. Property transferred to a trust which was not a “grantor” trust for income tax purposes, but over which the decedent-settlor retained control or an interest sufficient to make the assets includable under §§ 2036, 2037, or 2038 (such as a power to sprinkle income and principal) would be subject to estate tax at the death of the non-resident alien decedent.
U.S. property does not include any of the assets listed below unless they are held in connection with a U.S. trade or business of the decedent:
(a) Life insurance proceeds on the life of a non-resident alien (IRC § 2105(a));
(b) Real and tangible personal property located outside the U.S.;
(c) Stock of a foreign corporation;
(d) Bank deposits;
(e) “Portfolio interest” obligations (IRC §2105(b)); and
(f) U.S. Property owned by a foreign partnership if, under foreign law, the partnership is regarded as an entity separate from its partners and if the death of the decedent did not terminate the partnership.