
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-16 Section 532(c)(7)(C)]
[CITE: 26USC2107]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                    Subtitle B--Estate and Gift Taxes
 
                         CHAPTER 11--ESTATE TAX
 
           Subchapter B--Estates of Nonresidents Not Citizens
 
Sec. 2107. Expatriation to avoid tax


(a) Treatment of expatriates

                           (1) Rate of tax

        A tax computed in accordance with the table contained in section 
    2001 is hereby imposed on the transfer of the taxable estate, 
    determined as provided in section 2106, of every decedent 
    nonresident not a citizen of the United States if, within the 10-
    year period ending with the date of death, such decedent lost United 
    States citizenship, unless such loss did not have for one of its 
    principal purposes the avoidance of taxes under this subtitle or 
    subtitle A.

      (2) Certain individuals treated as having tax avoidance 
                                   purpose

        (A) In general

            For purposes of paragraph (1), an individual shall be 
        treated as having a principal purpose to avoid such taxes if 
        such individual is so treated under section 877(a)(2).

        (B) Exception

            Subparagraph (A) shall not apply to a decedent meeting the 
        requirements of section 877(c)(1).

(b) Gross estate

    For purposes of the tax imposed by subsection (a), the value of the 
gross estate of every decedent to whom subsection (a) applies shall be 
determined as provided in section 2103, except that--
        (1) if such decedent owned (within the meaning of section 
    958(a)) at the time of his death 10 percent or more of the total 
    combined voting power of all classes of stock entitled to vote of a 
    foreign corporation, and
        (2) if such decedent owned (within the meaning of section 
    958(a)), or is considered to have owned (by applying the ownership 
    rules of section 958(b)), at the time of his death, more than 50 
    percent of--
            (A) the total combined voting power of all classes of stock 
        entitled to vote of such corporation, or
            (B) the total value of the stock of such corporation,

then that proportion of the fair market value of the stock of such 
foreign corporation owned (within the meaning of section 958(a)) by such 
decedent at the time of his death, which the fair market value of any 
assets owned by such foreign corporation and situated in the United 
States, at the time of his death, bears to the total fair market value 
of all assets owned by such foreign corporation at the time of his 
death, shall be included in the gross estate of such decedent. For 
purposes of the preceding sentence, a decedent shall be treated as 
owning stock of a foreign corporation at the time of his death if, at 
the time of a transfer, by trust or otherwise, within the meaning of 
sections 2035 to 2038, inclusive, he owned such stock.

(c) Credits

                         (1) Unified credit

        (A) In general

            A credit of $13,000 shall be allowed against the tax imposed 
        by subsection (a).

        (B) Limitation based on amount of tax

            The credit allowed under this paragraph shall not exceed the 
        amount of the tax imposed by subsection (a).

                 (2) Credit for foreign death taxes

        (A) In general

            The tax imposed by subsection (a) shall be credited with the 
        amount of any estate, inheritance, legacy, or succession taxes 
        actually paid to any foreign country in respect of any property 
        which is included in the gross estate solely by reason of 
        subsection (b).

        (B) Limitation on credit

            The credit allowed by subparagraph (A) for such taxes paid 
        to a foreign country shall not exceed the lesser of--
                (i) the amount which bears the same ratio to the amount 
            of such taxes actually paid to such foreign country as the 
            value of the property subjected to such taxes by such 
            foreign country and included in the gross estate solely by 
            reason of subsection (b) bears to the value of all property 
            subjected to such taxes by such foreign country, or
                (ii) such property's proportionate share of the excess 
            of--
                    (I) the tax imposed by subsection (a), over
                    (II) the tax which would be imposed by section 2101 
                but for this section.

        (C) Proportionate share

            In the case of property which is included in the gross 
        estate solely by reason of subsection (b), such property's 
        proportionate share is the percentage which the value of such 
        property bears to the total value of all property included in 
        the gross estate solely by reason of subsection (b).

                          (3) Other credits

        The tax imposed by subsection (a) shall be credited with the 
    amounts determined in accordance with subsections (a) and (b) of 
    section 2102. For purposes of subsection (a) of section 2102, 
    sections 2011 to 2013, inclusive, shall be applied as if the credit 
    allowed under paragraph (1) were allowed under section 2010.

(d) Burden of proof

    If the Secretary establishes that it is reasonable to believe that 
an individual's loss of United States citizenship would, but for this 
section, result in a substantial reduction in the estate, inheritance, 
legacy, and succession taxes in respect of the transfer of his estate, 
the burden of proving that such loss of citizenship did not have for one 
of its principal purposes the avoidance of taxes under this subtitle or 
subtitle A shall be on the executor of such individual's estate.

(e) Cross reference

            For comparable treatment of long-term lawful permanent 
        residents who ceased to be taxed as residents, see section 
        877(e).

(Added Pub. L. 89-809, title I, Sec. 108(f), Nov. 13, 1966, 80 Stat. 
1573; amended Pub. L. 94-455, title XIX, Secs. 1902(a)(6), 
1906(b)(13)(A), title XX, Sec. 2001(c)(1)(E)(ii), Oct. 4, 1976, 90 Stat. 
1805, 1834, 1851; Pub. L. 104-191, title V, Sec. 511(e)(1), (f)(2)(A), 
Aug. 21, 1996, 110 Stat. 2097, 2099; Pub. L. 105-34, title XVI, 
Sec. 1602(g)(6), Aug. 5, 1997, 111 Stat. 1095.)


                               Amendments

    1997--Subsec. (c)(2)(B)(i). Pub. L. 105-34, Sec. 1602(g)(6)(A), 
substituted ``such foreign country as the value of the property 
subjected to such taxes by such foreign country and'' for ``such foreign 
country in respect of property included in the gross estate as the value 
of the property''.
    Subsec. (c)(2)(C). Pub. L. 105-34, Sec. 1602(g)(6)(B), amended 
heading and text of subpar. (C) generally. Prior to amendment, text read 
as follows: ``For purposes of subparagraph (B), a property's 
proportionate share is the percentage of the value of the property which 
is included in the gross estate solely by reason of subsection (b) bears 
to the total value of the gross estate.''
    1996--Subsec. (a). Pub. L. 104-191, Sec. 511(e)(1)(A), substituted 
``Treatment of expatriates'' for ``Rate of tax'' in heading and amended 
text generally. Prior to amendment, text read as follows: ``A tax 
computed in accordance with the table contained in section 2001 is 
hereby imposed on the transfer of the taxable estate, determined as 
provided in section 2106, of every decedent nonresident not a citizen of 
the United States dying after November 13, 1966, if after March 8, 1965, 
and within the 10-year period ending with the date of death such 
decedent lost United States citizenship, unless such loss did not have 
for one of its principal purposes the avoidance of taxes under this 
subtitle or subtitle A.''
    Subsec. (b)(2). Pub. L. 104-191, Sec. 511(e)(1)(C), substituted 
``more than 50 percent of--'' for ``more than 50 percent of the total 
combined voting power of all classes of stock entitled to vote of such 
foreign corporation,'' and added subpars. (A) and (B).
    Subsec. (c)(2), (3). Pub. L. 104-191, Sec. 511(e)(1)(B), added par. 
(2) and redesignated former par. (2) as (3).
    Subsec. (d). Pub. L. 104-191, Sec. 511(f)(2)(A), redesignated 
subsec. (e) as (d) and struck out former subsec. (d) which read as 
follows:
    ``(d) Exception for Loss of Citizenship for Certain Causes.--
Subsection (a) shall not apply to the transfer of the estate of a 
decedent whose loss of United States citizenship resulted from the 
application of section 301(b), 350, or 355 of the Immigration and 
Nationality Act, as amended (8 U.S.C. 1401(b), 1482, or 1487).''
    Subsec. (e). Pub. L. 104-191, Sec. 511(f)(2)(A), added subsec. (e). 
Former subsec. (e) redesignated (d).
    1976--Subsec. (a). Pub. L. 94-455, Sec. 1902(a)(6), substituted 
``November 13, 1966'' for ``the date of enactment of this section'' 
after ``dying after''.
    Subsec. (c). Pub. L. 94-455, Sec. 2001(c)(1)(E)(ii), substituted 
provisions relating to unified credit for ``The tax imposed by 
subsection (a) shall be credited with the amounts determined in 
accordance with section 2102.''
    Subsec. (e). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ``or 
his delegate'' after ``Secretary''.


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-34 effective as if included in the 
provisions of the Health Insurance Portability and Accountability Act of 
1996, Pub. L. 104-191, to which such amendment relates, see section 
1602(i) of Pub. L. 105-34, set out as a note under section 26 of this 
title.


                    Effective Date of 1996 Amendment

    Amendment by Pub. L. 104-191 applicable to individuals losing United 
States citizenship on or after Feb. 6, 1995, and to long-term residents 
of the United States with respect to whom an event described in section 
877(e)(1)(A) or (B) of this title occurs on or after Feb. 6, 1995, with 
special rule for certain individuals who performed an act of 
expatriation specified in section 1481(a)(1)-(4) of Title 8, Aliens and 
Nationality, before Feb. 6, 1995, see section 511(g) of Pub. L. 104-191, 
set out as a note under section 877 of this title.


                    Effective Date of 1976 Amendment

    Amendment by section 1902(a)(6) of Pub. L. 94-455 applicable in the 
case of estates of decedents dying after Oct. 4, 1976, see section 
1902(c)(1) of Pub. L. 94-455, set out as a note under section 2011 of 
this title.
    Amendment by section 2001(c)(1)(E)(ii) of Pub. L. 94-455 applicable 
to estates of decedents dying after Dec. 31, 1976, see section 
2001(d)(1) of Pub. L. 94-455, set out as a note under section 2001 of 
this title.


                             Effective Date

    Section applicable with respect to estates of decedents dying after 
Nov. 13, 1966, see section 108(i) of Pub. L. 89-809, set out as an 
Effective Date of 1966 Amendment note under section 2101 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 877, 2101 of this title.
