Stocks Gift Taxes
Stocks Gift Taxes
Estate and gift tax on israeli investments in the united states
ESTATE and GIFT TAX ON ISRAELI INVESTMENTS IN THE UNITED STATES
By Murrel Kohn, CPA (USA, Isr.) at Kisch & Co. CPA’s
Income Taxes
Without going into great detail, suffice it to say that the Israeli as a NRA (non-resident alien) or foreign company has the option to be taxed as a US person, which greatly reduces the income tax liability. As Israel now taxes its residents on world-wide income, it is important to be ensure the ability to take credit for foreign taxes.
The US income tax on investments in securities is limited/exempted by the tax treaty with the USA.
Estate Taxes
Whereas most investors are aware that they may incur an income tax liability, they are NOT aware of their exposure to US Federal and State Estate Taxes. This is a tax that applies to the value of one’s estate as of the date of his death or alternatively six months later, the lesser of the two.
What is Taxable?
The NRA is subject to this tax on real estate investments in the USA and other property (personal, tangible or intangible) situated in the USA (IRC Section 2103).
Situated in the USA means shares in a US company regardless of where the share certificates are held (IRC Section 2104(a)), deposits in the US branch of a foreign corporation (IRC Section 2104(c)), etc.
Exempt Property
Whereas as notes and bonds of US persons including the US Government are taxable (IRC Section 2104(c)), they are exempt from estate tax if their interest is considered portfolio interest that is exempt from US income tax (IRC Section 2105(b)(3)).
Also exempt from estate tax are deposits in banks and savings and loan associations and their foreign branches (IRC Sec. 2105(b)), funds held by life insurance companies, proceeds of life insurance of the deceased, and obligations that produce short-term original issue discount not effectively connected with the conduct of a US trade or business. Since NRAs have a low estate tax credit of $13,000, life insurance can be a great option for providing liquidity to pay estate taxes on U.S. sitused property.
Deductions
In computing the taxable estate, expenses of the funeral of the deceased, his US debts, contributions to US charities, and the administration of the Estate including the filing of the tax returns may be deducted.
Credits
Against this tax, the NRA is entitled to a life-time credit of $13,000, which is equivalent to exempting the first $60,000 of the taxable estate. A credit may also be available for state estate tax payable.
Tax Returns
The US estate tax return must be filed within nine months of the death of the deceased. The applicable exclusion amount also serves as the tax filing threshold. An
estate tax return must be filed if the gross value of the estate exceeds the applicable
exclusion amount for the year of death.
Estate Tax Planning
Depending on the individual situation, there are several avenues one may take to reduce or avoid US Estate taxes. If held as individuals and both are NRAs, holding it jointly will double the credit/exemption (see above). If the spouse of the NRA is a US citizen/resident, putting the ownership in their name might eliminate the tax as their exemption from US Estate Tax is fully exempt in 2010, and $1 million in 2011 and thereafter. The use of foreign companies/trusts/foundations should be considered for ownership of the property remembering the income tax and foreign tax credits considerations discussed at the outset.
The US estate tax on NRA’s estate may be deferred by leaving the entire estate less the exemption (currently $60,000) to a US citizen spouse or to a non-US citizen spouse if the assets are transferred to a qualified domestic trust (QDOT).
The US Gift Tax exemption for gifts to non-US citizen spouses is $134,000 for 2010 and the annual exemption is $13,000 per person.
Cash/Currency.
For U.S. gift tax purposes, a gift of currency that
takes place in the U.S. will be treated as a gift of tangible personal
property. Thus, a NRA may be able to avoid incurring U.S. gift
tax by using cash to purchase an intangible, such as stock in a U.S.
corporation, and then transferring the stock.
Conclusion
The area of Estate and Gift Tax is very complicated. The potential Israeli investor would be well advised to seek competent professional advice before investing in the USA and elsewhere outside Israel.
You are not a Chicken… “Your an Eagle and Don’t even Know It”
|
|
Euro – 24H x 22W – Peel and Stick Wall Decal by Wallmonkeys $40.99 WallMonkeys wall graphics are printed on the highest quality re-positionable, self-adhesive fabric paper. Each order is printed in-house and on-demand. WallMonkeys uses premium materials & state-of-the-art production technologies. Our white fabric material is superior to vinyl decals. You can literally see and feel the difference. Our wall graphics apply in minutes and won’t damage your paint or l… |
|
|
XM XPMP3H1 Portable Satellite Radio and MP3 Player (XMp3i) $145.00 Portable XM radio & mp3 player all-in-one; record up to 5 favorite channels simultaneously; record up to 100 hours of programming; 1-touch recording of up to 10 hours of individual songs; schedule recordings of up to 75 hours of XM programs; add up to 8 GB of mp3s with micro secure digital card slot; TUNESELECT finds favorite songs or artists; pause, rewind & replay up to 30 min of live radio; man… |
|
|
Autonet Mobile KT-ANMRTR-01 Automotive Wi-Fi Router $108.99 Autonet Mobile is a smart addition to any vehicle, combining 3G data technology and Wi-Fi, to turn your vehicle into a Wi-Fi hotspot. Autonet Mobile goes beyond in-car DVD players and mobile broadband cards by connecting multiple passengers and multiple Wi-Fi devices in and around the vehicle for hours of entertainment and productivity. With our wireless technology, it does not matter if you are i… |
|
|
Quality Park 21012 Quality Park Security Window Check Envelopes, Contemporary Seam, White, 500/Bx $34.99 Wove finish adds a professional touch. Gummed flap provides a secure seal. Windows provide faster addressing. Envelope Size: 3 5/8 x 8 5/8 Envelope/Mailer Type: Business/Trade Closure: Gummed Flap Trade Size: #8 5/8.Unit of Measure : Box… |
|
|
The 16% Solution: How To Get High Interest Rates in a Low Interest World with Tax Lien Certificates $4.99 A comprehensive guide to personal finance and investment explains how to achieve the maximum financial yield in a time of low interest rates and a weak stock market, discussing such options as tax lien certificates and their benefits. 50,000 first printing…. |
|
|
Gifting shares of stock in a closely held business.: An article from: Journal of Accountancy $9.95 This digital document is an article from Journal of Accountancy, published by American Institute of CPA’s on September 1, 2009. The length of the article is 805 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available immediately after purchase. You can view it with any web browser.Citation DetailsTitle: Gifting shares of stoc… |
|
|
Gifting compensatory stock options.: An article from: The Tax Adviser $5.95 This digital document is an article from The Tax Adviser, published by American Institute of CPA’s on August 1, 1998. The length of the article is 1656 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.From the supplier: T… |
