U.S. Estate and Gift Tax Treaties (Portfolio 6896)

Be a trusted advisor to your clients with Bloomberg Tax Portfolios. In this Portfolio, our expert authors describe the purpose, operation, and construction of the 17 estate and gift transfer tax treaties to which the United States is a party, as well as the income tax treaty with Canada, which bears on U.S. transfer taxes as well as Canadian income tax at death.

To view this Portfolio, take a free trial to Bloomberg Tax


This Portfolio is available with a subscription to Bloomberg Tax, a comprehensive research solution including over 500 Tax Management Portfolios, practice tools, primary sources and timely news.


The U.S. Estate and Gift Tax Treaties Portfolio is divided into six parts. Part I: Introduction, explains the purpose and types of transfer tax treaties. Part II: Situs-Type Treaties, describes when situs-type transfer tax treaties apply and explains how a situs-type treaty assigns primary taxing jurisdiction to one country. It also analyzes the effect that situs-type treaties have on the deductions and credits of treaty countries. Part III: Domicile-Type Treaties, describes when domicile-type treaties apply and how these treaties assign primary taxing jurisdiction. It also analyzes the situs rules that are incorporated into domicile-type treaties, the effect that domicile-type treaties have on the deductions, exemptions, and credits of treaty countries, and the general operation of the treaties' nondiscrimination provisions. Part IV: Special, Administrative, and Enforcement Provisions, discusses the ways in which transfer tax treaties enable a treaty country to enforce the collection of death taxes and exchange information with the other country, as well as issues that a taxpayer subject to a treaty may face in reporting income. Part V: Treaty Interpretation, sets forth the principles of treaty interpretation and construction. Part VI: Particular Treaty Analysis, discusses the details of each transfer tax treaty.


Our portfolios are written by leading tax professionals who set the standard as leaders in their fields. The U.S. Estate and Gift Tax Treaties Portfolio was authored by the following attorneys.  




Jeffrey A. Schoenblum is a professor at Vanderbilt University School of Law in Nashville, Tennessee.

Credentials / Jeffrey received his A.B. from Johns Hopkins University (1970) and J.D. from Harvard Law School (1973).


Table of Contents

Portfolio 6896-1st: U.S. Estate and Gift Tax Treaties

Portfolio Description


Technical Advisors


Detailed Analysis

I. Introduction

II. Situs-Type Treaties

A. Overview

B. Specific Considerations as to Whether a Situs-Type Treaty Applies

1. The Relevant Taxes

a. Limit to Death Taxes

b. Nonapplication to Gift Tax

c. Nonapplication to Generation-Skipping Transfer Tax

d. Nonapplication to State, Provincial, and Local Taxes

(1) In General

(2) Special Rule with Respect to Domestic Adjustments, Including at the Political Subdivision Level

e. Nonapplication to Income Taxes

f. The Meaning of “Estate Tax”

g. Hybrid Taxes

h. Section 2801

2. The Relevant Affiliation and Its Consequences

a. In General

b. Who Determines the Existence and Meaning of the Affiliation?

c. Beneficiary

d. Deemed Citizens, Domiciliaries, and Residents

3. Situs of Estate Property

a. In General

b. No Applicable Treaty Situs Rules

(1) Situs in a Third Country

(2) Situs in Third Country, but Disagreement as to Which One

(3) Situs in Treaty Country or Third Country

(4) Situs in Other Treaty Country or Third Country

(5) Each Country Determines Asset Has a Local Situs

(6) Each Country Determines Asset Has Situs in Other Treaty Country

c. Applicable Treaty Situs Rules, but No Tax Imposed by Treaty Situs Country

d. Preliminary Issues in the Application of Specific Situs Rules

(1) Which Country Determines the Character of a Property Right or Interest

(2) The Character of Various Property Rights

(a) Immovables and Real Property

(b) The Character of an Equitable Interest of a Trust Beneficiary

(i) In General

(ii) Diverse Equitable Interests of a Trust

(A) Revocable Trusts

(B) General Power of Appointment

(C) Equitable Interests in Trust Involving No Right to Revest the Underlying Assets

(iii) The Importance of Determining Trust Situs When a Beneficial Interest Is Regarded as a Debt

(iv) The Role of State Law

(v) Transfers, Identity, and Timing Problems Involving Trusts

(vi) Mutual Funds and Retirement Plans

(vii) U.S. Characterization of Foreign Property Rights Analogous to the Trust

(viii) The Trust Distinguished from Other Relationships

(c) Other Unaddressed Intangible Interests

(i) Partnership Interests

(ii) Interests in LLCs, LLPs, and Similar Entities

(d) Bank Accounts

(e) Tort Claims

(f) Stock and Stock Options

(i) Stock

(ii) Stock Options

(iii) ADRs and ADSs

(g) Patents, Copyrights, Trademarks, Franchises, and Licenses

(h) Life Insurance

(i) Indirect Consequences of Situs Rules

(j) The Role of State Law

C. Deductions

1. In General

2. Marital Deduction

3. Charitable Transfers

4. Specific Exemptions

D. Credits

1. The Primary Credit

a. General Operating Rules

b. Valuation

c. Interest and Penalties Ignored

d. The Special Charitable Contribution Deduction Alternative to the Treaty Credit

e. Reductions Affecting the Amount of the Creditable Tax

f. The Availability and Amount of the Unified Credit in Calculating the U.S. Estate Tax of a Nonresident Alien

(1) In General

(2) U.S. Situs Assets Exempt under the Code

(3) The Effect of Lifetime Use of the Unified Credit

(4) Availability of Unified Credit for Gift Taxes

(5) Disclosure When Claiming the Treaty Unified Credit

g. Effects of Disputed Situs on Primary Credit

h. Gross-Up with Non-Situs Assets

2. The Secondary Credit

3. Comparison of the Treaty Credits and Unilateral Credits

a. In General

b. The Interplay Between § 2014 and § 2013

(1) In General

(2) Schedules P and Q

(3) Balancing the Variables

c. The Proper Credit Choice When Property Has a Situs in Both Treaty Countries or Neither Treaty Country

d. Limitations on Multiple Credits for the Same Property

e. The Impact of Taxes at the Political Subdivision Level

4. Claiming the Treaty Foreign Death Tax Credit

III. Domicile-Type Treaties

A. Overview

B. Specific Considerations as to Whether a Domicile-Type Treaty Applies

1. The Relevant Taxes

a. Not Limited to Death Taxes — Gift Tax

(1) Introduction

(2) Interrelationships

(a) Unified Credit

(b) Foreign Tax Credit

(c) Tangible Movable Property

(d) Gift-Splitting

(e) Taxable Gifts Includible in the Gross Estate

(f) Marital Deduction

b. Nonapplication to State, Provincial, and Local Taxes

c. Nonapplication to Income Taxes

d. Uncertain Application to Generation-Skipping Transfer Tax

(1) In General

(2) The Special Case of the U.S.-France Treaty

2. The Relevant Affiliation and Its Consequences

3. Identical or Substantially Similar Taxes

4. Fiscal Domicile

a. In General

b. The Personal Affiliations Relied Upon to Determine Fiscal Domicile

(1) In General

(2) Domicile of Dependency

c. The Meaning of “Permanent Home”

(1) In General

(2) Income Tax Treaty Guidance

(3) Unsettled Aspects

(4) Leading U.S. Determinations

(5) Leading Foreign Determinations

(6) The Determination of Permanent Home in Both Treaty Countries

d. Center of Vital Interests

(1) In General

(2) Leading U.S. Determinations

(3) Leading Foreign Determinations

(4) Refinements in the Application of “Closer Personal and Economic Relations”

e. Habitual Abode

(1) In General

(2) The Time Frame for Establishing Habituality

(3) Determining Habitual Abode When There Is a Permanent Home in Both Treaty Countries or Neither of the Treaty Countries

(4) Appropriateness of Domestic Law Meanings of Habitual Abode

f. The Citizenship Fallback and Override

g. The Final Fallback: Competent Authority

C. Situs Rules

1. In General

2. Real Property (Immovables)

a. In General

b. Livestock and Equipment Used in Agriculture and Forestry

c. Property Accessory to Real Property

d. Landed Property Rights

e. Usufruct, Legal Life Estate, and Trust Income Interests

f. Mortgages and Other Security Interests in Real Property

g. Interests in Entities that Own Real Property

3. Permanent Establishment

a. In General

b. The Requirement of an Enterprise

c. Fixed Place of Business

d. Place of Business

e. Carrying Out Business Through Place of Business

f. Enumerated Examples of Permanent Establishments

g. Building Sites and Construction or Installation Projects

h. Items Excluded from the Meaning of “Permanent Establishment”

i. Agents and Associated Companies

j. Related Entities

4. Fixed Base

5. Ships and Aircraft

6. Stock

7. Intangibles

a. In General

b. Partnerships

8. Tangible Personal Property

D. Deductions and Exemptions

1. In General

2. Deductions for Administrative Expenses and Debts

3. Charitable Deductions

4. Deduction or Credit for Spousal Transfers

a. In General

b. Applicability of Treaty Provisions in Light of Revisions to the Code Marital Deduction

c. The Impact of Other Treaties — The U.S.-Austria Friendship Treaty Example

d. Gift Tax Marital Deduction

E. Credit Provisions

1. In General

2. Credit for Taxes of Political Subdivisions

3. The Credit and Timing Differences in Taxation

4. The Credit's Interaction with the Domestic Credit for Tax on Prior Transfers

5. The Credit and Expatriate Taxation as to Expatriation Prior to June 17, 2008

6. Credits in the Case of a Short-Term Fiscal Domicile in the Non-Citizenship Country

F. Nondiscrimination

1. In General

2. The Meaning of “The Same Circumstances”

3. The Persons Covered

4. The Matters Protected from Discrimination

5. Applicability of Nondiscrimination to Political Subdivisions

6. Special Case of Friendship Treaties Granting Nondiscriminatory Tax Treatment

IV. Special, Administrative, and Enforcement Provisions

A. Exchange of Information

1. Situs-Type Treaties

2. Domicile-Type Treaties

B. Collection of Taxes

C. Diplomatic and Consular Personnel; Officials of International Organizations

1. In General

2. Non-Tax Bilateral Treaties

3. Multilateral Treaties

4. Domicile-Type Treaties

5. Situs-Type Tax Treaties

6. Domestic Law

7. The Persons Covered

a. Persons in the Service of a Country

b. Diplomatic and Consular Officers of Third Countries

c. Persons in the Service of an International Organization or NGO

D. Mutual Agreement Procedure

E. Form 8833: Treaty-Based Return Position Disclosure

V. Treaty Interpretation

A. In General

B. Essential U.S. Principles of Tax Treaty Interpretation

C. The Sources of Treaty Interpretation

D. “Unless the Context Otherwise Requires”

E. Repeal by Later-Enacted Statute

F. Permissibility of Treaty Increases in Tax Liability

G. The Right to Opt Out of a Treaty

H. Deemed Citizens, Domiciliaries, and Residents

1. The Language of the Code and Treaties

a. Exceptions with Respect to Certain Domicile-Type Treaties

b. The § 2801 Tax

(1) Situs-Type Treaties

(2) Domicile-Type Treaties

(3) Section 2801 and the Treaty Assignment of Situs

(4) Section 2801 and Treaty Credits and Deductions

(5) Section 2801 and the Treaty Nondiscrimination Clause

(6) Reference to § 2801 and the Later Enacted Provision

2. Pre-June 17, 2008 expatriations

a. Pre-1967

b. 1967—February 5, 1995

c. February 6, 1995—August 20, 1996

d. August 21, 1996—June 3, 2004

e. June 4, 2004—August 20, 2006

f. August 21, 2006—June 16, 2008

g. Inclusion of Expatriates as “Citizens” Under Power to Define Terms in Treaty

h. Long-Term Lawful Permanent Residents

(1) In General

(2) The Special Expatriation Tax Credit

VI. Particular Treaty Analysis

A. Australia

B. Austria

C. Canada

D. Denmark

E. Finland

F. France

1. The Treaty, with Protocol Changes Noted, In General

2. Protocol

G. Germany

H. Greece

I. Ireland

J. Italy

K. Japan

L. Netherlands

M. Norway

N. South Africa

O. Sweden [Treaty officially terminated effective January 1, 2008]

P. Switzerland

Q. United Kingdom

Working Papers

Working Papers

Table of Worksheets

Worksheet 1 United States-Australia Estate Tax Treaty

Worksheet 2 United States-Australia Gift Tax Treaty

Worksheet 3 United States-Austria Estate and Gift Tax Treaty

Worksheet 4 Protocol Amending United States-Canada Income Tax Treaty

Worksheet 5 United States-Denmark Estate and Gift Tax Treaty

Worksheet 6 United States-Finland Estate Tax Treaty

Worksheet 7 United States-France Estate and Gift Tax Treaty

Worksheet 8 Protocol Amending the United States-France Estate and Gift Tax Treaty

Worksheet 9 United States-Germany Estate and Gift Tax Treaty

Worksheet 10 Protocol Amending United States-Germany Estate and Gift Tax Treaty

Worksheet 11 United States-Greece Estate Tax Treaty and Protocols

Worksheet 12 United States-Ireland Estate Tax Treaty

Worksheet 13 United States-Italy Estate Tax Treaty

Worksheet 14 United States-Japan Estate and Gift Tax Treaty

Worksheet 15 United States-Netherlands Estate Tax Treaty

Worksheet 16 United States-Norway Estate Tax Treaty

Worksheet 17 United States-South Africa Estate Tax Treaty and Protocol

Worksheet 18 United States-Sweden Estate and Gift Tax Treaty

Worksheet 19 United States-Switzerland Estate Tax Treaty

Worksheet 20 United States-United Kingdom Estate and Gift Tax Treaty

Worksheet 21 U.S. Model Estate and Gift Tax Treaty

Worksheet 22 Technical Explanation of U.S. Model Estate and Gift Tax Treaty