IRS Proposes Rules on Gifts and Inheritances from Expats

The Internal Revenue Service has proposed regulations providing guidance to U.S. taxpayers who receive gifts or inheritances from individuals who have expatriated.

Attorney Kevin Packman said the bottom line on these new rules is that there will be “more taxes, taxes, taxes” facing expatriates and their families.

“When the law came out, it introduced two new Code provisions, 877A, which is what everybody focuses on because it’s got the big, bad exit tax, and 2801,” Mr. Packman said. “Maybe it’s the nature of my practice. I started as an estate and gift guy. That certainly had more of an interest for me. Then the IRS came out with guidance for 877A, and nothing on 2801. We’ve had this law since 2008, basically saying if somebody leaves the country and they qualify as a covered expatriate, and then they make a gift, or if they die and send a bequest back to you as a U.S. person, there’s a tax. That’s the law. That’s 2801. But we’ve had no regulations. We’ve had no forms. We’ve had no means to comply or even report the tax consequences of any of those transactions if one did arise.”

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