poration, if the branch is connected with a U.S. business or trade;

or

(6) Moneys on deposit with a domestic branch of a foreign corporation, if decedent dies after 1975, regardless of connection with a U.S. business or trade.

Property that the decedent transferred before his death, but that is includible in his gross estate, is considered situated in the United States if it is determined, under the rules listed above, to be so situated either at the time of the transfer or at the time of the decedent's death.

Notwithstanding the above rules, property of decedents who, at the time of their death, were neither citizens nor residents of the United States, is not considered situated in the United States if it is:

(1) A deposit with a U.S. bank, if the deposit was not connected with a U.S. trade or business and the decedent died before 1977; (2) A deposit or withdrawable account with a savings and loan association chartered and supervised under Federal or State law, or an amount held by an insurance company under an agreement to pay interest on it, if the deposit or amount was not connected with a U.S. trade or business and the decedent died before 1977; (3) A deposit with a foreign branch of a U.S. bank, if the branch is engaged in the commercial banking business; or

(4) A debt obligation of a domestic corporation any interest on which, if it had been received by the decedent at the time of his death, would have been treated for income tax purposes as income from sources without the United States because less than 20 percent of the domestic corporation's gross income from all sources was derived from sources within the United States for the 3-year period (or applicable part thereof) ending with the close of the tax year of the corporation immediately preceding the

decedent's death.

Shares of stock issued by a corporation that is not a domestic corporation are not considered property within the United States even if the certificates are physically located in the United States. Amounts receivable as insurance on the decedent's life are not considered property within the United States.

The United States has concluded death tax conventions for the avoidance of double taxation with a number of foreign countries. These conventions, in addition to making available to estates of citizens and residents of the United States credits for death taxes paid to the foreign countries involved, provide certain rules for the determination of the situs of property. These rules, which in some cases differ from those set forth above, are used in the determination of the credit allowable to estates of citizens and residents and for the purpose of determining the property includible in the estates of nonresident alien decedents who come within the scope of the conventions. The following list shows the countries with which conventions are in force, and the nonresident aliens to whose estates the rules of situs in the conventions apply:

Australia-Domiciliary of Australia.

Canada-Domiciliary of Canada.

Finland-Resident of Finland-Also if a beneficiary of the decedent's estate was a resident of Finland.

Greece-Domiciliary of Greece.
Ireland-Domiciliary of Ireland.

Italy-National or domiciliary of Italy.

Japan-Decedent having a beneficiary of his estate domiciled in Japan. Netherlands-Domiciliary or resident of the Netherlands.

Norway-Citizen or domiciliary of Norway.

South Africa-Ordinary resident of South Africa.
Switzerland-No situs rules for purposes of imposition of tax.
United Kingdom-Domiciliary of United Kingdom.

B. Exemption and Deductions

1. Exemption. An exemption of $30,000 is allowed, unless under a Presidential proclamation, pre-1967 estate tax provisions apply to estates of residents of the foreign country of which the decedent was a resident. In that case an exemption of only $2,000 is allowed. This exemption may, however, be larger for the estate of a nonresident alien that comes within the scope of a death tax convention providing for a prorated exemption. In such a case there is allowed (with a minimum of $2,000 or $30,000, as the case may be) a fraction of the $60,000 exemption allowed for the estate of a citizen or resident of the United States, the numerator being the value of the property of the estate situated in the United States, and the denominator being the value of the entire gross estate wherever situated. This prorated exemption is also allowed the estate of a U.S. citizens who was a resident of a U.S. possession at date of death and who acquired his citizenship solely because of his connection with that possession and, therefore, is considered a nonresident not a citizen of the United States. 2. Expenses, indebtedness, taxes, and losses.-A proportion is allowed of the expenses, indebtedness, taxes, and losses of the estate of a citizen or resident of the United States, computed on the same basis as the prorated exemption in (1) above.

3. Transfers for public, charitable, and religious uses.-A deduction is allowed, computed in the same manner as the one allowed the estate of a citizen or resident for charitable, etc., transfers, except that the deduction is allowed only for transfers to or for the use of the United States, any State, any political subdivision thereof, or the District of Columbia, and for a transfer to a corporation, association, or trustee, only if the corporation or association was created or organized in the United States, or the transfer to a trustee is for use within the United States. These provisions are modified by some of the death tax conventions, under which larger benefits may accrue to the estate.

4. Bequests to the surviving spouse.-No "marital deduction" is available to estates of nonresident aliens unless specifically provided for under a death tax convention.

C. Computation and Rates of Tax

The tax is computed by applying the progressively graduated rates in the following table to the value of the taxable estate, obtained by deducting from the value of the property includible in the gross estate the total amount of deductions and exemption allowable. The result of that computation will be the amount of the gross estate tax, against

which certain credits may be available, as discussed in subsection (D) below.

The credits provided for State death taxes, gift tax, and tax on prior transfers are allowable in the case of the estate of a nonresident alien. The amount of each of these credits is determined in the same manner as that prescribed for its determination in the estates of citizens and residents of the United States. However, for the estate of a nonresident alien decedent, other than an estate subject to a Presidential proclamation applying pre-1967 estate tax provisions, the maximum portion of the computed credit allowed against the gross estate tax for State death taxes paid is proportionate to the value of the property upon which State death taxes were paid and which is included in the gross estate over the value of the gross estate. No credit for foreign death taxes is allowable to estates of nonresident aliens.

E. Application of Pre-1967 Estate Tax Provisions

For nonresident decedents not citizens of the United States, special rules apply if there is in effect a proclamation by the President of the United States based on his findings that (1) the foreign country of which the decedent was a resident, in connection with the transfer of estates of U.S. citizens who were not residents of the foreign country, imposes a tax which is more burdensome than that imposed under our laws on the transfer of estates of decedents who were not U.S. citizens and who were residents of the foreign country, (2) such foreign country, when requested by the United States to do so, has not acted to revise or reduce the tax imposed by it, and (3) it is in the public interest to apply pre-1967 tax provisions to the transfer of estates of decedents who were residents of the foreign country. In the event such findings are made, the President will proclaim that the estate of every nonresident alien who was a resident of the foreign country will be allowed an exemption of $2,000 (instead of $30,000), will compute the gross estate tax by using the table, and will be allowed the full State death tax credit allowable to estates of citizens or residents.

These special rules apply to decedents who die after the date of a Presidential proclamation. The special rules cease to apply after the date of a subsequent Presidential proclamation providing in effect that the pre-1967 provisions are no longer to be applied to transfers of estates of nonresident alien decedents who were residents of the foreign

F. Expatriation to Avoid Tax

A special tax computation is prescribed for the estates of certain decedent nonresidents not citizens of the United States who, after March 8, 1965, but within the 10-year period ending with the date of death, lost U.S. citizenship. It does not apply, however, if the decedent's loss of U.S. citizenship did not have for one of its principal purposes the avoidance of Federal estate, gift, or income taxes.

The Internal Revenue Service must establish only that it is reasonable to believe that an individual's loss of U.S. citizenship would, but for the special tax computation discussed here, result in a substantial reduction in the estate, inheritance, legacy, and succession taxes on the transfer of his estate. Once this has been established, the burden of proving that the individual's loss of citizenship did not have for one of its principal purposes the avoidance of estate, gift, or income taxes is on the executor of the estate of the decedent expatriate.

The special tax computation does not apply, however, where the loss of U.S. citizenship resulted from the application of sections 301(b), 350, or 355 of the Immigration and Nationality Act, as amended.

For the estates of decedent expatriates, subject to the special tax computation, the gross estate (except for certain stock in foreign corporations discussed below) is made up in the same way as the gross estate of any other nonresident alien, is allowed the exemption and deductions discussed in subsection (B) of this section, and is allowed to claim the credits, discussed in subsection (D) of this section. However, the tax computation set forth in subsection (C) of this section may not be used; where the special tax computation applies, estates of decedent expatriates must use the tax table, which is used by estates of U.S. citizens and residents.

In addition to property considered situated in the United States under the situs rules discussed in subsection (A) of this section, the value of a decedent expatriate's gross estate, if certain stock ownership tests are met, includes a proportionate part of the fair market value of foreign corporation stock owned by him at the time of death. This part is based on the relationship, as a proportion, that the fair market value of the foreign corporation's property having a U.S. situs bears to the fair market value of all corporation property, wherever located. The stock ownership tests referred to, both of which must be met, are as follows: (1) the decedent owned (directly or through a foreign corporation, partnership, trust, or estate) 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 the foreign corporation; and (2) the decedent owned at the time of his death more than 50 percent of the total combined voting power of all classes of stock entitled to vote of the foreign corporation.

In determining whether or not the more-than-50-percent test above has been met, stock that the decedent directly or indirectly owned, as described in (1) above, is added to stock that the decedent is considered to have owned at the time of his death because of constructive ownership (that is, ownership attributed to the expatriate for stock

held by members of his family, as well as by partnerships, trusts, estates or corporations in which he had certain interests). Note that the same shares of stock may not be counted more than once in determining whether the more-than-50 percent test has been met.

LIABILITY FOR THE PAYMENT OF THE FEDERAL ESTATE TAX

The executor or administrator of an estate is responsible for filing the estate tax return and is liable for the payment of any estate tax due. Additionally, the executor or administrator is required to retain records and supplemental data supporting the estate tax return. The prescribed forms, obtainable from the local Internal Revenue office, are required to be used in filing the estate tax return.

If there is no executor or administrator in the United States, any person in actual or constructive possession of any of the decedent's property is responsible for the filing of the return, maintaining records supporting the return, and payment of the tax. This includes any of the decedent's agents and representatives, safe deposit companies, warehouse companies, brokers, and debtors, but only if they have actual or constructive possession of his property.

The executor, administrator, or person in actual or constructive control of the decedent's property is only liable for the payment of the estate tax in his fiduciary capacity. However, he may become personally liable if he pays a debt due from the decedent's estate (other than funeral or administrative expenses) or he distributes any portion of the estate before all of the Federal estate tax is paid. His personal liability is limited to the extent of the payment or distribution he made, or the estate tax that remains unpaid and due, whichever is less. The executor may request a release from personal liability by making a written application to the Internal Revenue Service Center for a determination of the Federal estate tax and a discharge from personal liability. Within 9 months (1 year, if decedent died before January 1, 1974) after receipt of the application, or if the application is made before the return is filed, then within 9 months (1 year, if decedent died before January 1, 1974) after the return is filed the executor will be notified of the amount of the tax liability. Upon payment of this amount or upon the payment of this amount less any amount for which payment has been extended, and upon furnishing a bond (if requested by the Service Center), the executor shall be discharged from personal liability for any deficiency in taxes thereafter found to be due. If no notice is received after the 9 month period (1 year, if applicable), and the tax shown on the return has been paid, the executor is discharged from his personal liability. In either case, the discharge is only for the personal liability of the executor. The executor is still liable for the payment of the Federal estate tax in his fiduciary capacity out of assets included in the gross estate still in his possession.

If the decedent died after 1970 and was not a nonresident, a fiduciary other than the executor, like the trustee of a testamentary trust, can apply for a discharge from personal liability. The fiduciary should make written application to the Service Center for a determination of the amount of estate tax for which he may be personally liable, and