IRSFinal RuleJanuary 14, 2025

Guidance: Tax on Certain Gifts and Bequests from Covered Expatriates

Finance & Banking

Summary

This IRS guidance explains new tax rules for gifts and inheritances received from people who have given up their U.S. citizenship. The rules are designed to prevent wealthy individuals from avoiding taxes by leaving the country and then giving money to U.S. relatives.

Key Points

1U.S. citizens and residents who receive gifts or inheritances from someone who recently gave up their U.S. citizenship may owe federal taxes on those transfers
2The tax applies to gifts and bequests (money or property left in a will) valued over $100,000 from 'covered expatriates' — people who renounced citizenship or let their residency lapse
3Recipients must report these transfers to the IRS and may need to pay a special transfer tax in addition to regular income taxes
4This rule aims to prevent high-net-worth individuals from escaping U.S. taxes by leaving the country and then transferring wealth to family members back home
5The guidance clarifies how individuals should calculate and report these taxes, with specific rules for different types of gifts and inheritances

Impact Assessment

If you are a Financial Institution or Consumer who receives gifts or inheritances from someone who renounced U.S. citizenship, you may owe federal taxes on those transfers above certain thresholds.

Impact Level

Moderate

Geographic Scope

National

Compliance Cost

Minimal

Who is Affected

Financial InstitutionsConsumers

Key Dates

Published

January 14, 2025

Regulatory Connections

Authorized By

Internal Revenue Code Section 2801

Read on Federal Register View Docket

This summary is for informational purposes only. It may not capture all nuances of the regulation. Always refer to the official text for authoritative information.