Unlike a U.S. citizen, who is subject to estate taxation on worldwide assets, the gross estate of a nonresident alien (meaning, a foreign individual who is not a U.S. citizen or resident alien) only includes property that is situated in the U.S. at the time of the nonresident alien’s death.1
For purposes of determining what property is situated in the U.S., any property which the decedent has transferred, by trust or otherwise, which would be taxable within the provisions of IRC Sections 2035 through 2038 (relating to termination of certain property interests within three years of death, transfers with a retained life estate or to take effect at death, and revocable transfers), is deemed situated in the United States if it was so situated either at the time of the transfer or at the time of death.2
For a decedent who was a nonresident alien at the time of death, property is considered located in the U.S. if it falls into any of the following categories:
(1)Real property located in the U.S.;
(2)Tangible personal property located in the U.S., including clothing, jewelry, automobiles, furniture or currency. Works of art imported into the U.S. solely for public exhibition purposes are not included;
(3)A debt obligation of a citizen or resident of the U.S., a domestic partnership or corporation or other entity, any domestic estate or trust, the U.S., a state or a political subdivision of a state or the District of Columbia; or
(4)Shares of stock issued by domestic corporations, regardless of the physical location of stock certificates.3
However, in the case of a nonresident alien who dies while in transit through the U.S., personal effects are not considered located in the U.S. Neither is merchandise that happens to be in transit through the U.S. when a nonresident alien owner dies.