International Charitable Giving And Planning ... - Phillips Nizer LLP

The provisions of §§2055 and 2522(a) that allow transfer tax deductions for bequests andgifts to foreign charities do not apply to transfers to foreign charities by persons who areneither U.S. citizens nor U.S. non-citizen domiciliaries. Section 2106(a)(2) permits thecharitable deduction for bequests by decedents who were neither U.S. citizens nor U.S.non-citizen domiciliaries to the United States, the States of the United States, and theirpolitical subdivisions for exclusively public purposes. Unlike the provisions of §2055which make the U.S. estate tax charitable deduction available to estates of U.S. decedentcitizens and domiciliaries, §2106(a)(2) permits the deduction for transfers to corporationsdedicated exclusively to charitable purposes only if the charitable corporations aredomestic. Unlike §2055, it also limits the deduction to trustees only if "such contributionsof gifts are to be used within the United States." The same restrictions apply, under§2522(b), to the charitable deduction for gifts made by "a nonresident not a citizen of theUnited States." 13Exceptions and Special Cases under Tax TreatiesContributions to Canadian and U.S. CharitiesUnder Article XXIX(B) of the U.S.-Canada Income Tax Treaty, for U.S. tax purposes,transfers at death from a U.S. decedent or Canadian decedent to a Canadian charity areto have the same tax consequences that would apply if the Canadian charity were a U.S.charity. The same rule applies for Canadian tax purposes to U.S. and Canadiandecedents leaving property to U.S. charities. Since Canada has no inheritance tax, theCanadian deduction is applied against the Canadian capital gains tax on deemedrealization at death. It must be kept in mind that Article IV(1) permits the application ofTreaty benefits to a person who is not a Canadian resident but who is a U.S. citizen orpermanent resident only if the person has domicile-like connections with the UnitedStates because this Treaty is an income tax treaty rather than an estate tax treaty.Contributions to Danish and U.S. CharitiesFor U.S. tax purposes, under Article 9(1) of the U.S.-Denmark Estate and Gift Tax Treaty,contributions to a Danish corporation or organization that is devoted completely tocharitable purposes and receives tax relief in Denmark are to be treated by the UnitedStates as if the Danish charity were a U.S. charity. Similarly, contributions to the Danishgovernment "for exclusively public purposes" are to be treated as if they were made toU.S. governmental units "for exclusively public purposes." The same rules apply forDanish tax purposes for contributions to U.S. charities and governmental units.Contributions to French and U.S. CharitiesUnder Article 10 of the U.S.-France Estate and Gift Tax Treaty, for U.S. tax purposes,contributions to a French charity completely devoted to charitable purposes are to betreated as if the French charity were a U.S. charity if contributions to a French charitywould be fully tax-exempt in France, subject to the following conditions: the Frenchcharity must be organized exclusively for charitable purposes and the French charitymust receive a substantial portion of its support from the public. The same rule appliesfor French tax purposes to contributions to U.S. charities. This means that the Treatydoes not make the French charitable deduction available for contributions to U.S. privatefoundations.Contributions to German and U.S. CharitiesUnder Article 10(2) of the U.S.-Germany Estate and Gift Tax Treaty, for U.S. taxpurposes, contributions to a German charity completely devoted to charitable purposes orto a German "public body" for charitable purposes are to be treated as if the GermanTax Management Estates Gifts and Trusts Journal © 2005 Tax Management Inc.® Pg. 11