962 / How does the estate of a foreign individual (nonresident alien) calculate the amount of U.S. estate tax owed?
The estate tax computation base of a nonresident alien’s estate consists of his or her taxable estate plus any taxable gifts made during his or her lifetime.1 The taxable gifts of a nonresident alien made after 1976 (other than gifts included in the gross estate) also form part of the tax base upon which the estate tax is computed. The adjusted taxable gifts of a nonresident alien are computed in the same manner as for a resident citizen.2
Once the taxable estate of the nonresident alien decedent is determined, the mechanics of the actual tax calculation and the applicable rate schedule (before the unified credit) are the same for nonresident alien decedents as for citizen-residents. However, a very important difference comes into play in the use of the unified credit, which is greatly reduced for nonresident alien decedents. This, of course, indirectly results in a higher effective tax rate. See Q 964 for a discussion of the unified credit as applied to nonresident aliens.
1 IRC § 2101(c).