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Foreign investors dodge owed estate taxes on U.S. assets

On Behalf of | Nov 11, 2015 | Estate Taxes

Georgia residents may be displeased to learn that many foreign holders of U.S. assets fail to pay estate taxes they should owe on those assets. Under U.S. tax law, foreign estates are required to pay estate taxes on such holdings when the owner passes away, but very few file these forms.

The result of this foreign tax evasion is the U.S. missing out on potentially billions of dollars every year that could otherwise be used by the government to pay its debts. The IRS doesn’t even know how to ascertain the taxes that should be owed on these holdings, and there is no requirement for countries or banks to reveal the identities of foreign investors who hold those types of assets.

A good illustration of the problem is in real estate. While there has been a significant uptick in foreigners purchasing U.S. properties, very few estate tax returns are filed based on that ownership each year. One Swiss banker acknowledged the extent of the international tax evasion and indicated he expected some attempt at enforcement in the future. At this time, the IRS doesn’t have a method of enforcement in place to collect the foreign estate taxes it is owed.

With soaring deficits and much talk about closing tax loopholes, it seems as if the government should address this loophole that allows foreign estates to dodge estate taxes they rightfully owe to the U.S. government. Instead, the U.S. population is left shouldering the burden of those taking advantage in this way. While it is perfectly legal for U.S. citizens to try to minimize their estate tax liability through careful estate planning, often with the assistance of attorneys, it is wrong that foreign investors are easily able to get away with simply ignoring the law.