The Treasury Department and the Internal Revenue Service (IRS) have issued final regulations concerning taxes imposed on gifts and bequests received by U.S. citizens or residents from individuals who were once U.S. citizens or residents but have given up their status, known as "covered expatriates." These new rules clarify how the tax is calculated, who is responsible for paying it, and which gifts or bequests are exempt. Trusts, both foreign and domestic, are specifically addressed, with detailed guidance on compliance and election procedures for foreign trusts wishing to be treated as domestic for tax purposes. Additionally, the regulations outline the recordkeeping and reporting requirements to ensure proper tax administration. These regulations take effect on January 14, 2025.
Simple Explanation
Imagine if someone used to live in your neighborhood but moved away, and they gave you a gift. The new rules are like saying, "If you receive a gift from someone who moved away, you might need to share a bit of it because they don't live here anymore."