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Estate Taxes

Published on January 29, 2008

[*The double taxation between France and the United States, in terms of inheritance, is prevented pursuant the provisions of the French-US tax treaty of November 24, 1978, as amended by the Protocol of December 8, 2004, the text of which, you will find on this site.*]

A- INFORMATION ON THE CALCULATION OF THE ESTATE TAX IN THE UNITED STATES

The TAMRA law ("Technical And Miscellaneous Revenue Act of 1988) has deprived people who are not American citizens from a number of advantages provided by the Convention of November 24, 1978, regarding the taxation of estates in the United States.
The convention could not, in its current state, be an obstacle to this deteriorating situation of French citizens who are not United States citizens, since, according to the American law, the provisions of a new law take precedence over the ones of a prior international agreement (« treaty overriding").

Negotiations have been initiated in 1989 with the American authorities to make provision in the treaty for the reinstatement of deductions and tax credits eliminated by the TAMRA law.
These negotiations have resulted in the conclusion of the protocol of December 8, 2004 which modified the agreement in a manner favorable to the French citizens.

Pursuant to this text, which entered into force on December 21, 2006, the United States agreed to guarantee the following advantages:

- Marital deduction to the benefit of the surviving spouse who does not have an American citizenship to the level of the "applicable exclusion amount" under the legislation in force on the date of death ($ 2 million in 2007);
- 50% reduction on the taxable property in the United States going to the surviving spouse if the deceased was a resident of France;
- In the proportion of assets located in the United States, the same tax credit as the one granted to estates of French residents who do not have the US citizenship, as estates of American citizens ( "unified tax credit" which amounts to $780,800 in 2007).

Such measures are subject to certain conditions set out respectively in articles 11, paragraph 3; 11, paragraph 2 and 12, paragraph 3 of the convention, they apply to estates of persons who died on or after December 21, 2006.
Thus the degradation which the French citizens who did not have a US citizenship were subject to, as a result of the 1988 TAMRA law, is widely compensated.

The December 8, 2004 protocol also provides a retroactive provision with regard to the marital deduction to the benefit of the surviving spouse who does not have an American citizenship and the tax credit granted to the estates of persons residing in France (Article IX paragraph 3).

The survivors or heirs who have had to pay inheritance taxes based on the sole laws of the United States may therefore ask that the over-payment based on a tax assessed pursuant to articles 11, paragraph 3 and 12, paragraph 3 of the Convention be refunded to them.
The affected estates are the ones open as of November 10, 1988, they will receive a marital deduction equal to the "applicable exclusion amount" and/or a "unified tax credit" (in the proportion of properties located in the United-States) calculated pursuant to the legislation applied to American citizens, which was in force on the date of death of the deceased.

The corresponding refund claims can be submitted until January 30, 2008 to:
Department of the Treasury
Internal Revenue Service Center
CINCINNATI, OH 45999

It is recommended to keep a written record of the request.

Under the same conditions, estates for which a "qualified domestic trust" was created to take advantage of the marital deduction provided by the domestic law of the United States, may submit a request for the trust to be treated as if it had not been established.
The provisions of Article IX of the protocol of December 8, 2004 amending the convention of November 24, 1978 are reproduced below:

ARTICLE IX

1. The Contracting States shall notify each other when their respective constitutional and statutory requirements for the entry into force of this Protocol have been satisfied.

2. This Protocol shall enter into force on the date of receipt of the later of such notifications and shall have effect with respect to gifts made and deaths occurring after that date.

3. Notwithstanding paragraph (2) of this Article, paragraph (3) of Article 11 (Community Property and Marital Deduction) of the Convention and paragraph (3) of Article 12 (Exemptions and Credits) of the Convention, in each case as amended by this Protocol shall, notwithstanding any limitation imposed under the law of a Contracting State on the assessment or refund with respect to a person’s or estate’s return, have effect with respect to gifts made or deaths occurring after November 10, 1988, provided that (i) any claim for refund by reason of this Article IX is filed before the date that is one year after the first day of the second month following the date on which this Protocol enters into force or within the otherwise applicable period for filing such claims under domestic law, and (ii) the provisions of paragraph (4) of Article 1 (Estates and Gifts Covered) shall apply with respect to such claim for refund. In the case of an estate that, prior to the date on which this Protocol enters into force, was allowed a marital deduction by reason of a transfer to a qualified domestic trust, such estate may, within the time limit for filing a claim for refund referred to in the preceding sentence, elect to treat the qualified domestic trust as if it had not been established in order to claim the benefits of paragraph (3) of Article 11 (Community Property and Marital Deduction) or paragraph (3) of Article 12 (Exemptions and Credits) of the Convention. If such an election is made, the property shall be treated as having been transferred to the surviving spouse at the time of the decedent’s death for all purposes of this Convention.

B-INFORMATION ON THE CALCULATION OF ESTATE TAXES IN FRANCE

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