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CNBC Speaks to Beth Kaufman on Widely Ignored Estate Tax Requirement

November 4, 2015, CNBC

Caplin & Drysdale's President, Beth Shapiro Kaufman, spoke with CNBC concerning the U.S. tax law requiring estates of foreign holders of certain U.S. assets, such as stocks, real estate, or valuables, are required to pay estate taxes on those assets after the death of the owner.  Ms. Kaufman, who formerly served in the U.S. Treasury Department's Office of Tax Policy overseeing tax policy matters affecting trusts and estates, said "foreigners would be astounded to learn that they owed any U.S. tax."  She goes on to say that people "don't pay because there isn't any enforcement mechanism for it."  For the complete article, please visit CNBC's website.

Excerpt taken from the article.

One estate tax expert, shown those IRS figures by CNBC, said the numbers are simply not plausible. "Seventy-two is not a believable number," said Beth Shapiro Kaufman, an attorney at the law firm Caplin & Drysdale who specializes in estate planning for wealthy individuals. "There must be some serious slippage here."

To Kaufman, who earlier in her career served in the Treasury Department's Office of Tax Policy overseeing tax policy matters affecting trusts and estates, the IRS' accounting for how much estate tax is actually paid by foreigners suggests a large amount of money is missing. "It appears that there are substantial amounts of tax not being paid," she said.

Why is that? Partly because most foreigners have no idea how U.S. tax law treats U.S. assets, Kaufman said. "A number of foreigners would be astounded to learn that they owed any U.S. tax," Kaufman said. Another reason is it would be difficult for the IRS to reach into foreign countries to try to collect the tax it says it is owed. "It could be a failure of enforcement when people are aware that they owe the taxes, but they simply don't pay because there isn't any enforcement mechanism for it," Kaufman said.

.  .  .

One question is just how enforceable the IRS rules are, considering that they apply to people who live outside U.S. legal jurisdiction and who may not travel to or have business in the United States. Kaufman said any effort to vigorously enforce the foreign estate tax would require new laws as well as policy changes by American regulators.

One start, she said, would be a rule blocking the sale of U.S. equities to foreign accounts that don't have a specific Social Security or Individual Taxpayer Identification Number associated with them.


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