Your Miami bank account is not taxed. Your US shares in Geneva are
For US estate tax a share sits where its issuer was incorporated, not where it trades or where the account is held. Cash in a US bank account falls outside the estate. Cash in a brokerage account does not.
Most families who buy assets in the United States understand that the Miami apartment has an estate tax problem. Very few know that the share portfolio has the same problem, and that the portfolio is usually the larger of the two.
The Treasury regulation lists eight categories of property situated in the United States. Real estate is item one. The second half of that list is the part nobody reads.
This piece covers one of those categories. It is written for the person who holds an investment account in Geneva, Zurich, Panama or Bogotá, with shares of American companies inside it, and assumes that keeping them outside the country keeps them outside the reach of the US tax authorities.
It does not. And the rule that decides which shares count is not the one almost everybody repeats.
The starting point is one sentence of the statute.
The statute does not look at the exchange. It looks at the charter
Section 2104(a) of the Internal Revenue Code settles the question in a single line:
"For purposes of this subchapter shares of stock owned and held by a nonresident not a citizen of the United States shall be deemed property within the United States only if issued by a domestic corporation."
Issued by a domestic corporation. Nothing else in the sentence. The regulation says it from both directions: section 20.2104-1(a)(5) brings in shares of a domestic corporation "irrespective of the location of the certificates," and its mirror at 20.2105-1(f) leaves out shares of a corporation that is not domestic. "Domestic" carries its own definition in section 7701(a)(4): created or organized in the United States, or under federal or state law. Incorporation, not listing.
The IRS puts it plainly on its own page for executors. US property includes stock of corporations organized in or under US law, "even if the nonresident held the certificates abroad or registered the certificates in the name of a nominee."
That produces the consequence which orders everything else, and which almost nobody states correctly: a company can trade in New York and not issue American shares. Accenture plc trades on the New York Stock Exchange and Linde plc on Nasdaq, and both report to the SEC that they are incorporated in Ireland. Their shares are not property situated in the United States. It runs the other way too. A Delaware corporation listed only in London issues shares that are.
Two cautions about that example. Places of incorporation change, and any particular company's has to be checked on the cover of its 10-K on the day it matters. And section 7874(b) treats a foreign corporation as domestic "for purposes of this title" where it would qualify as a surrogate foreign corporation on the 80 percent threshold. That title includes the estate tax.
A certificate issued by a New York bank that is not US property
An ADR is American paper in every visible respect. A US bank issues and sells it, the bank's name and seal are on it, and it represents shares of a foreign company held on deposit in that company's home country.
In 2002 the IRS analyzed the instrument for a nonresident who held ADRs inside a revocable trust. Private letter ruling 200243031 concluded that ADRs and ADSs "do not constitute shares of stock issued by a domestic corporation and, therefore, are not property within the United States under § 2104(a)."
The same document carries the warning that has to travel with the conclusion: "Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent." So the IRS view is stated, it is clear, and it binds nobody except the taxpayer who asked for it. All three things are true at once.
Bank cash is outside the estate. Brokerage cash is not
Here is the inversion in the title.
Section 2105(b)(1) puts outside the taxable estate the amounts described in section 871(i)(3)(A), deposits "with persons carrying on the banking business," as long as they are not connected with a US trade or business. A non-domiciliary can hold $2,000,000 in a checking account in Miami and those dollars stay out. The same $2,000,000 in shares of US-incorporated companies, held at a bank in Geneva, comes in. Same family, same currency, same country of residence, opposite answers.
The Form 706-NA instructions list the deposits treated as located outside the country: one held at a US bank, an account at a savings and loan association, a deposit in a foreign branch of a US bank. Read the list again and notice what is missing from it. A brokerage account.
The omission has case law behind it, and a Latin American decedent. In Estate of Rodolfo Ogarrio v. Commissioner, 40 T.C. 242 (1963), aff'd 337 F.2d 108 (D.C. Cir. 1964), a brokerage house owed a nonresident Mexican the proceeds of a stock sale and held that money in a general account it used to pay obligations of every kind. The Tax Court held that a brokerage house is not carrying on the banking business, and that the decedent had a general claim against a debtor rather than an enforceable claim on a specific account.
The label on the intermediary does not decide it alone. In Gade v. Commissioner, 10 T.C. 585 (1948), a custodial account at a trust company did qualify as a deposit, because the decedent's own directions governed it. Which is why the honest formulation is that a money market balance in an investment account is generally treated as US-situs property, not that the statute says so in those words. Physical cash gets no relief either: the regulation states that "currency is not a debt obligation," and Rev. Rul. 55-143 pulled dollars kept in a safe deposit box into the gross estate.
Before you classify a fund, ask what you actually own
Section 2104(a) speaks of "shares of stock" issued by a "corporation." So the first question is not where the fund is. It is whether the thing you own is stock in a corporation.
When it is, the answer follows by itself. A US mutual fund is a corporation organized in the United States that issued shares to you, and those shares are US-situs property in full, even if the fund holds no American asset at all. The mirror works the same way: a fund organized abroad that invests only in US stocks does not itself issue US shares.
One exception used to exist, and it carries its own date of death in the text. Section 2105(d) allowed a look-through to exclude the portion invested outside the country, and section 2105(d)(3) says "This subsection shall not apply to estates of decedents dying after December 31, 2011." The 706-NA instructions still describe the old rule, fenced to deaths "after 2004 and before 2012," and respectable-looking professional material still publishes it as current.
A US-organized ETF comes in through the same door even where its legal wrapper is not a corporation: the largest are unit investment trusts that elect to be taxed as regulated investment companies, and say so in their SEC filings. Where the statute's sentence stops fitting, though, the answer opens up, and saying so beats inventing one.
- Exchange-traded products organized as grantor trusts, the bullion ones for instance, do not issue stock in a corporation. One such trust's registration statement says only that its shares "may well be considered to have a U.S. situs," which is an issuer declining to state the law.
- An Irish or Luxembourg fund set up as an ICAV, a plc or a SICAV is normally classified as a corporation under regulations 301.7701-1 through -4, and section 20.2105-1(f) then answers the question. A UCITS organized as a unit trust or a common contractual fund does not obviously fit the word "corporation," and nobody has published an analysis of those forms.
- US retirement accounts, IRAs and 401(k)s, appear in no statute, regulation, ruling or case on situs. The closest IRS analysis, CCA 201003013, dealt with a Canadian RRSP: "the interposition of the RRSP does not affect the determination of the situs of the property held by the RRSP." That points at the contents; it does not make the wrapper American property. The opposite claim circulates everywhere without a single citation.
The order is what matters: classify the entity under US law first, ask where it sits second. A vehicle called a trust in Dublin can be a corporation in Washington.
Bonds: most fall outside, and the exceptions are the ones that matter
Section 2104(c) starts by pulling debt in: any debt obligation whose primary obligor is a US person is US-situs property. Section 2105(b)(3) takes it back out where the interest would have qualified as portfolio interest under section 871(h)(1) had it been received at death. That is an income tax rule doing estate tax work, and it covers, per Karlin and Peebles in the Journal of International Taxation, "most U.S. corporate bonds and Treasury obligations having a term greater than 183 days."
The exceptions are not marginal. State and municipal bonds stay in, because their interest is exempt under section 103 rather than 871(h) and therefore cannot be portfolio interest. The same goes for debt of a company in which the decedent held 10 percent or more of the vote, debt paying contingent interest, and certain bearer bonds. Short-dated Treasury bills have no clean answer at all: one reading excludes them under section 2105(b)(4), but the IRS concluded in TAM 9422001 that a bill maturing in under 183 days "was property within the United States at the death of the decedent," on an analysis that never mentions that subsection. Nobody has published a reconciliation of the two positions.
One more point aimed straight at this reader. The portfolio interest exemption belongs to the nonresident income tax regime. Someone who spends half the year in Miami on a visa and becomes a US income tax resident, while remaining non-domiciled for estate tax, loses the 871(h) shelter.
A million dollars in shares, $332,800 at month nine
A non-domiciliary dies in 2026 holding $1,000,000 of shares in US-incorporated companies at a broker in Bogotá or Zurich, and nothing else in the country.
- US-situs gross estate: $1,000,000
- Tentative tax from the section 2001(c) table: $345,800
- Less the unified credit under section 2102(b)(1): $13,000
- Payable, in dollars, within nine months: $332,800
That is 33.3 percent of the position. The rate is not 40 percent. Forty is the top marginal bracket, reached above $1,000,000 of taxable amount. And the $60,000 is not an exemption but a $13,000 credit, so the 60,001st dollar is taxed at 26 percent. Article 01 works that through.
This site's calculator applies a flat 40 percent above $60,000 and would return $376,000. That is deliberate, and it is a ceiling rather than a computation. The figure from the table is $332,800.
The day after: the lien, the transfer agent and the medallion
The tax falls due at nine months. The asset that would pay it is the one nobody will hand over.
Section 6324(a)(1) creates a lien on the gross estate "for 10 years from the date of death," with no filing and no notice. Section 6324(a)(2) makes whoever holds the property personally liable up to its value. And section 2203 defines "executor," where no executor is appointed and acting in the United States, as "any person in actual or constructive possession of any property of the decedent." The custodian is not being difficult. It is reading the statute that makes it liable.
The regulation says so in writing, and it was written about shares. Section 20.6325-1(a) directs that "no domestic corporation or its transfer agent should transfer stock registered in the name of a non-resident decedent" without first requiring a transfer certificate, and it exempts transfer agents of foreign corporations except as to shares in the name of a nonresident who is not a citizen, which tracks the situs rule exactly.
That document is the transfer certificate, commonly called Form 5173. For estates of nonresidents not citizens, the IRS publishes a time frame of 12 to 18 months from the point it has the complete documentation. Payment lands at month nine and release comes later. The gap is the problem, more than the rate. There is an exit almost nobody uses: regulation 20.6325-1(b)(1)(i) requires no certificate where the US-situs estate did not exceed $60,000, and (b)(3) gives the custodian a safe harbor where it first receives, "having no information to the contrary," a statement of the facts from the executor. Transfer agents are generally unaware of it. The other exit, appointing an executor who acts in the United States, is covered in article 02.
One wall is left, and it is not a tax wall. A real transfer agent's published package for a deceased non-US holder asks for the federal certificate and a Medallion Signature Guarantee on every signature, with coverage sufficient for the value being transferred. The institution that stamps it generally requires a prior banking relationship and the signer's appearance in person. The SEC says it flatly: if you are not a customer of a participating financial institution, it is likely the institution will not guarantee your signature.
For a widow in Monterrey who never held a US account, that means obtaining the medallion from an institution that must first agree to take her on as a client. In the meantime the portfolio goes unmanaged. As an article in Trusts & Trustees (Oxford University Press, 2017) puts it, until clearance arrives from the IRS the beneficiaries have no access to the assets and cannot diversify the holdings to protect against market risk.
Employee shares are the same asset
A Mexican, Brazilian or Colombian executive at a US multinational who never bought a share in his life can own the whole problem through his pay package. Equity awards and shares in a US company that the decedent still holds at death, and that are not forfeited by it, are US-situs property. The threshold is still $60,000, and a block of vested RSUs clears it without effort. The plan's broker may decline to release the shares until the heirs have satisfied the US estate tax obligations.
What to check this week
Four lines. The situs of a share is fixed by where its issuer was incorporated, not by the exchange, the custodian or the country of the account. Cash at a US bank stays out of the taxable estate; cash in an investment account does not. A fund is judged by what it is before it is judged by what it holds, and for some forms the law never gave an answer. And the real problem is not the rate. It is that the tax falls due in month nine while the portfolio is released later.
The practical step fits in an email. Ask your broker for a list of positions sorted by the issuer's country of incorporation, not by exchange and not by currency. Almost no statement carries that field, which is precisely why almost nobody knows how much is exposed. With that list in front of you, three questions answer themselves: what the US-incorporated portion adds up to, how much of your cash sits at the brokerage rather than a bank, and what legal form each of your funds actually takes.
The Miami apartment is visible. The portfolio is not. It takes up no space and appears on no deed. It weighs the same.
One team, the whole problem
Complex is fine. Unattended is the expensive part.
Everything above is general information. Your own answer depends on your country, your ownership, and facts a professional has to confirm. We measure the exposure, place the life insurance that funds it, and coordinate the licensed attorneys, accountants, and trustees who complete the plan, so one team is accountable for the outcome.
