1. Who Is a Nonresident Donor
The gift tax applies to every individual, but a different rule set governs a nonresident not a citizen of the United States (NRNC): someone who, when the gift is made, is neither a U.S. citizen nor domiciled in the United States. Domicile is the gift and estate tax test: a person acquires a domicile by living somewhere, even briefly, with no definite present intention of leaving. It is not the income tax test. A person can be a U.S. resident for income tax under the substantial presence test and still be a nonresident for gift tax, and the reverse can also happen.
Part-year residents use Form 709
A donor who was a U.S. citizen or resident for part of the year and made a reportable gift during that part reports all of the year’s gifts on Form 709, not Form 709-NA (Instructions for Form 709-NA, “Coordination with Form 709”).
Certain former citizens and long-term residents
The intangible-property exemption does not apply to a donor to whom § 877(b) applies (§ 2501(a)(3)). Separately, gifts from a covered expatriate to U.S. recipients can carry the recipient-side tax of § 2801; see our Section 2801 and Form 708 guide.
2. What Is Taxed: U.S.-Situs Real and Tangible Property
Section 2511(a) limits the gift tax on a nonresident’s transfers to property situated in the United States, and § 2501(a)(2) removes intangible property from the tax altogether. What remains is real property located in the United States and tangible personal property physically located in the United States when the gift is made (Treas. Reg. § 25.2511-3).
| Property given by a nonresident donor | U.S. gift tax |
|---|---|
| Real estate located in the United States (a house, condominium, land) | Taxable |
| Tangible personal property located in the United States (art, jewelry, vehicles, precious metals held here) | Taxable |
| Stock of a U.S. or foreign corporation | Exempt: intangible property (§ 2501(a)(2)) |
| Bonds and other debt obligations, including of U.S. persons | Exempt: intangible property |
| Interests in partnerships and LLCs, including single-member LLCs | Generally intangible; see section 4 for the limits |
| Cash | Unsettled: physical currency in the United States is generally treated as tangible; how a transfer from a U.S. bank account is classified is debated |
| Any property located outside the United States | Not subject to U.S. gift tax |
Because cash is unsettled, practitioners often have a nonresident donor make cash gifts from an account outside the United States. Whether and how to do that is a judgment for the adviser and the facts.
3. No Unified Credit: The Tax Starts Above the Annual Exclusion
For a U.S. citizen or resident, the § 2505 applicable credit shelters lifetime gifts of about $15 million (2026). Every bracket below 40% is absorbed by that credit, which is why the gift tax is often described as a flat 40%. Section 2505(a) allows the credit only to citizens and residents. A nonresident donor has none, so the graduated table of § 2001(c) applies from the first dollar of taxable gifts.
Example: a $1,000,000 condominium given to a child in 2025
| Value of the gift | $1,000,000 |
| Annual exclusion (§ 2503(b)), 2025 | − $19,000 |
| Taxable gift | $981,000 |
| Tax: $248,300 + 39% of the amount over $750,000 | $338,390 |
| Same gift by a U.S. citizen with unused credit | $0 tax |
The effective rate is about 34.5%. Taxable gifts above $1,000,000 reach the 40% bracket. Earlier taxable gifts reported on prior returns push this year’s gifts into higher brackets (Schedule B).
What still reduces the tax
The annual exclusion per donee applies to present-interest gifts ($19,000 for 2025 and 2026). Gifts to a spouse who is not a U.S. citizen qualify for a larger annual exclusion instead of the marital deduction ($190,000 for 2025, indexed). Gifts to a U.S. charity for use in the United States are deductible. Tuition and medical expenses paid directly to the provider are excluded.
Gift tax treaties
Gift tax conventions are in effect with Australia, Austria, Denmark, France, Germany, Japan and the United Kingdom. Depending on its terms, a treaty can change where property is taxed, allow a credit for foreign gift tax, or provide a credit against U.S. tax. A treaty-based position is disclosed on Form 8833. Read the specific treaty; the relief differs from one to the next.
The contrast with the estate tax is worth explaining to clients. A nonresident’s U.S. estate receives a $13,000 credit (§ 2102(b)(1)), roughly the tax on $60,000, and includes stock of U.S. corporations (§ 2104(a)). The gift tax has no credit but exempts that stock. A plan that avoids gift tax can still leave estate tax exposure, and the reverse.
4. Gifts of Interests in Corporations, Partnerships and LLCs
Because § 2501(a)(2) exempts intangibles, a nonresident who owns U.S. real estate through an entity may give interests in the entity rather than the property itself. Shares of a corporation, U.S. or foreign, are intangible property. Under state law, an interest in a partnership or LLC is generally personal property of the member, not an interest in the entity’s assets. The question is whether the gift tax respects the entity, or looks through it to the real estate.
Single-member LLCs: Pierre v. Commissioner, 133 T.C. 24 (2009)
A single-member LLC is disregarded for income tax under the check-the-box regulations. In Pierre, the IRS argued that gifts of interests in a single-member LLC holding cash and securities should therefore be treated as gifts of a proportionate share of its assets, with no valuation discounts. The Tax Court disagreed: state law determines what property was transferred, the check-the-box regulations do not override that for federal gift tax, and the donor gave LLC interests. Pierre was a valuation case for a U.S. donor, not a situs case. Practitioners rely on its reasoning to treat a nonresident’s gift of an LLC interest as a gift of intangible property. No court has yet decided that situs question directly.
The limits: step transaction and indirect gifts
When funding an entity and giving interests in it are steps of one plan, courts have treated the gift as a gift of the underlying property. In Shepherd v. Commissioner, 115 T.C. 376 (2000), aff’d, 283 F.3d 1258 (11th Cir. 2002), contributions to a partnership that increased the other partners’ capital accounts were indirect gifts of the contributed property. In Senda v. Commissioner, T.C. Memo. 2004-160, aff’d, 433 F.3d 1044 (8th Cir. 2006), contributions and gifts made at the same time were treated as indirect gifts of the contributed stock. In Pierre v. Commissioner, T.C. Memo. 2010-106, gifts and sales of LLC interests on the same day were aggregated. Time and real economic risk between steps can matter: in Holman v. Commissioner, 130 T.C. 170 (2008), aff’d, 601 F.3d 763 (8th Cir. 2010), the court respected gifts made six days after funding because the interests bore real market risk in between.
The IRS is watching this pattern
The Form 709-NA instructions say that when a nonresident transfers U.S. real or tangible property to a closely held corporation, partnership or LLC for less than full and adequate consideration and later gives an interest in that entity, details of the original contribution should be documented. Failure to disclose the transfer to the entity on a timely filed Form 709-NA, with supporting documents, may result in a later determination that a taxable gift was made and not adequately disclosed, which keeps the statute of limitations open.
For a client who holds, or plans to hold, U.S. real estate through an entity, document when and why the entity was formed and funded, keep its formalities, avoid funding immediately before a gift, and consider disclosing the transfers on Form 709-NA. Estate tax treatment of the same interests is a separate question, and corporate shares stay in a nonresident’s U.S. estate. A foreign-owned single-member LLC also files Form 5472 with a pro forma Form 1120 each year; see our Form 5472 guide.
5. Filing Form 709-NA
Form 709-NA, first issued for 2024, is the nonresident donor’s annual gift tax return; before 2024, nonresidents filed Form 709. It is required when the donor’s U.S.-situs gifts to any donee exceed the annual exclusion, for any gift of a future interest, and for reportable gifts to a spouse.
Due date and extension
April 15 of the year after the gift. An extension of the donor’s income tax return also extends the gift tax return; otherwise, Form 8892 gives 6 more months to file. Neither extends the time to pay.
Identifying number and paper filing
Line 3 takes an SSN, an ITIN already used on another U.S. return, or an IRS-assigned IRSN, and is left blank if the donor has none. The IRS has told us that only donors with an SSN can e-file; donors with an ITIN, an IRSN or no number file on paper.
Adequate disclosure
The period of limitations on a gift begins only if the gift is adequately disclosed: a description of the property, the donor–donee relationship, how the value was determined (an appraisal for real estate), and for a gift in trust the trust’s EIN and terms.
Who pays
The donor owes the tax. If the donor doesn’t pay, the donee may have to (Instructions for Form 709-NA). That makes the return a concern for the U.S. family receiving the property, too.
6. The U.S. Recipient’s Side
A U.S. person who receives more than $100,000 in a year from a nonresident alien individual, counting related donors together, reports the gifts on Form 3520, Part IV, whether or not the donor owed gift tax. Gifted property generally keeps the donor’s basis (§ 1015). See our guide to gifts and inheritances from family abroad.
7. Frequently Asked Questions (FAQ)
Is U.S. gift tax a flat 40% for nonresident donors?
No. 40% is the top rate of a graduated table that starts at 18%. Citizens and residents effectively pay 40% because the unified credit absorbs the lower brackets. A nonresident donor has no unified credit, so the lower brackets apply: a $981,000 taxable gift owes $338,390, an effective rate of about 34.5%.
Does a nonresident donor get the annual exclusion?
Yes. The annual exclusion ($19,000 per donee for 2025 and 2026) applies to present-interest gifts by nonresident donors. Gifts to a spouse who is not a U.S. citizen qualify for a larger annual exclusion, $190,000 for 2025, indexed for inflation.
Can a nonresident give stock of a U.S. company without gift tax?
Generally yes. Stock is intangible property, and § 2501(a)(2) exempts a nonresident’s gifts of intangible property, unless § 877(b) applies to the donor. The same stock would be included in the donor’s U.S. estate at death (§ 2104(a)).
Is a gift of a single-member LLC that owns U.S. real estate exempt?
An LLC interest is generally intangible property, and Pierre v. Commissioner, 133 T.C. 24 (2009), held that a single-member LLC is respected for gift tax even though it is disregarded for income tax. No court has decided the situs question for a nonresident donor, and when funding and gift are steps of one plan, courts have treated gifts of entity interests as gifts of the underlying property. The Form 709-NA instructions ask that contributions of U.S. real or tangible property to a closely held entity be documented and disclosed.
When is Form 709-NA due, and can it be e-filed?
April 15 of the year after the gift, extendable 6 months with Form 8892 or an income tax extension. Only donors with an SSN can e-file; donors with an ITIN, an IRSN or no identifying number file on paper.
Authorities
- Internal Revenue Code: § 2001; §§ 2501–2505; § 2503; § 2511; § 2523; § 2102; § 2104; §§ 877(b), 2522
- Treas. Reg. § 25.2511-3 (transfers by nonresidents not citizens)
- Pierre v. Commissioner, 133 T.C. 24 (2009); Pierre v. Commissioner, T.C. Memo. 2010-106
- Shepherd v. Commissioner, 115 T.C. 376 (2000), aff’d, 283 F.3d 1258 (11th Cir. 2002)
- Senda v. Commissioner, T.C. Memo. 2004-160, aff’d, 433 F.3d 1044 (8th Cir. 2006)
- Holman v. Commissioner, 130 T.C. 170 (2008), aff’d, 601 F.3d 763 (8th Cir. 2010)
- Form 709-NA and its instructions (IRS)
Preparing a Form 709-NA?
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