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Foreign Affairs 101: Tax and Estate Planning Issues for U.S. Clients Who Own Foreign Property

When a U.S. citizen or resident client owns property in a foreign country, that client will face a number of U.S. and foreign legal and tax issues, and these issues sometimes are complicated or simplified by treaties between the United States and the foreign country involved. The most obvious situation is when a U.S. client owns real property in another country. Numerous complex issues, however, can also arise when the client owns intangible property with a connection to another country, such as shares in a foreign corporation or an interest in a foreign partnership. While these items of property may not raise too many foreign succession law issues, these items of property can raise complex federal income tax issues for clients. In all cases, U.S. federal estate tax issues will also be lurking. This outline describes some of the basic ground rules that U.S. estate planning advisers should follow when U.S. citizen and resident clients own foreign property, with a focus on succession law issues, federal income tax issues, and federal estate tax issues.

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