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Foreign Real Property Inherited by a US Citizen From a Nonresident Alien

A United States citizen who inherits foreign real property from a nonresident alien receives a stepped-up basis in such property under section 1014 of the Internal Revenue Code ("Code") even though the property is not includible in the value of the decedent's gross estate.


Section 1014(a)(1) of the Code states that the basis of property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent shall, if not sold, exchanged, or otherwise disposed of before the decedent's death by such person, be the fair market value of the property at the date of the decedent's death.


Section 1014(b)(1) of the Code provides that property acquired by bequest, devise, or inheritance, or by the decedent's estate from the decedent shall be considered to have been acquired from or to have passed from the decedent for purposes of section 1014(a).


Section 1014(b)(9)(C) of the Code further provides that section 1014(b)(9) shall not apply to property described in other paragraphs of section 1014(b).


Section 1014(b)(9) of the Code provides that, in the case of a decedent dying after December 31, 1953, property acquired from a decedent by reason of death, form of ownership, or other conditions (including property acquired through the exercise or non-exercise of a power of appointment), if by reason thereof the property is required to be included in determining the value of a decedent's gross estate shall be considered to have been acquired from or to have passed from the decedent for purposes of section 1014(a).


Section 1.1014-2(b)(2) of the Income Tax Regulations provides that section 1014(b)(9) property does not include property that is not includible in the value of a decedent's gross estate, such as property not situated in the United States acquired from a nonresident who is not a citizen of the United States.

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