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US stocks are traded on many European exchanges via an arrangement similar to the US ADR (the UK term is "CREST")

If you hold US stocks in such indirect way as a non-resident non-national would these be subject to US Estate Tax upon your death?

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  • It seems that an answer is provided by money.stackexchange.com/a/148767/24414
    – Nick
    Jan 23, 2022 at 8:21
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    I misread the question. You were asking US stocks deposited at UK. ADR = American Depositary Receipt, i.e. UK stocks deposited at US. They are called "DR" it seems, "Crest Depository Interest (CDI)", or GDR in general.
    – base64
    Jan 23, 2022 at 8:25
  • @base64 You are right - the wording of this question may be a bit misleading. I used ADR as it is the term familiar to US users. The equivalent UK term is CREST. I guess each country has a different term. What I meant is that the underlying stock is US-based but is traded on a non-US exchange
    – Nick
    Jan 23, 2022 at 8:29
  • @base64 I edited the wording of the question. Do you agree that your other post (money.stackexchange.com/a/148767/24414) provides the answer, i.e. US stocks held indirectly via DRs/GDRs are liable for US Estate Tax even if held by non-resident non-citizens?
    – Nick
    Jan 23, 2022 at 8:34
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    I edited this answer.
    – base64
    Jan 23, 2022 at 8:35

1 Answer 1

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If we just reframe the context of the IRS Ruling, my interpretation is that:

  • GDRs including Crest Depository Interest (CDI) constitute shares of stock issued by a US domestic corporation and, therefore, are property within the United States under §2104(a).
  • GDRs including CDI are certificates evidencing ownership of the underlying US domestic corporation. .

Below is the case for American Depositary Receipt representing ownership of non-US stocks.

IRS Private Letter Ruling 200243031

As discussed above, ADSs represent ownership rights in underlying shares of a foreign corporation. ADRs are certificates evidencing ownership of the ADSs. Accordingly, the 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).

Accordingly, we conclude that, if the ADRs are held by the Trust on the date of Settlor’s death, these assets will not be considered property situated in the United States for purposes of § 2103, and will not be included in Settlor’s gross estate, assuming the assets are not otherwise treated as situated in the United States under § 2104(b).

https://www.irs.gov/pub/irs-wd/0243031.pdf

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