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Using capital transfer tax treaty relief: The interaction of treaty and domestic law

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References

  1. See F. Jacobs & S. Roberts, eds.,The Effect of Treaties in Domestic Law, Sweet & Maxwell, 1987, 123–139 (UK) & 141–169 (US).

  2. Taxes on Estates of Deceased Persons and on Gifts: Convention Between the United States of America and the United Kingdom of Great Britain and Northern Ireland, S.I. No. 1979/1454, 30 U.S.T. 7223 (signed 1978).

  3. Model Double Taxation Convention on Estates and Inheritances and on Gifts, OECD, 1982.

  4. See Inheritance Tax Act 1984, as amended (IHTA) (formerly Capital Transfer Tax Act 1984).

  5. See Internal Revenue Code of 1986, as amended (IRC), ss.2001 et seq. The IRC is codified at Title 26 of the US Code.

  6. See Appendix,infra.

  7. L. Collins,Dicey & Morris on the Conflict of Laws, Stevens, 11th ed., 1987, 116;Bank One, Texas, N.A. v.Montle, 964 F.2d 48 (1st Cir. 1992).

  8. Treasury Regulations, s.20.0-1(b)(1) (estate tax) & s.25.2501-1(b) (gift tax).

  9. Collins,supra n.7 at 128.

  10. IHTA, s.267(1).

  11. In re Dorrance's Estate, 163 A. 303 (Pa. 1932),certiorari denied 288 U.S. 617 (1933).

  12. In re Dorrance's Estate, 170 A. 601 (Prer. Ct. NJ 1934).

  13. In re Dorrance's Estate, 172 A. 503 (Prer. Ct. NJ 1934),affirmed in Dorrance v.Martin, 184 A. 743 (Ct. App. NJ 1936),certiorari denied 298 U.S. 679 (1936).

  14. California v.Texas, 437 U.S. 601 (1978).

  15. IHTA, s.159(1).

  16. IHTA, s.159(2)–(4).

  17. IHTA, s.159(7).

  18. IRC, s.2014. The credit is denied to non-domiciliary non-US citizens: IRC s.2102(a).

  19. IRC, s.2014(a), (b).

  20. US/UK DTC, Arts.2(1) & 3(1)(f).

  21. US/UK DTC, Arts.2(2); see also OECD Model convention, Art.2(4).

  22. See V. Krishna,The Fundamentals of Canadian Income Tax, Carswell, 1989, 426–428.

  23. IHTA, s.158(6).

  24. US/UK DTC, Arts.2(1)(a) & 3(1)(f)(i).

  25. IRC, s.2011.

  26. US/UK DTC, Art.1.

  27. IHTA, ss.199–205; IRC, ss.2502(c), 2002, 2603(b).

  28. US/UK DTC, Art.13(1); see also OECD Model Convention, Art.13.

  29. US/UK DTC, Art.6(1); see also OECD Model Convention, Art.5(1).

  30. US/UK DTC, Art.6(2); see also OECD Model Convention, Art.5(2).

  31. US/UK DTC, Art.7(1); see also OECD Model Convention, Art.6(1).

  32. US/UK DTC, Art.7(2); see also OECD Model Convention, Art.6(2)–(5).

  33. US/UK DTC, Art.7(3); see also OECD Model Convention, Art.6(6).

  34. US/UK DTC, Art.4; see also OECD Model Convention, Art.4.

  35. US/UK DTC, Art.3(1)(e).

  36. US/UK DTC, Art.5(1); see also OECD Model Convention, Art.7.

  37. US/UK DTC, Art.5(2).

  38. US/UK DTC, Art.5(3)–(4).

  39. US/UK DTC, Art.5(5).

  40. See also OECD Model Convention, Arts.9A & 9B, under which exemption and credit methods are offered as alternatives.

  41. US/UK DTC, Art.8(1).

  42. US/UK DTC, Art.8(2)–(4).

  43. US/UK DTC, Art.8(2).

  44. US/UK DTC, Art.8(5).

  45. US/UK DTC, Art.9(1)(a), 9(2)(a).

  46. US/UK DTC, Art.9(1)(b), 9(2)(b).

  47. US/UK DTC, Art.9(3).

  48. US/UK DTC, Art.10; see also OECD Model Convention, Art.10.

  49. US/UK DTC, Art.11; see also OECD Model Convention, Art.11.

  50. IHTA, s.158(1).

  51. ICTA, s.788(3).

  52. In practice, problems are avoided if the more recent legislation amends the actual terms of the IHTA itself or if it provides that the amendments are to be construed as one with the principal Act; see, e.g., Finance Act 1986, s.114(5).

  53. For a similar (though not identical) entrenchment provision, see the European Communities Act 1972, s.2(4). See alsoFactortame Ltd. v.Secretary of State for Transport [1991] 1 A.C. 605, and H.W.R. Wade, “What Has Happened to the Sovereignty of Parliament?”,Law Quarterly Review 107 (1991), 1–4, for analyses of the effect of section 2(4).

  54. IRC, s.7852(d)(1) (as amended in 1988).

  55. IRC, s.7852(d) (prior to amendment in 1988).

  56. SeeSenate Report (Finance Committee) No. 100-445, 3 Aug. 1988, 318.

  57. Whitney v.United States, 124 U.S. 190 (1888);Cook v.United States, 288 U.S. 102 (1933). See alsoRestatement of the Law (Third) of the Foreign Relations Law of the United States, American Law Institute, 1986, s.115(1), (2).

  58. US Constitution, Art.VI, cl.2;Whitney, 124 U.S. at 194.

  59. United States v.Lee Yen Tai, 185 U.S. 213 (1902).

  60. See, e.g., Technical and Miscellaneous Revenue Act of 1988, Pub. Law No. 100-647, s.1012(aa)(2) (certain provisions of the Tax Reform Act of 1986 are to apply notwithstanding any treaty obligations of the US).

  61. Traynor v.Turnage, 485 U.S. 535 (1988).

  62. Whitney, 124 U.S. at 194.

  63. Cook, 288 U.S. at 120.

  64. Garland v.British Rail Engineering Ltd. [1983] 2 A.C. 751, 771.

  65. Duke v.G.E.C. Reliance Ltd. [1988] 2 W.L.R. 359, 371.

  66. IRC, s.6114(a).

  67. IRC, s.6712(a).

  68. SeeIRC v.Commerzbank [1990] S.T.C. 285 (UK);Lewenhaupt v.Commissioner, 20 T.C. 151 (1953) (US).

  69. For example, on treaty interpretation see Jacobs & Roberts, eds.,supra n.1 at 137–139 (UK) & 164–168 (US). On statutory interpretation see J. Bell & G. Engle,Cross: Statutory Interpretation, Butterworths, 2nd ed., 1987 (UK); N. Singer,Statutes and Statutory Construction, Clark Boardman Callaghan, 5th ed., 1992 (US).

  70. US/UK DTC, Art.12; see also OECD Model Convention, Art.12.

  71. IHTA, s.158(1A).

  72. See S.I. No. 1963/1319 (France, signed 1963); S.I. No. 1956/998 (India, signed 1956); S.I. No. 1978/1107 (Ireland, signed 1977); S.I. No. 1968/304 (Italy, signed 1966); S.I. No. 1980/706 (Netherlands, signed 1979); S.I. No. 1957/1522 (Pakistan, signed 1957); S.I. No. 1979/576 (South Africa, signed 1978); S.I. Nos. 1981/840 & 1989/986 (Sweden, signed 1980); S.I. No. 1957/426 (Switzerland, signed 1957); S.I. No. 1979/1454 (US, signed 1978).

  73. See 4 U.S.T. 2264 & 5 U.S.T. 92 (Australia, signed 1953); 8 U.S.T. 1699 (Austria, signed 1982); 13 U.S.T. 382 (Canada, signed 1961) (in respect of persons deceased prior to 1 Jan. 1985); T.I.A.S. No. 11089 (Denmark, signed 1983); 3 U.S.T. 4464 (Finland, signed 1952); 32 U.S.T. 1935 (France, signed 1978); T.I.A.S. No. 11082 (Germany, signed 1980); 5 U.S.T. 12, 5 U.S.T. 1543 & 18 U.S.T. 2853 (Greece, signed 1950, 1954 & 1964); 2 U.S.T. 2303 (Ireland, signed 1949); 7 U.S.T. 2977 (Italy, signed 1955); 6 U.S.T. 113 (Japan, signed 1954); 22 U.S.T. 247 (Netherlands, signed 1969); 2 U.S.T. 2353 (Norway, signed 1949); 3 U.S.T. 3792 (South Africa, signed 1947 & 1950); T.I.A.S. No. 10826 (Sweden, signed 1983); 2 U.S.T. 1751 (Switzerland, signed 1951); 30 U.S.T. 7223 (UK, signed 1978).

  74. IHTA, ss.1–2.

  75. IHTA, s.3(1).

  76. IHTA, s.4(1).

  77. IHTA, s.7(2). Under the current rate schedule, cumulative chargeable transfers of up to £150,000 are in the nil-rate band, and those in excess of this amount are taxed at 40%: IHTA, sch.1.

  78. IHTA, s.7(1).

  79. IHTA, s.5(1).

  80. IHTA, s.6(1).

  81. IHTA, s.267.

  82. IHTA, ss.18–29A.

  83. IHTA, s.3A(1).

  84. IHTA, s.3A(4)–(5).

  85. IHTA, s.7(4).

  86. IHTA, ss.103–114, ss.115–124B, ss.125–130 & ss.131–140.

  87. IRC, s.2501(a)(1).

  88. IRC, s.2503 (exclusions), ss.2522–2523 (deductions).

  89. IRC, ss.2501(a)(2), 2511.

  90. Treasury Regulations, s.25.2501-1(b).

  91. IRC, s.2505.

  92. IRC, s.2001(a).

  93. Treasury Regulations, s.20.0-1(b)(1).

  94. IRC, s.2051.

  95. IRC, ss.2031–2046.

  96. IRC, ss.2053–2056A.

  97. IRC, s.2001(b).

  98. IRC, ss.2010–2016.

  99. IRC, s.2101(a).

  100. IRC, ss.2103–2106; Treasury Regulations ss.20.2104-1, 20.2105-1.

  101. IRC, s.2102(c).

  102. IRC, s.2102(a).

  103. IRC, ss.2601et seq.

  104. IRC, ss.2631–2632.

  105. IRC, s.2604.

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  1. Faegre & Benson, 2200 Norwest Center, 90 South Seventh Street, 55402-3091, Minneapolis, MN, USA

    Derek Devgun (Associate Attorney)

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J.D. with High Distinction, University of Iowa College of Law (1993); LL.B. with Honours, University of Birmingham Faculty of Law (1990).

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Devgun, D. Using capital transfer tax treaty relief: The interaction of treaty and domestic law. Liverpool Law Rev 16, 133–150 (1994). https://doi.org/10.1007/BF01079810

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