(1)
Introduction. This rule
applies to deaths occurring on or before May 16, 2005, and discusses how
property of nonresident decedents is taxed if that property is located within
Washington at the time of death. The estate tax rules for deaths occurring on
or after May 17, 2005, can be found in WAC
458-57-105 through
458-57-165.
(2)
Nonresident decedents and
Washington's estate tax. If any decedent has tangible personal property
and/or real property located in Washington state at the time of death, that
property is subject to Washington's estate tax.
(a)
The reciprocity exemption. A
nonresident decedent's estate is exempt from Washington's estate tax if the
nonresident's state of domicile exempts the property of Washington residents
from estate, inheritance, or other death taxes normally imposed by the domicile
state. The nonresident decedent must have been a citizen and resident of the
United States at the time of death. Also, at the time of death the laws of the
domicile state must have made specific reference to this state, or must have
contained a reciprocal provision under which nonresidents of the domicile state
were exempted from applicable death taxes with respect to property or transfers
otherwise subject to the jurisdiction of that state.
In those instances where application of this provision results
in loss of available federal credit which would otherwise be allowed for
federal tax purposes, Washington will absorb that proportional share which is
applicable to property within the jurisdiction of this state. Application of
this provision will not act to increase the total tax obligation of the
estate.
(b)
Property
of a nonresident's estate which is located in Washington. A nonresident
decedent's estate may have either real property or tangible personal property
located in Washington at the time of death.
(i) All real property physically situated in
this state, with the exception of federal trust lands, and all interests in
such property, are deemed "located in" Washington. Such interests include, but
are not limited to:
(A) Leasehold
interests;
(B) Mineral
interests;
(C) The vendee's (but
not the vendor's) interest in an executory contract for the purchase of real
property;
(D) Trusts (beneficial
interest in trusts of realty); and
(E) Decedent's interest in jointly owned
property (e.g., tenants in common, joint with right of survivorship).
(ii) Tangible personal property of
a nonresident decedent shall be deemed located in Washington only if:
(A) At the time of death the property is
situated in Washington; and
(B) It
is present for a purpose other than transiting the state.
(iii) For example, consider a nonresident
decedent who was a construction contractor doing business as a sole proprietor.
The decedent was constructing a large building in Washington. At the time of
death, any of the decedent's equipment that was located at the job site in
Washington, such as tools, earthmovers, bulldozers, trucks, etc., would be
deemed located in Washington for estate tax purposes. Also, the decedent had
negotiated and signed a purchase contract for speculative property in another
part of Washington. For estate tax purposes, that real property should also be
considered a part of the decedents' estate located in Washington.
(c)
Formula to calculate
Washington's estate tax for nonresident decedents. The amount of tax
payable to Washington for a nonresident decedent equals the amount of federal
credit multiplied by a fraction, the numerator of which is the value of the
property located in Washington, and the denominator of which is the value of
the decedent's gross estate. Restated: Federal Credit x (Gross Value of
Property in Washington/Decedent's Gross Estate)=Amount of Washington Estate Tax
Due. This formula uses the gross value determined for estate tax purposes of
any property located in Washington. No reduction will be allowed for any
mortgages, liens, or other encumbrances or debts associated with such property
except to the extent allowable in computing the gross estate for estate tax
purposes.
