My brother is a Canadian citizen and resident. He is not a US person. He has never lived in the US. He has never filed a tax return with the IRS. However, he owns some US-listed ETFs (mainly ITOT) at a Canadian online discount brokerage. The total value of his US-listed ETFs is about 100,000 USD. I have read in several places that if he passes away, a US federal estate tax return has to be filed with the IRS. What happens if the executor, unaware of this rule, simply sells the US-listed assets and distributes the proceeds according to the will? How will the IRS find out? If they find out, what will they do?
I realize that he won't owe any taxes to the IRS since his worldwide estate is worth less than a few million USD. But I am concerned that
(a) filing a US federal estate tax return will require the help of a qualified accountant at potentially high cost;
(b) not filing a US federal estate tax return might cause some problems down the road.
US Estate Tax and the $60,000 treshold
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formerpatriot
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US Estate Tax and the $60,000 treshold
FormerPatriot in Montreal
Re: US Estate Tax and the $60,000 treshold
A foreign person does not enjoy the same exemption as a US person, so do not rely on that.
However, since these assets will be deemed sold by CRA, regardless of what the executor does, the tax involved if any will be more than covered by his Cdn income tax. The treaty allows this.
However, since these assets will be deemed sold by CRA, regardless of what the executor does, the tax involved if any will be more than covered by his Cdn income tax. The treaty allows this.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Re: US Estate Tax and the $60,000 treshold
RE: A foreign person does not enjoy the same exemption as a US person, so do not rely on that.
A Cdn does via treaty enjoy on a pro-rated basis (US situs assets over w/w assets) the same exemption as a US person, so DO rely on that.
Therefore, RE: I realize that he won't owe any taxes to the IRS since his worldwide estate is worth less than a few million USD. But I am concerned that filing a US federal estate tax return will require the help of a qualified accountant at potentially high cost and not filing a US federal estate tax return might cause some problems down the road.
I have the 2023 figures at hand, so using those for this free reply, for 2023, Canadians may be eligible for a unified credit of up to
US$5.11 million that can be applied against a tentative US estate tax liability. This credit effectively shelters US$12.92 million of a taxable estate. The unified credit must be pro-rated based on the ratio of US situs assets to worldwide assets.
So, if the value of your US situs assets is greater than US$60,000 and the value of your worldwide assets is greater than US$12.92 million, you may have a US estate tax liability when you die. You must file a US estate tax return to claim Canada-US treaty benefits of the Treaty
and calculate your tax liability.
Once that's settled and your executor turns toward CRA filing, that's where Nelson's comment kicks in, noting that you may also be able to apply a credit for US estate taxes paid against your Canadian federal income tax on US source income in the year of death. This credit includes gains on the shares of US corporations.
A Cdn does via treaty enjoy on a pro-rated basis (US situs assets over w/w assets) the same exemption as a US person, so DO rely on that.
Therefore, RE: I realize that he won't owe any taxes to the IRS since his worldwide estate is worth less than a few million USD. But I am concerned that filing a US federal estate tax return will require the help of a qualified accountant at potentially high cost and not filing a US federal estate tax return might cause some problems down the road.
I have the 2023 figures at hand, so using those for this free reply, for 2023, Canadians may be eligible for a unified credit of up to
US$5.11 million that can be applied against a tentative US estate tax liability. This credit effectively shelters US$12.92 million of a taxable estate. The unified credit must be pro-rated based on the ratio of US situs assets to worldwide assets.
So, if the value of your US situs assets is greater than US$60,000 and the value of your worldwide assets is greater than US$12.92 million, you may have a US estate tax liability when you die. You must file a US estate tax return to claim Canada-US treaty benefits of the Treaty
and calculate your tax liability.
Once that's settled and your executor turns toward CRA filing, that's where Nelson's comment kicks in, noting that you may also be able to apply a credit for US estate taxes paid against your Canadian federal income tax on US source income in the year of death. This credit includes gains on the shares of US corporations.