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§ 19.4 CHARITABLE GIVING BY NONCITIZEN NONRESIDENTS§ 19.3 GIFT TAX RULESThe federal tax law allows an unlimited gift tax charitable deduction for gifts toqualifying donees. 57 This deduction is not subject to the percentage limitationsapplicable to the income tax charitable deduction. 58Although a donor may be willing to forgo an income tax charitable deductionin order to benefit a foreign charitable organization, care should be taken toensure that the donor does not inadvertently make a taxable gift. The rules governingthe gift tax charitable deduction are similar to those applicable to theestate tax charitable deduction: A gift tax deduction is not limited to gifts to orfor the use of domestic charitable corporations.§ 19.4 CHARITABLE GIVING BY NONCITIZEN NONRESIDENTS(a) Estate Tax RulesWhen the decedent is a nonresident who is not a citizen of the United States, thefederal tax law allows a charitable deduction from the nonresident’s U.S. grossestate for transfers to qualifying donees “to or for the use of the United States, anypolitical subdivision thereof, or the District of Columbia” for exclusively publicpurposes: “charitable, educational, religious and other similar purposes.” 59 Thededuction is limited to transfers to domestic charitable corporations and transfersto trustees for use in the United States. 60Transfers to a foreign government for exclusively charitable purposes do notqualify for the federal estate tax deduction. Transfers to foreign organizations,including foreign governments, exclusively for charitable purposes may bedeductible 61 as a transfer to a trustee, provided the funds are restricted to usewithin the United States.An individual (a citizen and resident of Ontario, Canada) provided as followsin his will:If and when the Michigan College of Mining and Technology, Houghton,Michigan, U.S.A., establishes in Canada to the satisfaction of my Trustees, acharitable foundation corporation or a charitable trust so that monies may bereceived by it in Canada from my estate and others and the said money spentin Canada without income tax or succession duty levies of any kind, then onthat happening, and only then, my Trustees are to pay the remaining twentyfivepercent of the net annual income to the said charitable foundation corporationor charitable trust when established.The bequest was to be used to pay tuition and related expenses of Canadian studentsat the Michigan college. The court held that the bequest was “to a trusteeor trustees . . . to be used within the United States,” since the funds were to beexpended in the United States. 62 Hence, the decedent’s estate was held to beentitled to the claimed deduction for a charitable contribution. 6357 IRC § 2522(a). See § 8.2(k)(ii).58 See Chapter 7.59 IRC § 2106(a)(2).60 IRC § 2106(a)(2)(A).61 IRC § 2106(a)(2)(iii).62 McAllister Estate v. Commissioner, 54 T.C. 1407 (1970).63 IRC § 2106(a)(2)(A)(iii). 565