12 2 STA T . 1 645PUBLIC LA W 11 0– 245 —J U NE 1 7, 200 8‘ ‘ (c)EXCEPTIONF O RC ERT A IN G IFT S.—Subse c tion ( a )s h a l la p pl y only to the e x tent that the v alue o f cove r e dg ifts and be q uests received by any person during the calendar year exceeds the dollar a m ount in effect under section 2503 (b) for such calendar year. ‘‘(d) T AX R E DU CED BYF OREI G N GIFT OR ESTATE TAX.—The tax imposed by subsection (a) on any covered gift or bequest shall be reduced by the amount of any gift or estate tax paid to a foreign country w ith respect to such covered gift or bequest. ‘‘(e) CO V ERED GIFT OR B E Q UEST.— ‘‘( 1 ) I N GENERA L .—For purposes of this chapter , the term ‘covered gift or bequest ’ means— ‘‘( A ) any property acquired by gift directly or indirectly from an individual who, at the time of such acquisition, is a covered expatriate, and ‘‘(B) any property acquired directly or indirectly by reason of the death of an individual who, immediately before such death, was a covered expatriate. ‘‘(2) EXCEPTIONS FOR TRANSFERS OT H ER W ISE SUB J ECT TO ESTATE OR GIFT TAX.—Such term shall not include— ‘‘(A) any property shown on a timely filed return of tax imposed by chapter 12 which is a taxable gift by the covered expatriate, and ‘‘(B) any property included in the gross estate of the covered expatriate for purposes of chapter 11 and shown on a timely filed return of tax imposed by chapter 11 of the estate of the covered expatriate. ‘‘(3) EXCEPTIONS FOR TRANSFERS TO SPOUSE OR CHARITY.— Such term shall not include any property with respect to which a deduction would be allowed under section 2055, 205 6 , 2522, or 2523, whichever is appropriate, if the decedent or donor were a U nited States person. ‘‘( 4 ) TRANSFERS IN TRUST.— ‘‘(A) D O M ESTIC TRUSTS.—In the case of a covered gift or bequest made to a domestic trust— ‘‘(i) subsection (a) shall apply in the same manner as if such trust were a United States citi z en, and ‘‘(ii) the tax imposed by subsection (a) on such gift or bequest shall be paid by such trust. ‘‘(B) FOREIGN TRUSTS.— ‘‘(i) IN GENERAL.—In the case of a covered gift or bequest made to a foreign trust, subsection (a) shall apply to any distribution attributable to such gift or bequest from such trust (whether from income or cor - pus) to a United States citizen or resident in the same manner as if such distribution were a covered gift or bequest. ‘‘(ii) DEDUCTION FOR TAX PAID BY RECIPIENT.— There shall be allowed as a deduction under section 164 the amount of tax imposed by this section which is paid or accrued by a United States citizen or resident by reason of a distribution from a foreign trust, but only to the extent such tax is imposed on the portion of such distribution which is included in the gross income of such citizen or resident. ‘‘(iii) ELECTION TO BE TREATED AS DOMESTIC TRUST.—Solely for purposes of this section, a foreign trust may elect to be treated as a domestic trust. Ap p licab ili ty. Applicability. Applicability.
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