Nonresident aliens are subject to the US estate tax on the value of their assets located in the United States when they die. For example, a nonresident alien decedent who put some cash in an American safety deposit box would be taxed on the value of the funds (Rev. Rul. 55-143).
But fortunately for foreigners who are art collectors, Internal Revenue Code section 2105(c) provides that works of art are not considered be in the United States if such works of
imported into the United States solely for exhibition purposes,
loaned for such purposes, to a non-profit public gallery or museum, and
(3) on exhibition, or en
route to or from exhibition, in such a public gallery or museum, at the time of the death of the owner.
Before 1950, all art located in the United States were subject to the federal estate tax, with a top tax rate of 77%. Multimillionaire Armenian oil mogul and art collector Calouste Gulbenkian had a number of old master paintings on temporary loan to the National Gallery of Art. Gulbenkian became increasingly concerned about dying and paying the US estate tax on the loaned works, despite the fact that he was a spry 80-years-young at the time. He made some phone calls, and the trustee of the National Gallery of Art personally asked Congress to change the estate tax law.
Congress sprang into action and on September 1, 1950, it passed Public Law 81-749, which specifically exempted art works loaned by foreigners to the National Gallery of Art from federal and DC estate taxes.
A few months later, Congress realized that the rule did not have to be so specific to one institution. In the Revenue Act of 1951, the exemption was expanded to apply to all art loaned by foreigners to any non-profit public gallery or museum.
Gulbenkian died in 1955 with a fortune of between $200 million and $800 million.