3.1.2.1.6 Application of different types of taxes

Double non-taxation situations are conceivable where the states involved apply different types of death taxes and taxes on gifts. For example, the donor is a resident of State A at the time of the donation. The donee is also a resident of State A. State A levies a gift tax and establishes a personal nexus based on the donor’s nationality. The donor, however, is not a national of State A and therefore, State A will not seek to establish a personal nexus with him. The donated property is located in State B that levies income taxes on gifts if the donees are resident in its territory. It also does not apply an objective nexus rule. As the donees of this example reside in State A, State B will not seek to levy income tax on the donation at hand. As a result, the donated property at hand is not taxed anywhere.1