No issues - I will re-post the information - that is based on my own research:
See this article - http://www.nysscpa.org/cpajournal/2001/0900/features/f093201.htm
Scroll down to Transfers upon Death:
Although non-U.S. assets
held by a non-U.S. citizen nonresident are exempt
from U.S. estate tax
, there remain issues concerning the basis of the property and the application of IRC section 684 to the transfer of these assets. Under a longstanding revenue ruling
, all assets held by a non-U.S. resident at death receive a step-up in basis under IRC section 1014, including property not subject to U.S. estate tax. Under sections 1014(b)(1)–(4), the stepped-up basis applies to all assets owned by the nonresident directly, through a revocable trust, or through a trust in which the nonresident possessed a general power of appointment exercised by will.
So far - that article contradicts position taken by your attorney. While your attorney made a valid point - I feel that is very conservative position and even the IRS doesn't take such position.
I were looking for the "longstanding revenue ruling" mentioned above - and that is Rev. Rul. 84-139 - see for instance here - http://www.charitableplanning.com/document/670319
One may argue that is a very old document - but what we see - in this Private Letter Ruling - http://www.irs.gov/pub/irs-wd/1245006.pdf - which is dated by 2012 the IRS referenced Rev. Rul. 84-139 - so we may conclude - it is still in effect. Here is an extract :
In this case, Taxpayer’s issue will acquire, by bequest, devise, or inheritance, assets from Trust at Taxpayer’s death. The assets acquired from Trust are within the description of property acquired from a decedent under § 1014(b)(1). Therefore, Trust will receive a step-up in basis in Trust assets under § 1014(a) determined by the fair market value of the property on the date of Taxpayer’s death. See Rev. Rul. 84-139, 1984-2 C.B. 168 (holding that foreign real property that is inherited by a U.S. citizen from a nonresident alien will receive a step-up in basis under § 1014(a)(1) and 1014(b)(1)). This rule applies to property located outside the United States
, as well as to property located inside the United States.
So far - what we see the IRS's position - at least that was taken in 2012 - contradicts with whatever you were told by the attorney.
I hope that clarifies your situation.