PLR 200011045: Former resident's green card surrender lacked a principal tax avoidance purpose

Plain-English summary

A former U.S. permanent resident surrendered her green card after moving with her husband to her birth country. Her net worth exceeded the threshold that could trigger a presumption of tax avoidance under section 877. Based on her submission and representations, the IRS found she made a complete, good faith request for a ruling and was not presumed to have left for a principal tax avoidance purpose. The IRS also held that her submission established a lack of such a purpose. The letter expressed no opinion on her tax liability before expatriation or on tax consequences outside the specified expatriation provisions afterward.

Ruling snapshot

• Question: Did surrendering permanent resident status have a principal purpose of avoiding U.S. tax?
• Outcome: Approved: the IRS found no principal tax avoidance purpose on the submitted facts.
• Key authorities: IRC §§ 877, 2107, and 2501(a)(3); Notices 97-19 and 98-34.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Index Number: 877.01-00
Washington, DC 20224

Number: 200011045
Person to Contact:
Release Date: 3/17/2000
Telephone Number:

Refer Reply To:
PLR-112989-99/CC:INTL:B1
Date:
December 22, 1999

Re:

Tax year:

A
=

Country B =

Country C =

Year D
=

Year E
=

Year F
=

Date G
=

Date H
=

Dear
:

This is in response to your letter dated June 22, 1999, requesting a ruling under section 877(c) of the Internal Revenue Code of 1986 ("Code") that A’s surrender of her U.S. Alien Registration Card (Green Card) did not have for one of its principal purposes the avoidance of U.S. taxes under subtitle A or subtitle B of the Code. Additional information was submitted in a letter dated October 29, 1999. The information submitted for consideration is substantially as set forth below.

The ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by penalty of perjury statements executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.

A was born in and is a citizen of Country B. A’s husband was born in and is a

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citizen of Country C. A has been a citizen of Country B since birth, and A’s husband has been a citizen of Country C since birth. A moved with her husband to the United States in Year D for the purpose of her husband’s employment. A became a permanent resident of the United States in Year E. In Year E, A’s husband retired from his position as an employee for his employer. From Year E to Year F, A’s husband performed consulting services for his prior employer. On Date G, A’s husband retired from his position of performing consulting services for his prior employer, and shortly thereafter, A and her husband moved to Country B. A voluntarily rescinded her green card (expatriate) on Date H. A intends to live permanently in Country B. A is domiciled in Country B and is subject to Country B income tax on her worldwide income at a rate comparable to the applicable U.S. income tax base and rate. On the date of her expatriation, A’s net worth exceeded the amount prescribed in section 877(a)(2).

Section 877 generally provides that a citizen who loses U.S. citizenship or a U.S. long-term resident who ceases to be taxed as a lawful permanent resident (individuals who "expatriate") within the 10-year period immediately preceding the close of the taxable year will be subject to the special rules of section 877(d) for such taxable year, unless such loss did not have for one of its principal purposes the avoidance of U.S. taxes. Sections 2107 and 2501(a)(3) provide special estate and gift tax regimes, respectively, for individuals who expatriate with a principal purpose to avoid U.S. taxes.

A former citizen or former long-term resident will be treated as having expatriated with a principal purpose to avoid U.S. taxes for purposes of section 877, 2107 and 2501(a)(3) if the individual’s average income tax liability or the individual’s net worth on the date of expatriation exceed certain thresholds. See sections 877(a)(2), 2107(a)(2)(A) and 2501(a)(3)(B).

A former U.S. citizen whose net worth or average tax liability exceeds these thresholds, however, will not be presumed to have a principal purpose of tax avoidance if that former citizen is described within certain statutory categories and submits a request for a ruling within one year of the date of loss of U.S. citizenship for the Secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of U.S. taxes. See section 877(c)(1), 2107(a)(2)(B), and 2501(a)(3)(C).

Under Notice 98-34, 1998-27 I.R.B. 30, modifying Notice 97-19, 1997-1 C.B.
394, a former long-term resident whose net worth or average tax liability exceeds the applicable thresholds will not be presumed to have a principal purpose of tax avoidance if that former resident is described within certain categories and submits a complete and good faith request for a ruling as to whether such loss had for one of its principal purposes the avoidance of U.S. taxes.

Notice 97-19, as modified by Notice 98-34, requires that certain information be submitted with a request for a ruling that an individual's expatriation did not have for one of its principal purposes the avoidance of U.S. taxes.

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A is eligible to request a ruling pursuant to Notice 98-34 because she became fully liable to tax on her worldwide income in Country B, the country in which she was born.

A submitted all of the information required to be submitted by Notice 97-19, as modified by Notice 98-34.

Accordingly, based solely on the information submitted and the representations made, it is held that A has made a complete and good faith submission in accordance with section 877(c)(1)(B) and Notice 97-19, as modified by Notice 98-34. Therefore, A will not be presumed under section 877(a)(2) to have as one of her principal purposes for expatriating the avoidance of U.S. taxes. It is further held that A will not be treated under section 877(a)(1) as having as one of her principal purposes for expatriating the avoidance of U.S. taxes because the information submitted clearly established the lack of a principal purpose to avoid taxes under subtitle A or B of the Code.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter. In addition, no opinion is expressed as to A’s U.S. tax liability for the taxable years prior to expatriation or her United States tax liability for periods after her loss of permanent resident status under sections of the Code other than sections 877, 2107, and 2501(a)(3).

A copy of this letter must be attached to A’s U.S. income tax return for the year in which A obtained the ruling (whether or not A is otherwise required to file a return).

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to A’s representative.

Sincerely yours,

ALLEN GOLDSTEIN
Reviewer
Office of the Associate Chief Counsel
(International)