PLR 200037038: Former resident's departure lacked a tax avoidance purpose

Plain-English summary

A former U.S. permanent resident moved to the United States because of a spouse's temporary work assignment and later returned to their country of birth. The couple retained green cards for the employer's convenience until they were no longer needed. The IRS found that the former resident qualified to request a ruling under Notice 98-34 and had made a complete, good faith submission. It ruled that ending permanent resident status did not have a principal purpose of avoiding U.S. income, estate, or gift taxes under the cited provisions. The ruling did not decide the person's tax liabilities for other periods or under other Code sections.

Ruling snapshot

• Question: Did ending U.S. permanent resident status have a principal tax avoidance purpose?
• Outcome: Approved: no principal tax avoidance purpose under the cited expatriation provisions.
• Key authorities: IRC §§ 877, 2107, 2501(a)(3); Notice 98-34.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Index Number: 877.01-00 Washington, DC 20224

Person to Contact:
Number: 200037038
Telephone Number:
Release Date: 9/15/2000
Refer Reply To:
CC:INTL:Br.1-PLR-102418-00
Date:
June 16, 2000

Dear
:

This is in response to a letter from your authorized representative dated January 19, 2000, requesting a ruling on your behalf under section 877(c) of the Internal Revenue Code of 1986 (the “Code”) that your loss of permanent resident status did not have for one of its principal purposes the avoidance of U.S. taxes under subtitle A or subtitle B of the Code. The information submitted for consideration is substantially as set forth below.

The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement 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 Country B on Date C. Both her parents as well as her husband were also born in Country B. A’s husband was employed by a multinational firm. In Year D, her husband was temporarily assigned to work in the United States and she relocated here with him. The couple have no children. A’s husband’s employer arranged for A and her husband to receive a green card on Date E. After a year and one half, her husband was reassigned to work in Country B. A and her husband maintained their green cards for the employer’s convenience until Date F, at which time it was no longer necessary to retain green card status as her husband retired on date G.

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

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taxable year will be taxed on U.S. source income (as modified by 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 sections 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 exceeds a certain threshold. 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 one of these thresholds, however, will not be presumed to have a principal purpose of tax avoidance if that person 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 sections 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, an eligible former long-term resident will not be presumed to have a principal purpose of tax avoidance if that former long- term resident is described within certain categories and submits a complete and good faith request for a ruling within one year of the date of loss of long term residency status for the Secretary’s determination as to whether such loss had for one of its principal purposes the avoidance of U.S. taxes.

A is eligible to request a ruling pursuant to Notice 98-34, because she is described in three categories of individuals eligible to submit ruling requests. First, on the date of A's expatriation, A was, and continues to be, a citizen and resident fully liable to income tax in Country B, the country where A was born. Second, A is also eligible to submit a request because her parents were born in Country B. Finally, A is eligible to submit a request because her spouse was born in Country B

A submitted all the information required by Notice 98-34, including any additional information requested by the Service after review of the submission.

Accordingly, based solely on the information submitted and the representations made, we conclude that A has made a complete and good faith submission in accordance with section 877(c)(1)(B) and Notice 98-34. Therefore, A will not be presumed under section 877(a)(2) as having as one of his principal purposes for expatriating the avoidance of U.S. taxes. We further conclude 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.

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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 United States tax liability for taxable periods prior to expatriation or A’s U.S. tax liability for periods after expatriation 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 your authorized representative.

Sincerely,

______

Reviewer
Office of the Associate Chief Counsel
(International)