PLR 200133021: Former resident establishes no expatriation tax avoidance purpose

Plain-English summary

A former U.S. permanent resident requested a ruling that giving up his residency did not have a principal purpose of avoiding U.S. taxes. His net worth exceeded the threshold for a presumption of tax avoidance. He qualified to submit a request under the applicable notice because his parents and spouse were born in the country of his later citizenship. The IRS found his submission complete and made in good faith, so it removed the presumption. It also concluded that the submitted information clearly established no principal purpose to avoid U.S. income, estate, or gift taxes. The letter did not decide his tax liability for other periods or under other Code provisions.

Ruling snapshot

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

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200133021
Washington, DC 20224
Release Date: 8/17/2001
Index Number: 877.08-00
Person to Contact:

Telephone Number:
(202) 622-3880
Refer Reply To:
CC:INTL:BR1-PLR-113114-01
Date:
May 16, 2001

TY:

Legend

A
=

Date B =

Country C =

Country D =

Year E =

Date F =

Dear :

This is in response to a letter dated February 28, 2001, and a supplemental letter dated March 2, 2001, submitted by A’s authorized representative requesting a ruling under section 877(c) of the Internal Revenue Code of 1986 ("Code") that A’s loss of U.S. lawful permanent residence 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 on Date B in Country C. A subsequently became a citizen of Country D. A became a lawful permanent resident of the United States in Year E. A relinquished his lawful permanent residence (“expatriated”) on Date F. On the date A submitted his ruling request, his net worth exceeded the applicable threshold set forth in section 877(a)(2)(B) of the Code.

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PLR-113114-01

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 taxed on U.S. source income (as modified by section 877(d)) for such taxable year, unless such loss did not have for one if 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 exceed certain thresholds. See sections 877(a)(2), 2107(a)(2)(A) and 2501(a)(3)(B).

A former U.S. citizen or former long-term resident 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 or former long-term resident 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 citizen or long-term resident will not be presumed to have a principal purpose of tax avoidance if that former citizen or long-term resident 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 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.

A is eligible to request a ruling under section 877 because his parents and spouse were born in Country D.

A submitted all the information required by Notice 98-34. Accordingly, based on the facts submitted and 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, and therefore A will not be presumed to have expatriated with a principal purpose of tax avoidance.

It is further concluded that A will not be treated under section 877(a)(2) as having as one of his principal purposes of 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 subtitle B of the Code.

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PLR-113114-01

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 taxable periods prior to his loss of U.S. lawful permanent residence or for taxable periods after his loss of U.S. lawful permanent residence under sections of the Code other than sections 877, 2107, and 2501(a)(3).

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

A copy of this letter must be attached to any income tax return to which it is relevant.

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

Sincerely,
W. Edward Williams
Senior Technical Reviewer, Branch 1
Office of Associate Chief Counsel
(International)