PLR 200146022: Green card surrender rebuts tax avoidance presumption but leaves purpose open

Plain-English summary

A former U.S. long-term resident surrendered his green card and asked the IRS to rule that avoiding U.S. tax was not a principal purpose. His net worth exceeded the threshold that created a presumption of tax avoidance under the rules then in effect. He qualified to seek relief under the applicable notice because of limited time spent in the United States during the preceding ten years. The IRS found his submission complete and made in good faith, which rebutted the presumption. It did not decide whether tax avoidance was actually a principal purpose because the submitted information did not clearly establish that question.

Ruling snapshot

• Question: Did surrendering the green card lack a principal purpose of avoiding U.S. taxes?
• Outcome: Mixed: the presumption was rebutted, but the IRS gave no opinion on actual purpose.
• Key authorities: IRC §§ 877, 2107, 2501(a)(3); Notice 97-19 as modified by Notice 98-34.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200146022
Washington, DC 20224
Release Date: 11/16/2001
Index Number: 877.01-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:INTL:Br1-PLR-115282-01
Date:
July 17, 2001

TY:

A
=

Country B
=
Year l
=

Year 2
=

Year 3
=

Date C
=

Dear:

This is in response to a letter from your authorized representative dated March 1, 2001, requesting a ruling that A’s surrender of his 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 May 16, 2001. 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 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 in Year 1. In Year 2, A came to the United States for employment. In Year 3, A obtained a Green Card. A surrendered his Green Card on Date C. On the date of A’s expatriation, his net worth exceeded the amount set forth 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,

2
PLR-115282-01

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 U.S. citizen or former U.S. 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 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 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, 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 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 pursuant to Notice 98-34 because he was present in the United States for no more than 30 days during each year of the 10-year period prior to expatriation.

A submitted all of the information required to be submitted by Notice 97-19, as modified by Notice 98-34, including additional information requested by the Service after review of the submission.

Accordingly, based solely on the facts 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. However, because the information submitted does not clearly establish the existence or lack of a principal purpose to avoid taxes under subtitle A or B of the Code, no opinion is expressed as to whether A’s expatriation had for one of its principal purposes the avoidance of such taxes. While this ruling rebuts the presumption of tax avoidance under section 877(a)(2), it is not conclusive as to whether A subsequently may be found to have had a principal purpose

3
PLR-115282-01

of tax avoidance under sections 877(a)(1), 2107(a)(1), and 2501(a)(3)(A) based on all the facts and circumstances. See section 877(c)(1).

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 or after his 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 A’s authorized representative.

Sincerely,
W. Edward Williams
Senior Technical Reviewer
CC:INTL:Br1