PLR 200324021: Former permanent resident's move did not have a principal tax avoidance purpose

Plain-English summary

A foreign citizen who had held a U.S. green card returned to his home country after his employer permanently reassigned him there. He later surrendered the green card and asked whether avoiding U.S. tax was a principal purpose of that decision under the then-applicable expatriation rules. The IRS found that he made a complete, good faith submission under section 877(c) and Notice 98-34. Based on his submitted information, the IRS ruled that he would not be presumed or treated as having expatriated with a principal purpose of avoiding U.S. income, estate, or gift taxes. The ruling addresses the tax law discussed in this 2003 letter and his stated circumstances.

Ruling snapshot

• Question: Did the former permanent resident's surrender of his green card have a principal purpose of avoiding U.S. taxes?
• Outcome: Approved: the IRS found no such principal purpose on the submitted facts.
• Key authorities: IRC §§ 877(a)(2), 877(c), 2107, 2501(a)(3); Notice 98-34.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200324021
Washington, DC 20224
Release Date: 6/13/2003
Index Number: 877.00-00 Person to Contact:

Telephone Number:

Refer Reply To:
CC:INTL:Br1-PLR-103306-03
Date:
February 26, 2003

Taxpayer =
Country A =
Location B =
Year C =
Dates D =
Year E =
Year F =
Year G =
Date H =
Date I =
Year J =
Company X =
Company Y =
Headquarters=

DO: TY:

Dear
:

This is in response to the your letter dated December 12, 2002, on behalf of Taxpayer requesting a ruling under section 877(c) of the Internal Revenue Code of 1986 ("Code") that Taxpayer's loss of U.S. 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. 2 PLR-103306-03

The Taxpayer is a Country A citizen. He was born in Country A, as were his wife, his parents, and his wife’s parents. He was educated there and has lived there most of his life. After school he went to work for Company X in Year C. He was transferred to Company Y where he was assigned to Location B and remained there during Dates D. Then he was reassigned to the Headquarters in the United States. He was granted a green card in December of Year E, and was reassigned to Location B in Year F. He lived there with his family until February of Year G, when he was reassigned to the United States. He returned to the United States with his family in March of Year G. He was reassigned permanently to Country A and returned there with his family on Date H. He surrendered his green card on Date I, when it became obvious that he would not be required to return to the United States for his employer. The Taxpayer was 53 on the date of his expatriation.

His wife relinquished her green card in August of Year J. He has one daughter remaining in the United States to continue her education.

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 under section 877(b) and 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 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 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), 2107(a)(2)(B) and 2501(a)(3)(C).

Under Notice 98-34, 1998-2 C.B. 29, modifying Notice 97-19, 1997-1 C.B. 394, an eligible former citizen will not be presumed to have a principal purpose of tax avoidance if that former citizen 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 3
PLR-103306-03

ruling that an individual's expatriation did not have for one of its principal purposes the avoidance of U.S. taxes.

Taxpayer is eligible to request a ruling pursuant to Notice 97-19 because on the date of his expatriation, Taxpayer was a citizen of the country in which he, his wife, and his parents were born. See section 877(c)(2)(A)(ii) and (e).

Taxpayer 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 Taxpayer has made a complete and good faith submission in accordance with section 877(c)(1)(B) and Notice 98-34, and therefore, Taxpayer will not be presumed to have expatriated with a principal purpose of tax avoidance. It is further held that Taxpayer will not be treated under section 877(a)(2) as having as one of his principal purposes for expatriating the avoidance of U.S. taxes because the information submitted clearly establishes the lack of such a principal purpose to avoid tax 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.

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,

M. Grace Fleeman
CC:INTL:Br1
Office of the Associate Chief Counsel
(International)

cc: