PLR 200329033: Former resident's departure found not driven by U.S. tax avoidance

Plain-English summary

A former U.S. long-term resident relinquished that status and returned with a spouse to the taxpayer's country of birth. The taxpayer's net worth exceeded the threshold that, under the law addressed in the letter, could create a presumption that avoiding U.S. tax was a principal purpose of leaving. The IRS found a complete and good-faith submission under § 877(c) and Notice 98-34. It ruled that the taxpayer would not be presumed or treated under § 877(a)(2) as having a principal purpose of avoiding U.S. tax. The letter did not determine tax liability for other periods or under other Code provisions.

Ruling snapshot

• Question: Was avoiding U.S. tax a principal purpose of the former resident's loss of U.S. long-term residence?
• Outcome: Approved; the IRS found no such principal purpose under the provisions addressed.
• 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
Washington, DC 20224
Number:200329033
Release Date: 7/18/2003
Index No.: 877.01-00
Person to Contact:

Telephone Number

Refer Reply to
CC:INTL:BR1/PLR-103641-03
Date:
April 14, 2003

A
=

Date B =

Country C =

Dear
:

This is in response to your letter, received, requesting a ruling under section 877(c) of the Internal Revenue Code of 1986 ("Code") that A’s loss of U.S. long- term residence will not have for one of its principal purposes the avoidance of U.S. taxes under subtitle A or subtitle B of the Code.

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. The information submitted for consideration is substantially as set forth below.

A is a former U.S. long-term resident who relinquished such status on Date B. A returned with his spouse to Country C, the country in which he was born.

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.
PLR-103641-03
Page 2

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).

Notice 98-34, 1998-2 C.B. 29, 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 submitted all the information required by Notice 98-34, including any additional information requested by the Service after review of the submission.

A’s net worth exceeded the section 877(a)(2) amount on Date B. A is eligible to request a ruling because A became a resident fully liable to income tax in the country in which he was born. Section IV, Notice 98-34.

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) to have as one of his principal purposes for expatriating the avoidance of U.S. taxes. It is further concluded that A will not be treated under section 877(a)(2) as having one of his principal purposes of expatriation the avoidance of U.S. taxes.

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 her loss of permanent residence status or for taxable periods after her loss of permanent residence 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.
PLR-103641-03
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In accordance with the power of attorney on file with this office, a copy of this letter is being sent to A.

Sincerely yours,

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

CC: