PLR 9951030: Expatriation was not principally for tax avoidance

Plain-English summary

A former U.S. citizen requested a ruling after renouncing citizenship while her net worth exceeded the threshold in § 877(a)(2). She had become a citizen of the country where her parents were born and submitted a request under the procedure described in Notice 98-34. Based on her information and representations, the IRS found that her submission was complete and made in good faith. It also ruled that avoiding U.S. income, estate, or gift taxes was not one of her principal purposes for expatriating. The letter leaves other tax consequences and liabilities outside its ruling.

Ruling snapshot

• Question: Was avoiding U.S. taxes one of the former citizen's principal purposes for giving up citizenship?
• Outcome: Approved: the IRS found 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
Washington, DC 20224
Number: 199951030
Release Date: 12/23/1999
Index No.: 877.01-00
Person to Contact:

Telephone Number

Refer Reply to
PLR-118971-98/CC:INTL:B1
Date:
September 28, 1999

A
=

Date B =
Date C =
Date D =
Country E =

Dear

This is in response to the letter from your representative dated August 24, 1998, requesting a ruling under section 877(c) of the Internal Revenue Code of 1986 ("Code") that A’s loss of U.S. citizenship 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 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.

A was born on Date B and became a U.S. citizen at birth on the basis of her birth in the United States. A has been a resident of Country E since Date C. A renounced her United States citizenship on Date D. On the date of A’s expatriation, her net worth exceeded the net worth required under 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, unless such loss did not have for one of its principal purposes the avoidance of U.S. taxes.

PLR-118971-98
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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)(1), 2107(a)(2)(B), and 2501 (a)(3)(C).

Under Notice 98-34, 1998-27 I.R.B. 40, 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 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 A became not later than the close of a reasonable period after the loss of United States citizenship a citizen of the country in which her parents were born. See section 877(c)(2)(A).

Accordingly, based solely on the information submitted and the representations made, it is held that A has made a complete and good faith submission in accordance with section 877(c)(1)(B) and Notice 98-34. It is further held that A will not be treated under section 877(a)(2) as having as one of her 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 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. In addition, no opinion is expressed as to A’s U.S. tax liability for taxable periods prior to her loss of U.S. citizenship or for taxable periods after her loss of U.S. citizenship under sections of the Code other than sections 877, 2107, and 2501(a)(3).

PLR-118971-98
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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 representative.

Sincerely yours,

____
ALLEN GOLDSTEIN
Office of the Associate Chief Counsel
(International)

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