EXPATRIATION DIDN'T HAVE TAX AVOIDANCE MOTIVE.

Index Number: 877.08-00

[1] This is in response to a letter dated April 10, 2000, as supplemented by letters dated June 22, 2000 and July 25, 2000, 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 long-term 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.

[2] 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.

[3] A, a former long-term resident of the United States within the meaning of section 877(e), relinquished her U.S. lawful permanent resident status ("expatriated") on Date D. A is a citizen of Country C by reason of her birth on Date E in Country C. A's parents were also born in Country C. A became a citizen of Country B on Date F. A has lived primarily in Country B since Year G. A became a permanent resident of the U.S. and obtained her green card during Year H. On the date of A's expatriation, her net worth exceeded the applicable threshold in section 877.

[4] 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.

[5] A former citizen or former long term-resident will be presumed to have 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 exceeds certain thresholds. See sections 877(a)(2), 2107(a)(2)(A) and 2501(a)(3)(B).

[6] 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).

[7] Under Notice 98-34, 1998-27 I.R.B. 30, modifying Notice 97-19, 1997-1 C.B. 394, an eligible former long-term resident whose net worth or average tax liability exceeds the applicable thresholds will also not be presumed to have a principal purpose of tax avoidance if that former long-term 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.

[8] 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.

[9] A is eligible to request a ruling pursuant to Notice 98-34 because A was not present in the United States for more than 30 days during each year of the 10-year period prior to expatriation.

[10] A submitted all the information required by Notice 98-34, including any additional information requested by the Service after review of the submission.

[11] 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, and therefore, A will not be presumed to have expatriated with a principal purpose of tax avoidance.

[12] It is further concluded 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.

[13] 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).

[14] 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.

[15] 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,