internal_revenue_service number release date index number ---------------------- ---------------------- --------------------------------- ------------------------------- in re --------------- -------------------------- ------------------------------------- ----------- department of the treasury washington dc person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc intl br1- plr-135200-03 date date ty ------- -------------- ------- ----------- legend a -------------------------------------------- year b country c dear --------------- this is in response to your letter dated may14 requesting a ruling under sec_877 of the internal_revenue_code_of_1986 code that a’s loss of 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 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 a ruling it is subject_to verification on examination the information submitted for consideration is substantially as set forth below states and is a u s citizen in year b she became a citizen of country c a will expatriate within a year of receiving this ruling she was born in the united sec_877 generally provides that a person who loses his or her u s a former citizen whose net_worth or average tax_liability exceeds these plr-135200-03 citizenship an individual who expatriates within the 10-year period immediately preceding the close of the taxable_year will be taxed under sec_877 and the special rules of sec_877 for such taxable_year unless such loss did not have for one of its principal purposes the avoidance of u s taxes sec_2107 and sec_2501 provide special estate and gift_tax regimes respectively for individuals who expatriate with a principal purpose to avoid u s taxes a former citizen will be treated as having expatriated with a principal purpose to avoid u s taxes for purposes of sec_877 sec_2107 and sec_2501 if the individual’s average income_tax_liability or the individual’s net_worth on the date of expatriation exceed certain thresholds see sec_877 sec_2107 and sec_2501 thresholds will not be presumed to have a principal purpose of tax_avoidance if that person 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 sec_877 sec_2107 and sec_2501 a c 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 submission a is eligible to request a ruling because a is a citizen of the country in which her husband was born submitted and the representations made we conclude that a has made a complete and good_faith submission in accordance with sec_877 and notice_98_34 furthermore we conclude that a will not be treated under sec_877 as having the avoidance of u s taxes a principal purpose for her expatriation because the information submitted clearly establishes the lack of a principal purpose to avoid taxes under subtitle a or b of the code concerning the tax consequences 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 citizenship or for taxable periods after her loss of citizenship under sections of the code other than sec_877 sec_2107 and sec_2501 a submitted all the information required by notice_98_34 based on the facts a’s net_worth exceeded the sec_877 threshold at the time of her except as expressly provided herein no opinion is expressed or implied a copy of this letter must be attached to a’s u s income_tax return for the year in plr-135200-03 which she obtained the ruling whether or not a is otherwise required to file a return the code provides that it may not be used or cited as precedent letter is being sent to a this ruling is directed only to the taxpayer requesting it sec_6110 of in accordance with the power_of_attorney on file with this office a copy of this sincerely _______________________ w edward williams senior technical reviewer office of office of the associate chief_counsel international cc -------------- -------------------------- ------------------------------------- ----------- ---------------------------- ---------------------------------- -------------------------------- --------------------------------------------------------------------- -------------------------------


internal_revenue_service department of the treasury number release date index no cid washington dc person to contact telephone number refer reply to cc ita - plr-122547-02 date date legend taxpayers taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer date date year year year year year year year amount amount amount plr-122547-02 amount amount firm a this is a response to a request for a ruling dated date submitted by your authorized representative requesting relief under sec_301_9100-3 of the procedure and administration regulations to make consent_dividend elections under sec_565 of the internal_revenue_code and the regulations thereunder taxpayers are members of a consolidated_group with taxpayer as the common parent_corporation all corporations are accrual_method taxpayer filing a consolidated tax_return using a fiscal_year end of date taxpayers are principally engaged in the business of acquiring developing owning and operating independent power-generating facilities although taxpayer is a relatively large_corporation with a complex organizational structure this has not always been the case consequently taxpayers have not always employed a tax department that was sophisticated in its knowledge of federal tax laws and procedures beginning in year taxpayers engaged firm a to perform financial_accounting to provide tax consulting and to prepare and file tax returns taxpayers have consulted with firm a on the tax issues associated with the numerous transactions that have occurred over the years in addition taxpayers have relied on firm a to prepare all income_tax returns affected by this request for an extension of time to make consent_dividend elections and to bring to taxpayers’ attention any issues that arose during the course of preparing those returns in year firm a prepared taxpayers’ consolidated_return for year including a schedule ph related to the personal_holding_company phc rules in connection with a proposed corporate transaction between taxpayer and taxpayer taxpayers requested firm a to confirm that there were no phc issues for year firm a confirmed that it had tested taxpayer for phc status but firm a had not tested taxpayer or the other subsidiaries within the consolidated_group -- therefore it could not confirm that there were no phc issues for those entities taxpayers requested firm a to perform the necessary calculations to test phc status and phc liability for year and firm a determined that taxpayer had a phc liability firm a immediately communicated its findings with respect to year to taxpayers’ management who was previously unaware that such a liability existed taxpayers then directed firm a to determine whether there had been any phc testing for all other years still open under the applicable statutes of limitations taxable years ending date year date year date year date year date year and date year firm a confirmed that it had tested taxpayer for phc status and had included a schedule ph for taxpayer in the consolidated_returns for each of these years firm a also confirmed that it had not previously performed phc status testing on taxpayer or the other subsidiaries for plr-122547-02 each of these years except for the year ended date year an accrual review memorandum for that year contains the statement that each company has been reviewed for possible personal_holding_company phc issues however the memorandum does not contain any documentation firm a then tested all the members of the consolidated_group for the open years determining that there would be phc liabilities absent making a consent_dividend following this determination taxpayers filed this request for an extension of time to make consent_dividend elections taxpayers request the commissioner’s consent to extend the due_date to make consent_dividend elections under sec_565 on form sec_972 and as follows taxable_year ending date year date year date year date year date year corporation claiming deduction for consent_dividend form shareholder consenting to include specific amount in gross_income form taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer taxpayer dividend amount amount amount amount amount amount sec_301_9100-3 of the procedure and administration regulations generally provides extensions of time for making regulatory elections for this purpose sec_301_9100-1 defines the term regulatory election to include an election whose deadline is prescribed by a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides in part that requests for relief will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides in part that except as otherwise provided in sec_301 b i through iii a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief before failure to make the regulatory election is discovered by the irs or v reasonably' relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election the affidavits presented show that taxpayers acted reasonably and in good_faith having relied on firm a to prepare their returns during the tax years at issue hindsight may now indicate that the professionals in firm a may not have had the expertise necessary to adequately advise taxpayers with respect to consent_dividend elections however no evidence indicates that such reliance was unreasonable plr-122547-02 sec_301_9100-3 provides in part that a taxpayer is deemed to have not acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief taking into account sec_1_6664-2 of the income_tax regulations and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief in connection with hindsight if specific facts have changed since the due_date for making the election that make the election advantageous to the taxpayer the service will not ordinarily grant relief in such a case the service will grant relief only when the taxpayer provides strong_proof that the taxpayer's decision to seek relief did not involve hindsight in the present case taxpayers are not attempting to alter a return position taken for which a penalty has been or could be imposed under sec_6662 further taxpayers were not informed of the need to make the elections under sec_565 and so did not make any conscious choice as to whether or not to make the elections in addition there is no indication that taxpayers are using hindsight as defined above in requesting this relief while it is clear that taxpayers carefully considered all options available to it with its tax advisors before filing this request for relief specific facts have not changed since the due_date for making the elections that make the election more advantageous to taxpayers sec_301_9100-3 provides in part that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides in part that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment in the present case granting the relief requested will not prejudice the interests of the government under the given criteria taken together the disclosed circumstances indicate that the omission taxpayers now seek to correct originated from an honest mistake on the part of their tax advisors and not from a desire to avoid taxes granting this application will not prejudice the interests of the government accordingly the consent of the commissioner is hereby granted for an extension of time to file the forms necessary to make the sec_565 consent_dividend elections for each of the years at issue for each taxpayer as requested this extension shall be for a period of days from the date of this ruling please attach a copy of this ruling to the returns schedules and forms filed in connection with making the election under sec_565 when such forms are filed caveats a copy of this letter must be attached to any income_tax return to which it is relevant we enclose a copy of the letter for this purpose also enclosed is a copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 plr-122547-02 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent sincerely thomas d moffitt branch chief office of associate chief_counsel income_tax accounting enclosures copy of this letter copy for sec_6110 purposes