Thinking of abandoning green card without a formal surrender? Think again!

In a recent court case, the taxpayer who argued that by living in Germany for many years and selling his US properties a long time back, he had relinquished his Lawful Permanent Residence (LPR) or a green card and hence should not be subject to US taxes on his income. However, IRS did not accept this and court agreed with IRS making the taxpayer liable for the tax.

IRS contended that the taxpayer was liable for income tax deficiencies for 2004 and 2006 – 2009 (almost all of which was attributable to the gain on his installment sale of stock). IRS argued that (1) because the taxpayer did not formally abandon his LPR status (obtained in ’77) until 2010, he remained an LPR during the years in issue, and (2) because he was not taxable by Germany as a German resident during those years, he was not a German resident under Article 4 of the Treaty. Therefore, he was not exempted from U.S. taxation by the Treaty.

The Tax Court reasoned that the taxpayer did not formally renounce or abandon that status until Nov. 10, 2010, when he filed a Form I-407 and surrendered his green card to the USCIS consistent with the requirements of Reg. § 301.7701(b)-1(b)(3).The Court rejected the taxpayer’s argument that he “informally” abandoned his LPR status. The Court held that for Federal income tax purposes, the taxpayer’s LPR status turns on Federal income tax law and was only indirectly determined by immigration law. The taxpayer’s reliance on an immigration case that recognized “informal” abandonment was misplaced. Unlike immigration law, the Code and regs were not silent on the point at which a taxpayer’s LPR status was considered to change. The requirements set out in Code Sec. 7701(b)(6)(B), Reg. § 301.7701(b)-1(b)(1), and Reg. § 301.7701(b)-1(b)(3) for abandoning LPR status

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DHS announced changes in immigration policy

From Snell & Wilmer (www.swlaw.com)

Department of Homeland Security (DHS) Secretary Janet Napolitano announced today that certain qualified foreign nationals without immigration status who were brought to the United States as children, and meet other specific criteria, will be eligible for work authorization and will be considered for relief from removal. To be eligible, individuals must demonstrate that they meet the following criteria:

  1. Came to the United States under the age of 16 years;
  2. Have continuously resided in the United States for at least five years preceding June 15, 2012 and are present in the United States on June 15, 2012;
  3. Are currently in school, have graduated from high school, have obtained a general education development certificate, or are honorably discharged veterans of the Coast Guard or Armed Forces of the United States;
  4. Have not been convicted of a felony offense, a significant misdemeanor offense, multiple misdemeanor offenses, or otherwise pose a threat to national security or public safety; and
  5. Are not above the age of 30.

Only those individuals meeting all of the above criteria will be considered for deferred action and work authorization, and such action will be decided on a case-by-case basis. It will be the responsibility of the applicant to present verifiable documentation to establish all of the criteria.

Obtaining deferred action and work authorization will not grant the applicant any immigration status or pathway toward citizenship. Grants of deferred action will be given for a period of two years, subject to renewal. 

While this directive takes effect immediately, U.S. Citizenship and Immigration Services (USCIS) and Immigration and Customs Enforcement (ICE) are expected to begin implementation of the application process within 60 days. We expect USCIS to provide further instructions regarding this process in the very near future.  More information is available at www.dhs.gov.