§877. Expatriation to avoid tax

(a) In general

Every nonresident alien individual who at any time after March 8, 1965, and within the 10-year period immediately preceding the close of the taxable year lost United States citizenship, unless such loss did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle B, shall be taxable for such taxable year in the manner provided in subsection (b) if the tax imposed pursuant to such subsection exceeds the tax which, without regard to this section, is imposed pursuant to section 871.

(b) Alternative tax

A nonresident alien individual described in subsection (a) shall be taxable for the taxable year as provided in section 1, 55, or 402(d)(1), except that-

(1) the gross income shall include only the gross income described in section 872(a) (as modified by subsection (c) of this section), and

(2) the deductions shall be allowed if and to the extent that they are connected with the gross income included under this section, except that the capital loss carryover provided by section 1212(b) shall not be allowed; and the proper allocation and apportionment of the deductions for this purpose shall be determined as provided under regulations prescribed by the Secretary.

For purposes of paragraph (2), the deductions allowed by section 873(b) shall be allowed; and the deduction (for losses not connected with the trade or business if incurred in transactions entered into for profit) allowed by section 165(c)(2) shall be allowed, but only if the profit, if such transaction had resulted in a profit, would be included in gross income under this section.

(c) Special rules of source

For purposes of subsection (b), the following items of gross income shall be treated as income from sources within the United States:

(1) Sale of property

Gains on the sale or exchange of property (other than stock or debt obligations) located in the United States.

(2) Stock or debt obligations

Gains on the sale or exchange of stock issued by a domestic corporation or debt obligations of United States persons or of the United States, a State or political subdivision thereof, or the District of Columbia.

For purposes of this section, gain on the sale or exchange of property which has a basis determined in whole or in part by reference to property described in paragraph (1) or (2) shall be treated as gain described in paragraph (1) or (2).

(d) Exception for loss of citizenship for certain causes

Subsection (a) shall not apply to a nonresident alien individual whose loss of United States citizenship resulted from the application of section 301(b), 350, or 355 of the Immigration and Nationality Act, as amended (8 U.S.C. 1401(b), 1482, or 1487).¹

(e) Burden of proof

If the Secretary establishes that it is reasonable to believe that an individual's loss of United States citizenship would, but for this section, result in a substantial reduction for the taxable year in the taxes on his probable income for such year, the burden of proving for such taxable year that such loss of citizenship did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle B shall be on such individual.

(Added Pub. L. 89–809, title I, §103(f)(1), Nov. 13, 1966, 80 Stat. 1551 ; amended Pub. L. 93–406, title II, §2005(c)(8), Sept. 2, 1974, 88 Stat. 992 ; Pub. L. 94–455, title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834 ; Pub. L. 95–600, title IV, §421(e)(5), Nov. 6, 1978, 92 Stat. 2876 ; Pub. L. 96–222, title I, §104(a)(1), (4)(H)(v), Apr. 1, 1980, 94 Stat. 214 , 217; Pub. L. 99–514, title XII, §1243(a), Oct. 22, 1986, 100 Stat. 2580 ; Pub. L. 102–318, title V, §521(b)(31), July 3, 1992, 106 Stat. 312 .)

References in Text

Sections 301(b), 350, and 355 of the Immigration and Nationality Act, as amended (8 U.S.C. 1401(b), 1482, 1487), referred to in subsec. (d), were repealed by Pub. L. 95–432, §§1, 2, Oct. 10, 1978, 92 Stat. 1046 .

Prior Provisions

A prior section 877 was renumbered section 878 of this title.

Amendments

1992-Subsec. (b). Pub. L. 102–318 substituted "402(d)(1)" for "402(e)(1)".

1986-Subsec. (c). Pub. L. 99–514 inserted at end "For purposes of this section, gain on the sale or exchange of property which has a basis determined in whole or in part by reference to property described in paragraph (1) or (2) shall be treated as gain described in paragraph (1) or (2)."

1980-Subsec. (b). Pub. L. 96–222 substituted "55, or 402(e)(1)" for "section 55, 402(e)(1), or section 1201(b)".

1978-Subsec. (b). Pub. L. 95–600 substituted "section 1, section 55," for "section 1".

1976-Subsecs. (b)(2), (e). Pub. L. 94–455 struck out "or his delegate" after "Secretary".

1974-Subsec. (b). Pub. L. 93–406 inserted reference to section 402(e)(1).

Effective Date of 1992 Amendment

Amendment by Pub. L. 102–318 applicable to distributions after Dec. 31, 1992, see section 521(e) of Pub. L. 102–318, set out as a note under section 402 of this title.

Effective Date of 1986 Amendment

Section 1243(b) of Pub. L. 99–514 provided that: "The amendment made by subsection (a) [amending this section] shall apply to sales or exchanges of property received in exchanges after September 25, 1985."

Effective Date of 1980 Amendment

Amendment by Pub. L. 96–222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title.

Effective Date of 1978 Amendment

Amendment by Pub. L. 95–600 applicable to taxable years beginning after Dec. 31, 1978, see section 421(g) of Pub. L. 95–600, set out as a note under section 5 of this title.

Effective Date of 1974 Amendment

Amendment by Pub. L. 93–406 applicable only with respect to distributions or payments made after Dec. 31, 1973, in taxable years beginning after Dec. 31, 1973, see section 2005(d) of Pub. L. 93–406, set out as a note under section 402 of this title.

Effective Date

Section applicable with respect to taxable years beginning after Dec. 31, 1966, see section 103(n)(1) of Pub. L. 89–809, set out as an Effective Date of 1966 Amendment note under section 871 of this title.

Plan Amendments Not Required Until January 1, 1994

For provisions directing that if any amendments made by subtitle B [§§521–523] of title V of Pub. L. 102–318 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1994, see section 523 of Pub. L. 102–318, set out as a note under section 401 of this title.

Section Referred to in Other Sections

This section is referred to in sections 2, 865, 894, 3405, 7701 of this title.

¹ See References in Text note below.