SECTION 9. GIFTS OR BEQUESTS

Gifts or bequests from a covered expatriate on or after June 17, 2008, are subject to a transfer tax under new section 2801. Separate guidance will be issued for U.S. persons who receive gifts or bequests on or after June 17, 2008, from expatriates who are subject to the rules of this notice. Satisfaction of the reporting and tax obligations for covered gifts or bequests received will be deferred, pending the issuance of guidance. That guidance will provide a reasonable period of time between the issuance of that guidance and the date prescribed for such reporting and tax payments.

must certify on a Form 8854 filed with Form 1040NR for the 2009 taxable year that A has complied with all of A’s federal tax obligations for 2004 through 2008. For the portion of the taxable year that includes the day before the expatriation date, A must attach a Form 1040 (or other schedule, as provided in Treas. Reg. § 1.6012–1(b)(2)(ii)( b )) to his Form 1040NR. If A does not file Form 8854, A will be treated as a covered expatriate even if A does not meet the tax liability test or the net worth test.

Individuals electing to defer the tax im- posed by section 877A. A covered expatriate who makes a deferral election under section 877A(b) and section 3.E of this notice must list all deferral assets on Form 8854 for the taxable year that includes the day before the expatriation date, as well as the amount of deferred tax attributable to each deferral asset, and make an irrevocable election on such Form 8854 to waive any right under any treaty of the United States that would preclude assessment or collection of any tax imposed by reason of section 877A. The covered expatriate also must file Form 8854 annually for taxable years up to and including the taxable year in which the full amount of deferred tax and interest is paid. These annual filings will permit the IRS to monitor compliance with the terms of the covered expatriate’s tax deferral agreement. See section 3.E of this notice for guidance on the types of events that will trigger the payment of the deferred tax. The Form 8854 must be attached to a timely filed Form 1040NR (or, if applicable, Form 1040). If the covered expatriate is not otherwise required to file Form 1040NR (or Form 1040), Form 8854 must be submitted to the address provided in the instructions to the form by the due date (had the covered expatriate otherwise been required to file) of Form 1040NR plus extensions, and must contain such information as required by the instructions to Form 8854.

2008 tax year. For purposes of complying with section 877A for the 2008 tax year, Form 8854 and the request for the deferral of tax will be timely filed if these documents are filed by the due date of the return plus extensions (or 30 days after publication of this notice, if later). However, interest will be imposed on tax that is paid after the due date of the return (without regard to extensions granted).

D. Form W–8CE

A covered expatriate who has a deferred compensation item, a specified tax

deferred account, or an interest in a nongrantor trust must file Form W–8CE with the relevant payor on the earlier of (1) the day prior to the first distribution on or after the expatriation date or (2) 30 days after the covered expatriate’s expatriation date as defined in section 877A(g)(3)). However, if the expatriation date was prior to the publication date of Form W–8CE, the covered expatriate must file Form W–8CE with the relevant payor on the earlier of (1) the date prior to the first distribution on or after the expatriation date or (2) 30 days after the date of publication of this notice.

Eligible deferred compensation item . In the case of an eligible deferred compensation item described in section 5.B(2) of this notice, Form W–8CE provides notice to the payor that the individual is a covered expatriate who has waived treaty benefits with respect to the eligible deferred compensation item, with the result that taxable payments will be subject to 30 percent withholding under section 877A(d)(1). See section 5.C of this notice.

Ineligible deferred compensation item . In the case of an ineligible deferred compensation item described in section 5.B(3) of this notice, Form W–8CE provides notice to the payor that the individual is a covered expatriate who is treated as receiving an amount equal to the present value of his or her accrued benefit on the day before the expatriation date and with respect to which appropriate adjustments must be made to subsequent distributions to reflect the tax imposed by reason of such treatment. See section 5.D of this notice. Within 60 days of receipt of Form W–8CE, the payor must provide a written statement to the covered expatriate setting forth the present value of the covered expatriate’s accrued benefit on the day before the expatriation date.

Specified tax deferred account . In the case of a specified tax deferred account, Form W–8CE provides notice to the payor that the individual is a covered expatriate who is treated as receiving a distribution of his or her entire interest in the account on the day before his or her expatriation date and with respect to which appropriate adjustments must be made to subsequent distributions to reflect the tax imposed by reason of such treatment. See section 6 of this notice. Within 60 days of receipt of Form W–8CE, the payor must provide a

November 9, 2009 612 2009–45 I.R.B.

estimate that annually approximately 100 taxpayers will expatriate who will be subject to 877A, and that it will take approximately 4 hours to prepare the documentation. The total reporting burden is estimated to be 400 hours.

The second collection requirement in the notice is also in section 8 of the notice, as required by section 877A(b)(4)(B). This collection of information is necessary for the proper performance of the function of the IRS because it notifies the IRS that the covered expatriate is electing to defer a tax that is owed and allows for insuring that the tax owed is eventually paid.

A bond, letter of credit, or adequate security statement must be furnished to the appropriate SBSE Advisory Office by the covered expatriate for each item the covered expatriate wishes to defer the tax. We estimate that annually approximately 10 taxpayers will elect to defer the payment of tax, and that it will take approximately 2 hours to prepare the documentation. The total reporting burden is estimated to be 20 hours.

Books or records relating to collections of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by section 6103.

REQUEST FOR COMMENTS

The Treasury Department and the IRS invite public comments on the guidance provided in this notice. All materials submitted will be available for public inspection and copying.

Comments may be submitted to Internal Revenue Service, CC:PA:LPD:PR (Notice 2009–85), Room 5203, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may also be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to the Couriers Desk at 1111 Constitution Avenue, NW, Washington, DC 20224, Attn: CC:PA:LPD:PR (Notice 2009–85), Room 5203. Submissions may also be sent electronically via the internet to the following email address: Notice.comments@irscounsel.treas.gov . Include the notice number (Notice 2009–85) in the subject line.

EFFECTIVE DATE

Regulations to be issued incorporating the guidance set forth in this notice will apply to individuals whose expatriation date is on or after October 15, 2009. Until such regulations are issued, such individuals may apply the rules described in the notice in their entirety. Individuals whose expatriation date is on or after June 17, 2008, and before October 15, 2009, may apply the rules described in this notice in their entirety.

DRAFTING INFORMATION

The principal drafters of this notice are Willard W. Yates and Lara A. Banjanin

of the Office of Associate Chief Counsel (International). For further information regarding this notice generally, contact Willard W. Yates or Lara A. Banjanin at (202) 622–3880 (not a toll-free number). For further information regarding deferred compensation items, contact Ilya E. Enkishev at (202) 622–6030 (not a toll-free number).

PAPERWORK REDUCTION ACT

The collections of information contained in this notice have been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–2123. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number.

The first collection of information requirement in this notice is in section 8 of the notice, as required by section 877A(a)(1). The collection of information relates to the requirement that the covered expatriate obtain the fair market value appraisal of his or her property and report such value to the IRS. This collection of information is necessary for the proper performance of the function of the IRS in the collection of the mark-to-market tax imposed by section 877A(a)(1).

The statement must be attached to the final Form 1040 filed by the covered expatriate setting forth the fair market value of all assets the covered expatriate owns along with the basis of such assets. We

2009–45 I.R.B. 613 November 9, 2009

APPENDIX A

DEPARTMENT OF THE TREASURY — INTERNAL REVENUE SERVICE

AGREEMENT ON DEFERRAL OF TAX

IMPOSED UNDER I.R.C. § 877A

Under § 877A of the Internal Revenue Code of 1986, as amended (“I.R.C.”), the Taxpayer (as identified on the signature page of this agreement by Taxpayer’s name and address) (herein referred to as “Taxpayer”) and the Commissioner of Internal Revenue (the “Commissioner”) enter into the following agreement to defer tax with respect to the property(ies) identified below (this “Agreement”):

WHEREAS, I.R.C. § 877A(a) imposes tax on covered expatriates, as defined in I.R.C. § 877A(g), by deeming such individuals to have sold all of their property for its fair market value on the day before their expatriation date (“mark-to-market tax”), as provided in Notice 2009–85, I.R.B. 2009–45, and any subsequent guidance, and

WHEREAS, I.R.C. § 877A(b) provides that a covered expatriate may make an election to defer payment of the mark-to-market tax imposed on the deemed sale of property, on a property-by-property basis, if adequate security is provided with respect to such property, as provided in Notice 2009–85, I.R.B. 2009–45, and any subsequent guidance,

IT IS HEREBY DETERMINED AND AGREED THAT:

(1) Taxpayer is a covered expatriate, as defined in I.R.C. § 877A(g), who renounced (his/her) (U.S. citizenship/ceased to be a lawful permanent resident of the United States) on [date].

(2) Taxpayer is liable for the tax imposed by I.R.C. § 877A(a) by reason of his/her covered expatriate status.

(3) By signing this Agreement, Taxpayer consents to the assessment and collection of the liabilities for tax, interest, additions to tax, and penalties determined by or resulting from the determinations of this agreement, waiving all defenses against and restrictions on the assessment and collection of those liabilities including any defense based on the expiration of the period of limitations on assessment or collection.

(4) Pursuant to I.R.C. § 877A(b), Taxpayer is making an irrevocable election to defer payment of the mark-to-market tax imposed with respect to the property(ies) identified in an attachment to this Agreement and in an amount reflected on such attachment in accordance with the instructions in section 3.E of Notice 2009–85, I.R.B. 2009–45.

THEREFORE, based on the above information and material submitted by the Taxpayer it is determined that:

(1) Taxpayer has furnished a bond or other security (“collateral”) that is acceptable to the Commissioner, conditioned upon payment of the amount of tax due.

(2) Interest on the amount of the deferred tax will be charged for the period that payment of the tax is deferred (in other words, from the due date for the payment of the tax, determined without regard to the election, to the date on which payment of such tax is received) at the rate established under I.R.C. § 6621 that is applicable to individual underpayments as computed under I.R.C. § 6622.

(3) The Commissioner may accept collateral other than a letter of credit or bond in his sole discretion. If the collateral is not a letter of credit or bond, Taxpayer is required to verify to the satisfaction of the Commissioner the existence, location, and value of the collateral.

(4) If Taxpayer elects to defer the tax and supplies security that the Commissioner determines is not adequate and Taxpayer fails to correct such failure within 30 days of written notice, the tax owed will not be deemed to have been deferred and penalties will be imposed under I.R.C. § 6651(a)(2) for failure to pay the tax owed.

(5) By signing this agreement, Taxpayer hereby certifies that he/she has irrevocably waived, on Form 8854 ( Expatriation Information Statement ), any right under any treaty of the United States that would preclude assessment or collection of any tax imposed by reason of I.R.C. § 877A.

(6) Subject to the provisions of paragraphs 8 through 11 of this Agreement, the time for payment of the additional tax attributable to the property that is the subject of this Agreement shall be extended until the due date of the return for the taxable year in which each such property is disposed of either by sale, gift, disposal in a transaction in which gain is not recognized in whole or in part, or by Taxpayer’s death.

(7) If any of the tax that is the subject of this Agreement remains unpaid at the time of Taxpayer’s death, such tax is due and payable by Taxpayer’s estate no later than the due date of the return for the year of Taxpayer’s death. If such payment is not received by such due date, the collateral will be applied to the tax liability and interest.

November 9, 2009 614 2009–45 I.R.B.

(8) If, in his sole discretion, the Commissioner determines that the collateral provided with respect to any property that is the subject of this Agreement no longer provides adequate security, and Taxpayer fails to correct such failure within 30 days after the IRS mails notification of such failure to the last known addresses of the covered expatriate and the covered expatriate’s agent, the deferred tax and the interest with respect to such property will be immediately due, and this Agreement will be defaulted and the collateral will be applied to the tax liability and interest.

(9) This Agreement shall be effective for [# of years] years from the date it is executed by Taxpayer and the Commissioner. At the expiration of [# of years] years, this Agreement will be terminated and the deferred tax and interest will be immediately due, unless Taxpayer renews this Agreement by providing any amended or replacement collateral that may be required under paragraph 10 of this Agreement and certifying in writing that none of the property that is the subject of this Agreement has been disposed of by sale, gift, disposal in a transaction in which gain is not recognized in whole or in part, or by Taxpayer’s death. If this Agreement is renewed, it will remain in effect for another [# of years] years. Taxpayer may continue to renew this Agreement every [# of years].

(10) Ninety days prior to the termination date of this Agreement, the Commissioner will notify Taxpayer that amended or replacement collateral is required to reflect the tax and projected interest in order to renew this Agreement. If amended or replacement collateral is not received by the Commissioner 30 days before the termination date of this Agreement, the collateral will be applied to the tax liability and interest.

(11) In order to renew this Agreement, Taxpayer must ensure such renewal is effected 30 days prior to the stated termination date of this Agreement by complying with the requirements prescribed in paragraphs 9 and 10 of this Agreement. If such a renewal is not received in writing by the Commissioner 30 days prior to the stated termination date of this Agreement, Taxpayer will not be eligible to renew this Agreement and the collateral will be applied to the tax liability and interest.

(12) If Taxpayer does not notify the Commissioner in writing of any change of address within 30 days of such change, this Agreement will be terminated and the collateral will be applied to the tax liability and interest.

(13) As a condition for entering into this Agreement, all returns due from Taxpayer for the five taxable years preceding the taxable year that includes the expatriation date must be timely filed and must be true, accurate, and complete; otherwise this agreement will be null and void.

(14) For all matters pertaining to this Agreement, Taxpayer should contact the following office:

Advisory 7850 SW 6th Court Mail Stop 5780 Plantation, Florida, 33324–3202 Telephone: 954–423–7344 Fax: 954–423–7809

(15) All notices, instructions, and other communications (“Notices”) required or permitted to be given, forwarded, or transmitted hereunder shall be in writing and shall be deemed to have been duly given if: (a) within the continental United States, delivered personally or mailed by first class mail (postage prepaid, by registered or certified mail, return receipt requested); (b) outside of the continental United States, sent by a private delivery service designated in Notice 2004–83, 2004–2 C.B. 1030 (or any subsequent publication that replaces Notice 2004–83); or (c) regardless of place of origination, sent by cable, telex, telegram or facsimile transmission ( e.g., telecopier) subsequently confirmed by letter.

(16) If the Commissioner determines that any material fact represented by Taxpayer is erroneous or inaccurate, the restrictions and obligations imposed on the Commissioner by this Agreement shall be null and void.

(17) This Agreement and all of its terms and conditions shall inure to the benefit of, and be binding upon all parties to the Agreement and their respective successors and assigns.

(18) This Agreement may not be amended, modified, superseded or canceled, and none of the terms hereof may be waived, except by a written instrument executed by the Commissioner, and the other party or parties hereto sought to be charged thereby.

(19) This Agreement shall be governed, construed, and enforced in accordance with the laws of the United States of America.

(20) This Agreement shall not be binding upon any signatory hereto until it has been signed by the Commissioner, and the Commissioner has received counterparts thereof duly executed by each of the signatories whose names appear at the foot of this Agreement.

2009–45 I.R.B. 615 November 9, 2009

(21) As a condition for entering into this Agreement, and prior to its execution, Taxpayer must appoint a U.S. person to act as Taxpayer’s limited agent for purposes of accepting communication related to this Agreement from the Commissioner on behalf of Taxpayer. This includes, but is not limited to, acting as Taxpayer’s limited agent for the timely enforcement of the terms of this Agreement, for applying I.R.C. § 7602 and all related procedural provisions of the I.R.C. with respect to a request by the Commissioner to examine records, for the production of testimony, or for a summons by the Commissioner for such records or testimony, and for the acceptance of service of process for an enforced collection suit, if necessary. Taxpayer must enter into a binding agreement with the agent, and the authorization under such agreement must remain in effect for as long as this Agreement remains in effect. If the agent resigns, liquidates or terminates its responsibility as Taxpayer’s agent, Taxpayer must, within 90 days, notify Advisory at the following address:

Advisory 7850 SW 6th Court Mail Stop 5780 Plantation FL 33324–3202 Telephone: 954–423–7344 Fax: 954–423–7809

This notification must contain the name, address, and TIN of the new U.S. agent (if any). If no new agent is appointed, then this Agreement is in default and the collateral will be applied to the deferred tax and interest attributable to all of the deferral assets.

WHEREAS, the determinations set forth above are hereby mutually agreed to by Taxpayer and the Commissioner.

IN WITNESS WHEREOF, the above parties have subscribed their names to these presents, in triplicate.

(Name of Taxpayer) Date

Taxpayer Identification Number:

Address in country of residence:

Commissioner of the Internal Revenue Service

By

(Title) Date

November 9, 2009 616 2009–45 I.R.B.

APPENDIX B

AUTHORIZATION OF AGENT

[Name of covered expatriate] hereby expressly authorizes [name of U.S. agent] to act as his or her agent solely for purposes of accepting communication related to the Tax Deferral Agreement from the Internal Revenue Service on behalf of [covered expatriate], the timely enforcement of the terms of the Tax Deferral Agreement between [covered expatriate] and the IRS, and applying section 7602 and all related procedural provisions of the Internal Revenue Code with respect to any request to examine records or produce testimony or with respect to a summons for such records or testimony related to the enforcement of the Tax Deferral Agreement.

Signature of [covered expatriate] (date)

Type or print your name below

TIN

Address

[Name of agent] accepts this appointment to act as agent for [covered expatriate] for the above purpose. I certify that I have the authority to execute this authorization of agent to act on behalf of [covered expatriate] and agree to accept communications and service of process on behalf of [covered expatriate] for the above purposes.

Signature of agent (date)

Type or print your name below

TIN

Address

26 CFR 601.602: Tax forms and instructions. (Also Part I, §§ 1, 23, 24, 25A, 32, 42, 59, 62, 63, 132, 135, 137, 146, 147, 148, 151, 170, 179, 213, 220, 221, 512, 513, 877, 877A, 911, 2032A, 2503, 2523, 4161, 6033, 6039F, 6323, 6334, 6601, 7430, 7702B; 1.148–3, 1.148–5.)

Rev. Proc. 2009–50

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