Page
v.
Comm'r of Internal Revenue

Tax Court of the United States.Apr 21, 1955
24 T.C. 52 (U.S.T.C. 1955)
24 T.C. 52T.C.

Docket No. 49239.

1955-04-21

GEORGE A. PAGE AND JUDITH F. PAGE, HIS WIFE, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

James H. Meredith, Esq., for the petitioners. Hunter D. Heggie, Esq., for the respondent.


James H. Meredith, Esq., for the petitioners. Hunter D. Heggie, Esq., for the respondent.

Held, petitioner was a bona fide resident of Argentina throughout the year 1948 within the meaning of section 116(a), Internal Revenue Code of 1939.

Respondent has determined a deficiency in petitioners' income tax for 1948 in the amount of $749.28. The sole issue is whether petitioner George A. Page was a bona fide resident of a foreign country during all of 1948 within the meaning of section 116(a), Internal Revenue Code of 1939.

FINDINGS OF FACT.

Some of the facts are stipulated and are incorporated herein by this reference.

George A. Page and Judith F. Page, husband and wife, are now residing in Buenos Aires, Argentina. They filed their 1948 income tax return with the collector of internal revenue for the district of Maryland. The income in controversy was that of the husband, and he will sometimes hereinafter be referred to as the petitioner.

In August 1945 petitioner was employed by the A. P. Green Fire Brick Company, hereinafter referred to as the company. The company's main office was in Mexico, Missouri. However, the company has agents all over the world, and operating plants in Canada, South America, and South Africa. Even though petitioner was specifically employed as an engineer for a foreign development, he worked out of the Mexico, Missouri, office and moved his family, his wife and three children, from the west coast to Mexico where they purchased a home.

In the latter part of 1946, in pursuit of his employment, petitioner made a 2 months' trip to British Guiana. He also spent a total of 6 weeks working in Venezuela, Colombia, and some countries in Central America. When these trips were completed petitioner returned to the home office in Mexico and prepared reports on the information he had gathered.

In the early part of 1947 petitioner's family moved from Mexico, Missouri, to Oregon City, Oregon. In that year petitioner's work called him first to Chile and later to Argentina. He was in Argentina from part of August to the latter part of October. When he was in Buenos Aires in October 1947 the company advised him that he was to become a permanent employee of A. P. Green's subsidiary in Buenos Aires. At that time petitioner decided to accept such permanent employment in Argentina and thereafter considered himself permanently employed there.

Because there was a housing shortage in Buenos Aires, petitioner asked the company officials to look for a house for him while he returned to the United States to pick up his family. Before he left South America petitioner wrote his wife and asked her to meet him in Mexico. He also told her of his permanent employment in Buenos Aires and asked her to make whatever arrangements were necessary for moving their furniture and personal effects.

Petitioner returned to the United States during the first week in November 1947. He then talked with his wife about the practical details of the transfer and later they talked to the company officials. They immediately began making detailed plans to move to South America. Arrangements were made to rent their home in Oregon City, to store their furniture, and to dispose of their automobile. They also took their children out of school at the beginning of the Christmas vacation. Petitioner resigned from the country club in Mexico, the only organization to which he belonged. In the meanwhile petitioner completed a report of his last trip to South America.

On or about December 19, 1947, petitioner left Mexico for San Francisco where he met his wife and children. Petitioner did not wish to fly to South America, and since the earliest available sailing date from San Francisco was December 26, 1947, petitioner and his family remained in San Francisco until sailing time. While in San Francisco he was notified by the company that a house had been found. Petitioner cabled instructions to rent it.

On December 26, 1947, petitioner and his family sailed from San Francisco. They arrived in Buenos Aires in February 1948. With the exception of two trips to the United States, one in 1950 and the other in 1953, petitioner and his family have continued to live in Buenos Aires. In 1948 petitioner paid an income tax to Argentina.

During the trips in 1945, 1956, 1947, petitioner lived in hotels and traveled with a tourist visa. Immediately after his arrival in Buenos Aires in 1948 he applied for a permanent visa. Petitioner and his wife were not physically present in the United States during any time in 1948. Petitioner considered himself a resident of Argentina from September 1947 to the present.

During the trips in 1945, 1946, and 1947, petitioner was always paid expenses over and above his regular salary. In 1945 and 1946 these expenses were paid to him in dollars; but in 1947, because of the dollar shortage and restrictions imposed by the Argentine Government in the first part of that year, the expense allowance was paid in pesos. During these 3 years petitioner's salary was paid in dollars by the company and deposited in a bank in Mexico. Petitioner never had a written employment contract with either the company or its South American subsidiary.

Salary negotiations for petitioner's South American employment were held in Mexico during the last part of 1947, but the amount was not definitely determined until the company treasurer visited petitioner in Buenos Aires in the spring of 1948. Petitioner's salary in 1948 was paid approximately 70 per cent in dollars and 30 per cent in pesos; the dollars were banked in Mexico by the company.

On their 1948 tax return petitioner and his wife reported $8,012 as total wages from the company and a note attached to the return stated:

I am advised by Mr. D. H. Kreutzer, Treasurer of A. P. Green Fire Brick Company, Mexico, Missouri, that since I was out of the United States the entire year of 1948 that I am not subject to payment of income taxes.

I am enclosing my declaration of income and if there are any questions concerning this declaration I would ask that they be taken up with Mr. Kreutzer of the above mentioned Company.

Respondent explained the adjustment to petitioner's 1948 income tax as follows:

(a) It is held that you were not a bona fide resident of a foreign country during the entire taxable year of 1948 within the meaning of Section 116(a) of the Internal Revenue Code. Accordingly the amount of $8,012.00 representing compensation received for services rendered during that year is being included to your taxable income.

For tax purposes petitioner was a bona fide resident of Argentina for the entire year 1948.

OPINION.

JOHNSON, Judge:

Section 116(a) of the 1939 Code provides that earned income of an individual citizen of the United States from sources without the United States shall be exempt from taxation when he establishes that he is a bona fide resident of a foreign country or countries during the entire taxable year. For the purpose of section 116(a), ‘earned income’ means wages, salaries, and professional fees received as compensation for personal services actually rendered.

On the sole issue before us respondent maintains that petitioner was not a bona fide resident of Argentina for the entire year 1948 and that income earned in Argentina by the petitioner in 1948 was fully taxable. In opposition to this, petitioner and his wife contend that he and she were residents of Argentina for the entire year 1948 and that there was no tax deficiency for that year.

Simply, this issue is dependent upon a determination of the time petitioner first established his residence in Argentina. Was it some time in 1947 when he was working there, or was it is 1948 when he and his wife arrived there?

There appears to be no issue concerning the question as to petitioner's bona fide residence in Argentina after he and his family arrived there in February 1948. The question of when the residence started is one of fact and the criteria to be used are the same as those which are applicable in determining whether an an alien is a resident of the United States. These criteria are listed in Regulations 111, section 19.211-2. See Arthur J. H. Johnson, 7 T.C. 1040, and Herman Frederick Baehre, 15 T.C. 236.

Paraphrasing the standards set up by the regulations, we find if petitioner was a transient or a sojourner in Argentina he was not a resident of that country for Federal tax purposes. Whether he was a transient was determined by his intention with regard to the length and nature of his stay. A mere floating intention, indefinite as to time, to return to the United States does not constitute him a transient. If he lived in Argentina and had no definite intention as to his stay, he was a resident. If he went to Argentina for a definite purpose which in its nature could be accomplished promptly, he was a transient. But, if an extended stay was necessary he was a resident even though his intention was at all times to return to his domicile in the United States when the purpose for which he went to Argentina had been consummated or abandoned.

There were three instances when petitioner's residence could have first started. The earliest was in October 1947 while he was in Buenos Aires and when the company advised him he was to become a permanent employee of the Argentine subsidiary; the second was in December 1947 when he sailed from the United States; the third was in February 1948 when he and his family arrived in Argentina.

We shall discuss the earliest first, that is, when petitioner was informed that he was to become a permanent employee of the Argentine subsidiary. Until then he was a transient or a sojourner; he was in Argentina for a particular job which in its nature could be promptly accomplished in a limited time. However, when he was informed that he was to be a permanent employee in Argentina, he had a physical presence, which when coupled with a proper intention, would make him an Argentine resident.

We are convinced from the evidence that in October 1947 he then formed an intention to be an Argentine resident. The intention plus his physical presence where he had a job for an extended stay is sufficient to meet the ‘bona fide resident’ requirements of section 116(a) of the Code, and the corresponding regulations. Leonard Larsen, 23 T.C. 599. We cannot find that the short trip to the United States in the latter part of 1947 interrupted his Argentine residency so as to preclude him from the benefits of section 116(a) for the year 1948. See David E. Rose, 16 T.C. 232, 237.

Decision will be entered for the petitioners.