Where Lock and Acone fell short, Linde v. IRS, T.C. Memo 2017-180 succeeded in establishing a foreign tax home. Therein, the Tax Court provided this analysis:
"Section 911(d)(3) defines the term “tax home” as an individual’s home for purposes of section 162(a)(2). Section 162(a)(2) provides for a deduction for ordinary and necessary expenses paid during the taxable year in carrying on a trade or business, including travel expenses incurred while away from home in the pursuit of a trade or business. See also Commissioner v. Flowers, 326 U.S. 465, 470-472 (1946). For purposes of section 162(a)(2) an individual’s tax home is generally “the vicinity of the taxpayer’s principal place of employment and not where his or her personal residence is located.” Mitchell v. Commissioner, 74 T.C. 578, 581 (1980); see also Rev. Rul. 75-432, 1975-2 C.B. 60.
An individual, however, shall not be treated as having a tax home in a foreign country for any period during which his abode is within the United States. Sec. 911(d)(3); see also Harrington v. Commissioner, 93 T.C. 297, 307 (1989). Temporary presence of the individual in the United States does not necessarily mean that the individual’s abode is in the United States. Sec. 1.911-2(b), Income Tax Regs. Moreover, “[m]aintenance of a dwelling in the United States by an individual, whether or not that dwelling is used by the individual’s spouse and dependents, does not necessarily mean that the individual’s abode is in the United States.” Id.
Mr. Linde’s principal place of employment during the years in issue was in Iraq. Therefore, whether his tax home was in Iraq rests on whether his abode was in the United States during the years in issue. Neither section 911 nor the regulations thereunder define “abode”. Thus we turn to our caselaw.
In prior section 911 cases, we have examined and contrasted a taxpayer’s domestic ties (i.e., his familial, economic, and personal ties to the United States) with his ties to the foreign country in which he claims a tax home in order to determine whether his abode was in the United States during a particular period. (citations omitted)
Even though a taxpayer may have some limited ties to a foreign country during a particular period, if the taxpayer’s ties to the United States remain strong, we have held that his abode remained in the United States, especially when his ties to the foreign country were transitory or limited during that period. See Harrington v. Commissioner, 93 T.C. at 308.
On the basis of the record before us, we conclude that Mr. Linde had stronger ties to Iraq than he did to the United States during the years in issue. At all relevant times Mr. Linde’s economic and social life was centered in Iraq. Mr. Linde credibly testified that, while it was becoming nearly impossible for him to work as a helicopter pilot in the United States, he could do so in Iraq for the foreseeable future.9 Mr. Linde did not work in any other country besides Iraq, and he spent two-thirds of each year in issue there. Mr. Linde’s economic ties to Iraq grew stronger over the years in issue. He opened a bank account there in 2010, and in 2012 he accepted a promotion from DynCorp. Moreover, Mr. Linde’s use of his free time in Iraq--socializing with other contractors and Iraqi interpreters, making physical improvements to his CHU, and visiting local markets and restaurants--evidences an effort to create a domestic and personal life for himself there.
We encountered similar facts involving a pilot in Cobb v. Commissioner, T.C. Memo. 1991-376, 1991 Tax Ct. Memo LEXIS 420. In Cobb, the taxpayer resided with his spouse and children in Alaska for several years before accepting a permanent transfer assignment in Japan. Id., 1991 Tax Ct. Memo LEXIS 420, at *3-*4. During the years at issue in that case the taxpayer lived in a Japanese hotel when he was not in transit; his family remained in the United States. Id. at *5, *7. While he did not participate extensively in Japanese cultural or social activities, he attended dinner parties with Japanese friends and was a member of the hotel’s swim club. Id. at *6. During flight layovers in Los Angeles, the taxpayer stayed with his family in Redlands, California.10 Id. at *7, *19. The taxpayer maintained a joint checking account with his wife in California. Id. at *8. His personal physician and dentist were also there. Id. at *9. After concluding that the Mr. Cobb had intended to become a resident of Japan, we held that he did not have an abode in the United States despite his U.S.-based family and “other substantial ties” to the United States. See id. at *15, *18-*19. While Mr. Cobb spent time in the United States with his family, such trips were “mere visits” and “limited by convenience and * * * [the taxpayer’s] flight schedule”. Id. at *19.
Mr. Linde’s ties to the United States were equal to those of Mr. Cobb. Both took permanent work assignments in foreign countries while their families remained in the United States. Like Mr. Cobb, Mr. Linde had limited opportunities to return to his family in the United States because of his work schedule and his employer’s demands.
Meanwhile, Mr. Linde’s ties to Iraq were stronger than Mr. Cobb’s ties to Japan. Mr. Linde exclusively occupied and even improved his living quarters, whereas Mr. Cobb lived in various hotel rooms. While Mr. Cobb had little contact with the Japanese community, Mr. Linde had regular contact with Iraqi citizens at work and socialized with several Iraqi interpreters during his free time. ..
The IRS (Respondent) also contends that Mr. Linde’s abode was in Alabama because he visited his family there and owned a home there. Respondent cites Mr. Linde’s Alabama driver’s license and voter registration as additional evidence of his ties to Alabama. However, Mr. Linde credibly testified about the lack of piloting opportunities in the United States, his desire to remain in Iraq indefinitely, and the effort he has made to create a domestic and personal life for himself there. We also credit Mr. Linde’s testimony that he would have preferred to meet his family in Europe but could not do so because of his son-in-law’s disability. In the light of this and other evidence, we find that Mr. Linde’s ties to the United States were not as strong as respondent contends. Petitioners’ ownership of a home in Alabama and Mr. Linde’s occasional visits there do not compel a different conclusion. The regulations explicitly state that “[m]aintenance of a dwelling in the United States by an individual, whether or not that dwelling is used by the individual’s spouse and dependents, does not necessarily mean that the individual’s abode is in the United States.” Sec. 1.911-2(b), Income Tax Regs. (emphasis added). Furthermore, temporary presence of the individual in the United States does not necessarily mean that the individual’s abode is in the United States. Id.
Considering the unique facts and circumstances of this case, including Mr. Linde’s continuous employment in Iraq up to the date of trial, we find that Mr. Linde’s ties to Iraq were stronger than his ties to the United States during the years in issue. We therefore hold that Mr. Linde’s abode was not in the United States and that his tax home was in Iraq.
The Court’s full account of the facts in Linde (available here: https://scholar.google.com/scholar_case?case=15108540579991505396&q=T.C.+Memo+2017-180&hl=en&as_sdt=6,39) along with the above analysis provide a very recent, helpful example on which a taxpayer might model his or her plans to successfully claim the Foreign Earned Income Exclusion. Contrasting these facts with Lock and Acone will improve one’s ability to plan on claiming the Foreign Earned Income Exclusion under the most recent authority.
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