Docket Nos. 8728, 8729.

9 T.C. 142 (1947)


United States Tax Court.

Promulgated July 31, 1947.

Attorney(s) appearing for the Case

John Moore Robinson, Esq., for the petitioners.

A. J. Hurley, Esq., for the respondent.

Respondent has determined deficiencies in income tax for the calendar year 1943 against the petitioner in each of these proceedings in the sum of $564.80. The proceedings were consolidated for hearing and decision. The issue presented is whether or not income earned by petitioner Dudley A. Chapin for services performed for an American contractor at an Army base in Ireland is exempt from tax under section 116 of the Internal Revenue Code.


The petitioners are husband and wife and citizens of the United States, residing in San Luis Obispo, California. They filed original and amended income tax returns for the year 1943 with the collector of internal revenue for the sixth district of California. The word "petitioner" when hereinafter used will refer to Dudley A. Chapin.

In 1942 Lockheed Aircraft Corporation contracted with the Federal Government to organize, equip, and operate an aircraft base in North Ireland. Prior to July 1, 1942, petitioner entered into a contract with Lockheed Overseas Corporation (hereinafter referred to as "Lockheed") in which he agreed to perform services for the corporation at an aircraft base to be operated by it in the British Isles. Petitioner was a truck driver. The contract provided, inter alia, as follows:


Contractor employs Employee to render services in connection with said aircraft depot with such duties as reasonably may be assigned to him, and Employee accepts such employment with knowledge of the conditions recited above. Subject to the terms and conditions hereinafter set forth, Employee's employment hereunder shall commence when he reports for duty at a point within the United States to be designated by Contractor, at the time and place designated by Contractor, and shall continue until November 1, 1942, or such later date as may be agreed upon and thereafter until sixty (60) days after return transportation to the United States is made available by Contractor, it being understood that such return transportation shall be made available on November 1, 1942, or the later date agreed upon or as soon thereafter as is practicable under the circumstances then existing.


During the time that Employee is employed hereunder and remains at the place or places of his duty outside the United States, Contractor shall furnish or cause to be furnished, without cost to Employee, such adequate food, lodging, special clothing and equipment, medical, nursing, and hospital services and treatment and recreational facilities as circumstances may reasonably permit.

Employee shall submit prior to departure and from time to time during his employment to such vaccination, inoculation, and/or any other medical, dental, surgical, nursing, and/or hospital treatment, preventative or curative, as the Contractor or other medical staff at the destination or elsewhere may from time to time specify, without expense to Employee.

Contractor may direct the return to the United States of Employee, if in Contractor's judgment Employee's health condition is unfavorable.

Pursuant to this contract, petitioner on June 29, 1942, sailed from New York for North Ireland, where he arrived about July 17, 1942, and entered the country on a limited visa as an employee of Lockheed Overseas Corporation. Following his arrival in North Ireland, he continually from that date until his return to the United States in July 1944 was employed by Lockheed at the aircraft base near Belfast, North Ireland.

On or about November 1, 1942, the expiration date of petitioner's contract with Lockheed was extended by agreement of the parties to May 1, 1943. At the expiration of this time, he entered into a new contract with Lockheed, which provided, inter alia, as follows:


Contractor employs Employee to render services in connection with said aircraft depot with such duties as reasonably may be assigned to him, and Employee accepts such employment with knowledge of the conditions recited above. The term of Employee's employment hereunder shall * * * continue, subject to the terms and conditions hereinafter set forth, for (i) the duration of the contract between the Government and Lockheed as from time to time extended and for such period after the termination or completion of said contract as Contractor may, in respect of such Employee, deem necessary for the winding up of the operations carried on under said contract after such termination or completion; and (ii) thereafter until return transportation to the United States for such Employee is made available by Contractor or by the Government to Contractor which transportation Contractor shall use its best efforts to obtain as promptly after the end of the period described in the foregoing clause (i) as is practicable under the circumstances then existing; * * *

Through the period of petitioner's stay in North Ireland and during the entire taxable year 1943 he lived in hutments provided by Lockheed and his meals were furnished by Lockheed at a regular employees' mess located on the base. Petitioner, together with other Lockheed employees in Ireland, was at all times subject to military jurisdiction and discipline, and was not at liberty to come and go as he pleased and was required to secure military passes to leave the base. He was also subject to the control of military police and was on call and available for duty 24 hours a day.

Petitioner received as compensation for personal services rendered to Lockheed in North Ireland during the taxable year 1943 the sum of $5,850, of which sum 90 per cent was deposited by Lockheed to the account of petitioner in the California Trust Co. of Los Angeles.

No income taxes were paid by petitioner to any foreign government for the taxable year 1943. The laws of Great Britain governing immigration into North Ireland would not have permitted the petitioner to remain in North Ireland indefinitely or to become a resident thereof. At no time did petitioner make application to become a citizen of North Ireland or a British subject, and at all times he intended to retain his American citizenship. When the Lockheed overseas project was completed in 1944, the United States Army transported the petitioner back to the United States, where he rejoined his wife in California. Throughout the entire period petitioner remained overseas, his wife resided at Pismo Beach, California.

The petitioner, Dudley A. Chapin, at all times during the taxable year 1943, was domiciled in the State of California, and his earnings received from the Lockheed Overseas Corporation during that year in the amount of $5,850 were the community income of Dudley A. Chapin and Leola B. Chapin, his wife. The petitioner, Dudley A. Chapin, was not a bona fide resident of a foreign country during the taxable year 1943.


LEECH, Judge:

The issue is determined by the ultimate fact as to whether petitioner Dudley A. Chapin was a bona fide resident of the British Isles during the year 1943 within the provisions of section 116 of the Internal Revenue Code.1 The determinative underlying facts established by the record are almost identical with those considered by us in Arthur J. H. Johnson, 7 T.C. 1040; Michael Downs, 7 T.C. 1053; and Ralph Love, 8 T.C. 400. Indeed, the petitioners in the last two cases cited were fellow-employees of this petitioner and had gone to North Ireland in the employ of the Lockheed Overseas Corporation under contracts identical to the one executed by the petitioner, and performed services for Lockheed under the same rules and regulations governing this petitioner.

There is only one difference between the evidence in this case and that in the cited cases. The petitioner here testifies, with some qualifications, that when he proceeded to Ireland under the Lockheed contract it was his intention to remain there permanently. This testimony is less than convincing. It is difficult to believe in view of the fact that he admits that he had never been to Ireland, that he knew nothing of the country except what he had read, and that the pay of workers in Ireland was far below that received by them in the United States. Moreover, it would have been impossible for him to have remained in Ireland, since he was not permitted to stay after the expiration of his contract and the termination of the visa period.

We hold that petitioner is concluded by the Johnson, Downs, and Love cases cited above, and that he was not a bona fide resident of the British Isles during 1943.

Decisions will be entered for the respondent.



In addition to the items specified in section 22 (b), the following items shall not be included in gross income and shall be exempt from taxation under this chapter:


(1) FOREIGN RESIDENT FOR ENTIRE TAXABLE YEAR.—In the case of an individual citizen of the United States, who establishes to the satisfaction of the Commissioner that he is a bona fide resident of a foreign country or countries during the entire taxable year, amounts received from sources without the United States (except amounts paid by the United States or any agency thereof) if such amounts would constitute earned income as defined in section 25 (a) if received from sources within the United States; but such individuals shall not be allowed as a deduction from his gross income any deductions properly allocable to or chargeable against amounts excluded from gross income under this subsection.

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