Docket No. 28012.

19 T.C. 109 (1952)


United States Tax Court.

Promulgated October 30, 1952.

Attorney(s) appearing for the Case

Wilford M. Burton, Esq., for the petitioner.

T. M. Mather, Esq., for the respondent.

Respondent determined deficiencies and delinquency penalties in petitioner's income tax liability as follows:

Year                                                Deficiency   Penalty

1947 --------------------------------------------      $724.85   $144.97
1948 --------------------------------------------       603.35      none

Respondent has conceded petitioner's freedom from liability for the penalty. The remaining issue is whether petitioner was a bona fide resident of Afghanistan during the years in controversy within the meaning of section 116 (a) (1) of the Internal Revenue Code, so as to permit the exclusion from gross income of salary earned and received there.


Petitioner is an individual now residing in Salt Lake City, Utah. He filed his Federal income tax returns for the years 1947 and 1948 with the collectors of internal revenue for the districts of Utah and Maryland, respectively. He is a citizen of the United States.

Prior to October 1946, petitioner was employed by the Union Pacific Railroad Company as a construction engineer and resided in Salt Lake City with his parents when not out of town on his job for the railroad. In March 1946, petitioner was divorced from his wife, who was awarded the custody and care of their two minor children. Petitioner was required to contribute monthly payments to the support of his children. By agreement, his former wife retained their rented home. Petitioner owned no real property in the United States and had no business ties there from 1946 to 1949.

Prior to his divorce, petitioner became interested in the advantages of a career in foreign service, and extensively discussed with his family, co-workers and supervisors the advisability of his undertaking a permanent career abroad. He expressed the intention at different times of going abroad and working enough years, ranging from 10 to 20 in his estimates, so that upon his return to the United States he could retire. He was advised that it would not be worth while to go into foreign service for a short time and then return to the United States after having severed his ties with local companies. He stated on many occasions that he would go into foreign service permanently, so that he might work up in a company, and that he would not return until he could do so without having to work here. It was immaterial to petitioner in which foreign country he was employed.

In 1945, petitioner corresponded with the office of the International Engineering Corporation in Denver, Colorado. In 1946, he traveled to Boise, Idaho, and personally contacted the office of Morrison-Knudsen Afghanistan, Inc. They referred him to San Francisco, California, to which he traveled. He made definite arrangements in San Francisco for the signing of a contract in New York, and discussed generally the possibilities of a career with the Morrison-Knudsen Company on any of their various projects in Afghanistan, in South America, or in the Pacific Islands.

Petitioner, his father and sister were all born in Switzerland. His father became a naturalized citizen of the United States. When petitioner mentioned to his sister that he was leaving the United States, she informed him that his citizenship would be derived from his father and that she thought he should check his status. He learned that it would take several months to get citizenship papers in his own name, and notified his sister of his intention not to postpone his going abroad under the contemplated contract with Morrison-Knudsen, as he expected to be gone so long that it would be unimportant. He hoped that his foreign career would eventually result in a contract and work in Switzerland.

On October 4, 1946, petitioner entered into an employment contract in New York with Morrison-Knudsen Afghanistan, Inc., for a 2-year period. The contract read partly as follows:

2. Place of Employment

The services of Employee shall be performed in Afganistan at any one or more of the places therein which may be designated by Employer, or, at Employer's option, at such other place or places outside said country which Employer may designate in connection with the performance of said construction contract.

* * * * * * *

12. Board and Lodging

Employer agrees to furnish Employee with Board and Lodging during the term of this contract or cash allowance in lieu thereof at Employer's option.

* * * * * * *

15. Income or Other Taxes

Employer will pay and not recharge to Employee income or any other taxes imposed by any country on salary earned by Employee under this Contract, other than taxes imposed by the United States of America or any state thereof.

* * * * * * *

Petitioner arrived in Kabul, Afghanistan, in the latter part of October 1946 and returned to the United States in October 1949, spending a few days less than 3 years abroad. Under the terms of the contract, he was originally employed as a recorder by the Company's engineering unit at a salary of $400 per month. The contract was amended to raise petitioner's salary to $450 per month and advanced him to the position of instrument man on May 1, 1947. Shortly after the expiration of the original contract, petitioner was approached by the construction superintendent and was asked if he would like to switch to the construction unit. He was told that he would receive a promotion in status and raise in pay. Accordingly, when the original contract expired, petitioner did not renew it, but terminated it, receiving his pay in rupees with an additional month's salary in lieu of vacation which he had not taken, and return transportation to the United States which had been withheld from his salary under the contract. On October 24, 1948, after a 2-week vacation in Pakistan, he returned and entered into an amendatory agreement extending his original contract for an additional 12-month period. Under further amendments, his position was changed to labor foreman and his salary raised to $500 per month. Amendments made on August 1, 1949, changed his position to carpenter foreman and raised his salary to $550 per month.

Petitioner felt that a foreign career offered more opportunity and advancement than an engineering career in the United States, because outside of the United States there were no experts to call in for special jobs, and therefore he would have the opportunity of doing them. He was one of three men who learned to speak and acquired a working knowledge of the Persian language, feeling that it would qualify him for advancement, and on occasion was used as an interpreter.

Board and lodging were furnished by the employer in accordance with the contract. The living quarters consisted of barracks. For the first two years petitioner lived in the desert, but spent the last year in the headquarters camp in Kandahar, Afghanistan. During this third year he was in charge of the headquarters camp. He had separate two-man quarters which he and his companion fixed up for an extended stay. They purchased a refrigerator, furniture, drapes, rugs, bedspreads, and curtains, put in extra windows and remodeled a china cupboard. His roommate brought an electric stove, dishes, and cutlery back from a vacation in the United States. Things were arranged so that they could entertain and prepare their own meals when they did not wish to eat at the mess hall. To the limited extent possible, petitioner participated in the social life available. Sometimes with the whole camp and sometimes with a selected group, he was invited to dinner by the Governor, the Major General of the Armies, and men with whom he worked as an interpreter. Every few months he spent a few days or a week end across the border in Pakistan where they had an officers' club and he could enjoy English conversation and the rudiments of civilization.

While in Afghanistan, petitioner wrote to his former wife, asking her to bring the family, remarry him, and live with him in Afghanistan. He offered to marry her in India, Africa, or France. She could not be reconciled to his foreign career and did not join him.

In 1949, Afghanistan withdrew a major part of the funds for the particular project upon which petitioner was working. Consequently, the project was abandoned, and petitioner's contract was terminated under an escape clause for such a contingency on September 19, 1949. Petitioner returned to Salt Lake City, Utah, where he has since remained. In answer to petitioner's request that he be transferred to a different foreign job, the construction manager promised him that as soon as the curtailment was over he could come back to the same job, but indicated that company regulations required workers to return to the point of origin and have new jobs assigned from there. Preferring to continue his career abroad without returning to the United States, petitioner cabled a friend who worked for the American-Arabian Company, and on his way back to Europe stopped off to discuss the possibilities of work with that company. He was informed that all contacts had to be made in the United States.

When petitioner's contract was terminated by Morrison-Knudsen, he left all of the personal property acquired in his quarters in Kandahar.

Petitioner returned to the United States in October of 1949 and successively contacted Morrison-Knudsen Company, Bechtel Corporation, Raymond Concrete Tile Company and the Atlas Construction Company. All were receiving cutbacks in their foreign work and informed petitioner that an assignment would not be available before the following summer. When the case was heard in May 1952, petitioner was still in Utah.

While petitioner was outside the United States, he received only $50 per month from his salary and deposited the balance in a bank account held jointly with his divorced wife in the Utah State National Bank, Salt Lake City, Utah.

During the taxable years 1947 and 1948, petitioner was not a bona fide resident of Afghanistan.


OPPER, Judge:

We have found as a fact that petitioner was not a bona fide resident of Afghanistan during the years in question. Under the statute as amended in 1942, that is the decisive issue. Prior to that time, it was necessary only for a taxpayer to show that he was a bona fide nonresident of the United States. Under that provision, perhaps petitioner's supposed intention to remain somewhere abroad for from "ten to twenty years" might have sufficed. But it must now appear that the taxpayer is a bona fide resident "of a foreign country," and the only country to which in this proceeding that phrase could apply would be Afghanistan.

Unlike the taxpayer in Charles F. Bouldin, 8 T.C. 959, this petitioner has demonstrated by his own testimony that he had no desire or intention of making Afghanistan his residence but that he went there because of his desire to spend his working life abroad and Afghanistan happened to be available at the time for this purpose. When his employment in Afghanistan ceased, his endeavor was to find some other job abroad, not necessarily to remain in Afghanistan. Equally distinguishable is Audio Gray Harvey, 10 T.C. 183 (acquiesced 1948-1 C. B. 2), where not only had petitioner for many years previously been employed abroad but where great stress is laid upon the fact that that petitioner was liable for payment of taxes in the foreign country and that such taxes were paid. This petitioner's only absence from the United States was from late 1946 to late 1949, so that the two years in controversy are his first and only full years away from home. And he not only paid no taxes in Afghanistan but under the contract his employer was bound to pay any that might arise.

Rather, we consider this proceeding governed by such cases as Downs v. Commissioner, 166 F.2d 504. Of that case, the opinion in White v. Hofferbert, (D. C. Md.) 88 F.Supp. 457, says:

* * * the taxpayers in that case were not entitled to the exemption because, as explained by Senator George, Chairman of the Senate Committee on Finance, in the Congressional hearings on the proposed amendment of 1942, the purpose of the amendment was so that "a non-resident American citizen who establishes a home, maintains his establishment and is taking on corresponding obligations of a home in a foreign country, may enjoy the exemption and * * * so that technicians, American citizens who are merely temporarily away from home could be properly reached * * *. [Emphasis added.]

We have made our finding because within that explicit legislative purpose we view petitioner as being no more than a "transient or sojourner"1 for a specific purpose and definite period in Afghanistan, without a home there or its "obligations," living in the company barracks, eating at the company mess, and who, on this record, was a "technician" merely temporarily away from home. See also Meso v. Viley (D. C. Idaho), 102 F.Supp. 173, where an employee of the same employer as petitioner's was involved.

Decision will be entered for the respondent for the deficiencies in income tax.


1. Regulations 111, section 29.211-2.


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