Docket No. 42594.

22 T.C. 343 (1954)


United States Tax Court.

Filed May 17, 1954.

Attorney(s) appearing for the Case

Edmund L. Browning, Jr., Esq., for the petitioners.

George C. Lea, Esq., for the respondent.

Respondent determined a deficiency in income taxes of petitioners for the taxable year 1948 in the amount of $2,796.04. The sole issue presented is whether petitioners were, during 1948, bona fide residents of China within the purview of the taxing statute.


The facts which were stipulated are so found, and, by this reference, made a part hereof. Additional facts found were adduced by oral testimony.

The petitioners, Burlin B. Hamer (hereinafter sometimes referred to as Burlin) and Marjorie A. Hamer (hereinafter sometimes referred to as Marjorie), are, and were, at all times relevant hereto, husband and wife. They filed their joint income tax return for the year here involved with the collector of internal revenue for the district of Maryland at Baltimore.

Prior to January 1, 1946, petitioners resided in Eldora, Iowa, where Burlin was employed by the Farmers Hybrid Seed Corn Company and Marjorie was employed as a teacher in the Eldora public school system. In late November 1945 Burlin resigned his job and accepted employment with the United Nations Relief and Rehabilitation Administration (hereinafter called UNRRA) with the knowledge and intent that he would be sent to some part of China. Burlin departed from the United States in February 1946 and arrived in China in March of 1946. In April 1946 Marjorie resigned her teaching position and became employed by UNRRA to work in China. She joined her husband in Kaifeng, China, in June 1946.

UNRRA was a temporary agency of the United Nations and was so regarded by the petitioners when they left for China. When Burlin accepted employment with UNRRA in China, his intention was to remain there for the duration of UNRRA, and, if possible, to find employment elsewhere in the foreign field. Marjorie went to China because she wanted to be with her husband.

Burlin had majored in agricultural economics and allied subjects in college and had worked in that field prior to his employment by UNRRA. He was employed by UNRRA as a farm management specialist. From December 1, 1947, until his departure from China in the spring of 1949, he was employed by the Food and Agricultural Organization of the United Nations (hereinafter called FAO) as an agricultural extension specialist.

Prior to their departure from Eldora, Iowa, petitioners occupied an apartment. Upon their departure, they sold their automobile and various heavy items of household furnishings. Other furnishings, including beds, small lamps, linens, pictures, and a piano, were stored with Marjorie's mother, with whom arrangements were made for the later shipment thereof to China at the petitioners' expense. All such shipments, excepting that of the piano, were completed.

Both petitioners continued to be employed by UNRRA in China on an indefinite basis until on or about December 1, 1947. Under the contracts or arrangements pursuant to which they were so employed, they were guaranteed certain rights, including that of being repatriated at UNRRA expense, provided they worked for at least 1 year. On or about November 30, 1947, UNRRA ceased to function in China. Both petitioners sought and obtained employment with FAO, for which organization they continued to work until they were separately repatriated in the spring of 1949. Both petitioners went to work for FAO pursuant to written contracts which were of 6 months' duration, and which gave them many of the same rights which they had with UNRRA, including the right to be repatriated at the end of the 6 months. Such contracts were both renewed for 19 additional months as of June 1, 1948. The petitioners were repatriated before the expiration of this 19-month period, from Canton, China, in the face of advancing Chinese Communist forces. Before the petitioners were employed by FAO they knew the Communists were taking over much of China, and that the duration of their employment with FAO might be limited by that development.

When Burlin arrived in Shanghai, he was sent up to Kaifeng where he lived until June 1946 in housing provided by UNRRA. Thereafter, following the arrival of his wife, the two lived together in a house they rented in the Baptist Compound until the fall of 1946, when the missionary entitled thereto claimed it. Petitioners then occupied other quarters within the Baptist Compound along with other members of UNRRA, which quarters were furnished rent free by UNRRA, until the spring of 1947, at which time they were ordered moved into the UNRRA hostel.

Upon termination of UNRRA in December 1947 petitioners did not request return to the United States but went to Shanghai and were sent by their new employer, FAO, to Nanking, where they arrived during December 1947. Following their arrival at Nanking, petitioners lived for a time in quarters supplied rent free by FAO. About June 1, 1948, they rented a house for 1 year without signing a lease, paying monthly rent of $300 in advance and giving postdated checks. These checks were required to cover the subsequent months. As of November 19, 1948, the progress of the Communists in China had developed to the point that FAO issued a memorandum, dated November 19, 1948, wherein it alerted its personnel, including the petitioners, to that condition; and wherein it was stated that "any staff members who do not feel they wish to continue under current conditions, or find it impossible to do effective work, could be repatriated to their homes." Petitioners left Nanking in November 1948 on 72 hours' notice, being evacuated by destroyer escort. They abandoned their furniture ahead of the advancing Communist forces, and returned to Shanghai. They then proceeded to Canton. Marjorie continued to be employed by FAO until March 15, 1949, leaving China for the United States in April. Burlin left China for the United States in late May 1949.

During the periods when petitioners had their own housing, and after their furniture arrived, they used it, together with more they had made in Nanking, to furnish such quarters. It was their understanding that they did not have to rent their own housing or provide their own furniture. Upon petitioners' return to this country in 1949, they came to Washington, D. C., and purchased an interest in a cooperative apartment, which they sold, and purchased (in common with a friend) a house in Fairfax County, Virginia, in 1953.

After his return to this country, Burlin did not seek employment at home. He found employment, first as United States Agricultural Attache in Moscow, then with United Nations Korean Reconstruction Administration, where he was employed, in connection with the rehabilitation of Korean agriculture, at the time of the hearing.

Petitioners did not abandon their church membership nor Burlin his lodge membership in Eldora when they departed in 1945 and early 1946. Nor did they close their joint bank account. While in China, Burlin studied Chinese. This was not required by his employer. He also became affiliated with a masonic club, of which the members were both occidental and oriental. Marjorie, while in China, affiliated herself with the YWCA, and taught Sunday school when the opportunity presented itself. She also instrucetd Chinese students in shorthand. Petitioners found no church of their denomination with which to affiliate. They attended such services of other denominations as they could understand.

While in China the petitioners caused most of their salaries, which were in American dollars, to be deposited to their joint credit in a bank in Eldora, on which account Marjorie's mother, who had a power of attorney, occasionally drew to pay some of their fixed expenses such as insurance.

At the time of their departure from the United States, petitioners understood and intended that they were setting out for a period overseas of indefinite but protracted duration. The petitioners did not leave this country for China because of any dislike for the United States. They each traveled on an American passport in which his and her address was set forth as Eldora, Iowa, in the United States. Before the time limits specified in their respective passports expired, each obtained an extension of such time limit through an American consul in China.

While in China neither of the petitioners applied for naturalization or citizenship there. They did not purchase a house, nor did they pay any taxes to the Republic of China during their stay there. When the petitioners returned to the United States from China they were reimbursed for the cost of their return transportation, as provided in their contracts of employment.

Based upon the foregoing facts, we find as an ultimate conclusion of fact that petitioners were bona fide residents of China during the entire year 1948.



It is undisputed that petitioners were citizens of the United States and that the income in question was derived from sources outside thereof. The sole controversy to be resolved by us is whether petitioners were bona fide residents of China during the entire taxable year 1948 so as to be entitled to the exemption provided in section 116 (a) (1) of the Code.1

The tests to be employed, in determining the applicability of the provision in question to the petitioners, are those generally applicable in ascertaining the residence or nonresidence of aliens in the United States. S. Rept. No. 1631, 77th Cong., 2d Sess. (1942), p. 116. C. Francis Weeks, 16 T.C. 248; Seeley v. Commissioner, 186 F.2d 541, affirming in part and reversing in part 14 T.C. 175. See also Regs. 111, sec. 29.116-1. Such criteria are given in Regulations 111, section 29.211-2, as follows:

An alien actually present in the United States [China] who is not a mere transient or sojourner is a resident of the United States [China] for purposes of the income tax. Whether he is a transient is determined by his intentions with regard to the length and nature of his stay. A mere floating intention, indefinite as to time, to return to another country is not sufficient to constitute him a transient. If he lives in the United States [China] and has no definite intention as to his stay, he is a resident. One who comes to the United States [China] for a definite purpose which in its nature may be promptly accomplished is a transient; but if his purpose is of such a nature that an extended stay may be necessary for its accomplishment, and to that end the alien makes his home temporarily in the United States [China], he becomes a resident, though it may be his intention at all times to return to his domicile abroad when the purpose for which he came has been consummated or abandoned. An alien whose stay in the United States [China] is limited to a definite period by the immigration laws is not a resident of the United States [China] within the meaning of this section, in the absence of exceptional circumstances. [The word "China" appearing in brackets is added to facilitate adjustment of the section to the present case.]

Respondent leans heavily on Richard H. Lovald, 16 T.C. 909, which case also involved an employee of UNRRA who served in China. There are, however, vital differences. Unlike petitioner in the present case, Lovald's service was terminated when UNRRA ceased to operate and he returned to the United States in December 1947. This Court ruled that "assuming a bona fide residence in China it is not shown to have been for the entire year 1947," with the consequence that the statutory period of residence was not satisfied. As appears in our Findings of Fact, the situation here present is very dissimilar. The Lovald case is no authority here.

The case of Ernest Rudolf Hertig, 19 T.C. 109, is also distinguishable and of no controlling authority on the present facts. In that case, the taxpayer went to Afghanistan to work upon a construction project carried on by an American corporation. Pursuant to his contract therewith, board and lodging were furnished by the employer. The living quarters consisted of barracks located in various labor camps. The taxpayer was unaccompanied by any portion of his family and returned to this country following the abandonment of the project prior to completion. In the instant case, although petitioners originally went to China with UNRRA, a temporary agency, they did not return to the United States when UNRRA was terminated but became associated with FAO and throughout the year here involved both were employees of that organization. The latter we may judicially notice as a permanent specialized agency of the United Nations with permanent headquarters in Rome, Italy, the purposes of which are to raise nutrition levels and standards; to secure improvements in production and distribution of food and agricultural products. As such permanent international agency, it had undertaken work in China that by its very nature and purpose was incapable of being assigned a definite completion date such as is true in the case of any single construction project, and which, but for the Communist activity and military domination, would undoubtedly still be carried on. Petitioners' intentions were also indefinite inasmuch as Burlin intended at the outset and throughout the period involved to remain in this type of work as long as such was available and then to seek work of a like nature in the same general area of the Far East. The short-term contracts under which both petitioners served during the taxable year are not particularly significant since, in view of the indefinite period for which the work of FAO was intended to be carried on, they were renewable indefinitely. Moreover, both petitioners took part to some degree in the social activity of the community. Although their employer was, at all times, obligated to furnish them with living quarters, petitioners did, in fact, for a time, furnish their own and establish a home. The employer was not obligated to provide board. Nor apparently did it do so at any time. A careful weighing of the evidence here, following a close study of the criteria considered pertinent in resolving the question before us (see also 51 Col. L. Rev. 378), leads us to conclude that petitioners were, during the taxable year, bona fide residents of China, within the scope and intendment of the pertinent statute and the regulations promulgated thereunder.

The question presented is essentially one of fact, David E. Rose, 16 T.C. 232; Audio Gray Harvey, 10 T.C. 183; Charles F. Bouldin, 8 T.C. 959; and our ultimate finding set out above is dispositive thereof. No useful purpose is to be served by a repetition or further discussion of the facts leading us so to conclude. They are fully stated in our findings. It is sufficient to say that in our judgment those appearing on the present record, when measured by the criteria to which we have adverted, distinguish the instant case from Arthur J. H. Johnson, 7 T.C. 1040; Michael Downs, 7 T.C. 1053, and others of like import. On the other hand, the facts bring it within the scope of such cases as Charles F. Bouldin, supra; Audio Gray Harvey, supra; and Swenson v. Thomas, 164 F.2d 783.

Reviewed by the Court.

Decision will be entered under Rule 50.



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 RESIDENTS 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 constitute earned income as defined in paragraph (3); but such individual 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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