WHITE v. COMMISSIONER

The respondent determined a deficiency in income tax of the petitioner for the taxable year 1946 in the amount of $650.92. Except for a minor question concerning an alleged payment on account of the deficiency, the sole issue for our decision is whether, under section 116 (a) (2), Internal Revenue Code, as in effect during 1946, the petitioner was a bona fide resident of a foreign country or countries for a period of at least 2 years before the date on which he changed his residence to the United States.

FINDINGS OF FACT.

The petitioner, a native-born American citizen, resides at Ottsville, Pennsylvania, and filed his individual income tax return for the taxable year 1946 with the collector of internal revenue for the first district of Pennsylvania.

Desiring to become a foreign newspaper correspondent, in 1937 after residing a while in New York City the petitioner gave up his apartment, disposed of his furniture, his library, and other belongings and departed from the United States to go to Spain. Certain personal items, such as scrap books and photographs, were stored in New York City.

After service of approximately 6 months as an ambulance driver for the Spanish Nationalists, the petitioner secured positions as local correspondent for Reuters News Agency, the London Daily Express, and several other British newspapers. He had an apartment in Barcelona, Spain. Thereafter the petitioner resided in the following places, with various employers, during the periods shown:

      Period                  Headquarters              Employer

November 1938-July   Paris, France -----------   European Edition New
 1939.                                             York Herald-Tribune.

July 1939-February   Petitioner was present in
 1940.                 the U. S. during this
                       period.

March 1940-March     Budapest, Hungary -------   Overseas News Agency,
1941.                                              Columbia Broadcasting
                                                   System.

March 1941-October   Athens, Greece ----------   Overseas News Agency,
1941.                                              Columbia Broadcasting
                                                   System.

While residing in Paris the petitioner married a Spanish national and during July 1939 he and his wife returned to the United States for the sole purpose of enabling his wife to become an American citizen. Petitioner then had no intention of resuming his residence in the United States.

Upon their return to Europe, and in each succeeding place where he resided, the petitioner and his wife resided together in a common home, usually maintained in an apartment.

On April 25, 1941, the Greek troop train on which the petitioner was a passenger was strafed by a German warplane, with machine-gun and cannon fire. As a result, the petitioner suffered a wound resulting in a compound comminuted fracture of the right femur. This wound necessitated medical and surgical treatment of a type which could not be secured in wartorn Greece.

The petitioner was a virtual prisoner in Athens until about October 1, 1941, when he and his wife escaped from Greece and started their return to the United States. On October 12, 1941, the petitioner was admitted to Columbia Medical Center, New York City, for treatment which had been arranged by his then employer, the Columbia Broadcasting System, hereinafter referred to as C. B. S.

The petitioner remained under the treatment of the doctors at Columbia Medical Center until June 1942, when he entered the Lincoln General Hospital, Lincoln, Nebraska, for the purpose of securing the specialized surgical treatment necessary to straighten and restore his injured leg to usefulness.

The petitioner remained in the Lincoln General Hospital until September 1942 when he reported to C. B. S. in Washington, D. C., where he was detailed to duty as a radio commentator and news analyst.

Throughout the period that the petitioner was broadcasting from Washington, D. C., he continually requested that his employer assign him to Europe. These requests were refused because of the petitioner's physical condition. He continued to use crutches until October 1943. Thereafter, and until after August 1944, he occasionally used canes, and until July 1944 periodic X-ray examinations were made.

Petitioner's employment in Washington, D. C., continued for approximately 11 months, or until October 1943, when, although still a member of the foreign staff, petitioner left the payroll of C. B. S. and accepted a Neiman Fellowship at Harvard University, where he remained until June 1944.

During the 11 months he was in Washington, D. C., the petitioner earned approximately $10,000 from his employment and while at Harvard he received a stipend of $5,000. While at Harvard the petitioner engaged in research upon problems relating to the peace in the post-war period and completed a book entitled "The Long Balkan Night" which was published in 1944.

Some time during the period while the petitioner was in Washington, D. C., and at Harvard he was offered by C. B. S. an opportunity to go to London as a civilian rather than a military correspondent. This offer was refused by petitioner. In May 1944 the Chicago Daily News offered the petitioner a position as its correspondent in Moscow, Russia. This offer was accepted and the petitioner severed his connections with C. B. S.

On August 2, 1944, the petitioner left the United States and flew to Moscow, where he took up residence as an employee of the Chicago Daily News. Upon his arrival in Moscow the petitioner found that he had been rehired by C. B. S. under an arrangement with the Chicago Daily News. The petitioner was joined by his wife some time after his arrival. They maintained their home while in Moscow at the Metropole Hotel, the only living facilities available to foreigners in Moscow.

The petitioner maintained his residence in Moscow until April 26, 1945, when he was transferred to Rome, Italy, where he and his wife maintained a residence. From Rome the petitioner returned to the United States on May 27, 1946.

The petitioner was recalled to the United States for consultation with representatives of the Chicago Daily News, which paper had undergone a change of ownership. When the petitioner returned to the United States on May 27, 1946, it was his hope that he could secure a reversal of the decision of the Chicago Daily News to abolish the Rome bureau, and that he might return to Rome. The petitioner was unsuccessful in this, and instead was offered by the Chicago Daily News an opportunity to go to China. This offer was not accepted by the petitioner, and his counterproposal was not accepted by the Chicago Daily News.

By a letter dated May 2, 1947, the petitioner finally rejected the proposal to send him to China.

On July 8, 1946, the petitioner went off the payroll of the Chicago Daily News on an indefinite leave of absence. By this time he had also severed his relationship with C. B. S.

On August 21, 1946, petitioner purchased a home in Ottsville, Pennsylvania, into which he moved on September 7 or 9.

After his return to the United States the petitioner was a free-lance reporter, lecturer, author, and magazine writer, and at various times after October 1947 he took trips abroad for magazines and news publications.

The $2,750.01 in controversy was paid to petitioner as compensation for personal services performed by him without the United States.

The petitioner ceased to be a resident of a foreign country or countries at some time between October 1, 1941, and August 2, 1944, when he was in the United States.

The petitioner became a resident of a foreign country when he arrived in Moscow, shortly after August 2, 1944.

He continued to be a resident of a foreign country or countries until he abandoned his intention to return to Rome, which occurred not later than July 8, 1946.

On or before August 21, 1946, the petitioner became a resident of the United States.

The petitioner was not a bona fide resident of a foreign country or countries for a period of at least 2 years before the date in 1946 on which he reestablished his residence in the United States.

On November 18, 1948, petitioner made payment of $93.68 to be applied against his income tax liability for the year 1946.

OPINION.

BAAR, Judge:

To support his contention that he was a bona fide resident of a foreign country or countries for a period of at least 2 years before the date on which he reestablished his residence in the United States the petitioner puts forth two arguments. First, he argues that he was a resident of foreign countries continuously from 1937 to 1946, and that his presence in the United States during the period October 12, 1941, to August 2, 1944, for the purpose of securing medical treatment, did not constitute a break in his foreign residence. Our finding is to the contrary. In the alternative, the petitioner argues that he was a bona fide resident of foreign countries from August 2, 1944, at least until August 21, 1946, or until May 2, 1947. Whatever the date of the establishment of the petitioner's residence in the United States, which in our opinion occurred on or before August 21, 1946, we have found that not later than July 8, 1946, the petitioner ceased to be a resident of a foreign country.

The respondent also takes a position which we reject, although we sustain his determination of deficiency. He argues, first, that the petitioner did not become a resident of Moscow in 1944, and second, that his residence in Rome, if any, was terminated upon his return to the United States on May 27, 1946. Both of these contentions are opposed by our findings.

The question for our decision is one of ultimate fact, to be determined by the interpretation of the undisputed evidence, in the light of the applicable statute and implementing regulations, as in effect for the taxable year 1946, which are set out in the margin.1

The term "income from sources without the United States" is not defined in the quoted statute, but the situation here presented is governed by section 119 (c) (3), Internal Revenue Code, and section 29.119-7 (3), Regulations 111. As in effect during 1946, they provide that compensation for personal services performed without the United States is to "be treated as income from sources without the United States," regardless of the location of the employer.

The statute also lacks any definition of the term "residence," but the meaning of that term is explained at length in the quoted regulations. It has been stated that these regulations are "entitled to great weight," and that they are "especially authoritative." Commissioner v. Nubar, (C. A. 4, 1950) 185 F.2d 584, 587; Seeley v. Commissioner, (C. A. 2, 1951) 186 F.2d 541, 543. It is made clear by many decisions that the term is not to be confused with "domicile," and that it includes a temporary residence, where an extended stay is contemplated although there is at all times an intention thereafter to return to a former residence or to establish a new residence elsewhere. Even the absence of any "settled place of abode" does not preclude the existence of a "residence." Swenson v. Thomas, (C. A. 5, 1947) 164 F.2d 783. On the other hand, for the present purpose it has been held that "an intention to live in the place for the time being" is an essential element of "residence." Robert W. Seeley, 14 T.C. 175, 180 (1950).

It is also established that the term "residence" as used in this statute is to be interpreted in accordance with the legislative purpose, which was essentially to encourage our foreign trade by encouraging foreign employment of United States citizens. Seeley v. Commissioner, supra; Swenson v. Thomas, supra; White v. Hofferbert, (D. Md. 1950) 88 F.Supp. 457, 461, 462; Arthur J. H. Johnson, 7 T.C. 1040, 1046 (1946).

The term is best defined by the many and varied factual situations respecting which the application of this particular statute has been adjudicated in many cases, including, among others, those cited herein. For most recent decisions of this Court, see: Burlin B. Hamer, 22 T.C. 343; Fred H. Pierce, 22 T.C. 493.

The facts upon which we base our conclusion that the residence of the petitioner outside of the United States did not continue from 1937 to 1946, but was interrupted at some time between 1941 and 1944, are recited in our findings and need not be reviewed. At some time after he returned to the United States on October 12, 1941, in our opinion the petitioner abandoned his intention to leave this country otherwise than at some indefinite future date. He then ceased to be "a mere transient or sojourner" and became a resident, under section 29.211-2 of Regulations 111, and Commissioner v. Nubar, supra. His residence here continued until he left this country on August 2, 1944.

The requirements of the statute are not met by the fact that the petitioner was a resident of foreign countries for more than a period of 2 years, all of which elapsed "before the date on which he changed his residence" to the United States in 1946 — namely, within the period between 1937 and 1944. The statute refers to a change of residence "from such country to the United States." This requires that the significant 2-year period of foreign residence shall continue until it is terminated by the "change of residence" occurring during the taxable year.

The statutory "change" necessarily consists of two elements — first, the termination of the foreign residence and, second, the establishment of a residence in the United States — but there is no suggestion in the statute that these two events must be simultaneous. Nor is there any implication that the second event must have occurred before the period of foreign residence can be regarded as ended, which would in this case require that the petitioner's foreign residence must be deemed to have continued until his residence in the United States was established. It seems to be possible that an individual may for some time have no "residence" at all, as that concept is distinguished from that of "domicile."

By our finding that a residence in a foreign country was established shortly after August 2, 1944, we reject the respondent's contention that the petitioner intended only a temporary sojourn and not a permanent residence in Moscow when he went there in 1944, citing Ernest Rudolf Hertig, 19 T.C. 109 (1952). We conclude that this petitioner became a resident of Moscow in 1944 because he then intended to abandon his residence in the United States, if any, and thereafter to reside in Russia for "an extended stay," and elsewhere in Europe for an even longer period.

We sustain the respondent's determination of deficiency, however, upon the ground that the foreign residence was terminated before August 2, 1946, even though we reject his contention that it was ended on May 27, 1946, when the petitioner arrived in the United States. At that time and for some weeks thereafter the petitioner did not have the intention not to return, which is required to convert a physical departure from the country to an abandonment of a "residence" therein. Seeley v. Commissioner, supra. The requisite change of intention, however, had been completely accomplished on or before July 8, 1946.

When the petitioner was recalled from Rome in May 1946 it was his plan to persuade his employer to "resurrect" the Rome bureau and to send him back to Rome. But the petitioner was unsuccessful in this attempt, and was offered instead an opportunity to go to China, to which he gave consideration for some time. At some undisclosed date between May 27 and July 8, the petitioner apparently became convinced that his employer would not send him back to Rome. Thereafter he no longer had any intention or expectation of returning to Rome at any early date. The foreign residence therefore terminated at that time, within a period of less than the required 2 years.

The fact that the petitioner was continuously contemplating the possibility or probability of establishing a residence in some other foreign country, specifically China, did not serve to prolong his residence in Rome, nor to establish a residence in China or in any other foreign country. This precise question was decided in Richard H. Lovald, 16 T.C. 909, 914-915 (1951), which held that the taxpayer's residence in Honduras terminated about September 1945 while his alleged residence in China was not established until about March 1, 1946, even though in the interim the taxpayer definitely intended (or hoped) not to remain in the United States.

It is not necessary to our decision to find that the petitioner's residence within the United States began upon precisely the date of the termination of his residence in Rome. Such a distinction is not material under our view, but the petitioner relies upon the contention that he did not become a resident of the United States until after August 2, 1946. The evidence, however, fails to sustain this position.

We reject the contention that no residence in the United States was established until May 2, 1947, when the petitioner finally rejected the proposal to send him to China, and instead have found that the petitioner became a resident of the United States on or before August 21, 1946. Even though he did not for several days thereafter reside in the home which he then purchased, certainly on that date if not earlier, while he was looking for a home and considering the purchase, and perhaps on or before July 8, the petitioner adopted the required intentions to cease to be a mere sojourner and to make his home temporarily in the United States for the period necessary to resolve the problems which were delaying his anticipated resumption of a foreign residence.

Concerning the payment of $93.68, the respondent has indicated his acquiescence in the petitioner's claim that this amount should be credited against the deficiency. Unlike a payment made in discharge of an assessment, which reduces the amount of the deficiency to be determined by this Court, the payment here in question is being carried in a "suspense account," awaiting the assessment of the deficiency against which it is to be applied. Our decision, therefore, is that the respondent's determination of the amount of the deficiency is sustained.

Reviewed by the Court.

Decision will be entered for the respondent.