T.C. Memo. 2000-365
UNITED STATES TAX COURT
JOSÉ ANGEL LUJÁN, Petitioner v
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 24268-97. Filed December 4, 2000.
José Angel Luján, pro se.
James P. Dawson and Tamara S. Moravia-Israel, for
respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
JACOBS, Judge: Respondent determined the following
deficiencies in petitioner’s Federal income taxes and an addition
to tax:
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Addition to Tax
Year Deficiency Sec. 6654
1993 $15,511 $651
1994 62,745 3,232
All section references are to the Internal Revenue Code in
effect for the years in issue.
The primary issue we must resolve is whether petitioner, an
Argentinean citizen, is subject to U.S. tax on compensation he
received during 1993 and 1994. Resolution of this issue requires us
to decide whether during 1993 and 1994 petitioner was a “resident
alien”, as that term is defined in section 7701(b)(1)(A), which in
turn requires us to determine whether petitioner meets the
“substantial presence test” of section 7701(b)(3) for those years.
If petitioner is subject to U.S. tax on the compensation he received
during 1993 and 1994, we then must resolve whether petitioner is
liable for the section 6654 addition to tax (failure to pay
estimated income tax) for 1993 and 1994.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The
stipulation of facts and the attached exhibits are incorporated
herein by this reference.
Background
Petitioner’s mailing address was in Buenos Aires, Argentina, at
the time he filed his petition contesting respondent’s
determination.
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Petitioner was born and raised in Argentina. He received a law
degree from the Universidad de Buenos Aires in 1971. In 1983, he
entered the United States on a student visa. Petitioner’s wife and
children accompanied him.
Petitioner took courses at the University of Texas and its law
school, receiving a master’s degree in comparative jurisprudence in
1984, and a master’s degree in Latin American studies in 1990.
After completing his studies, petitioner accepted employment as an
international attorney with an Austin, Texas, law firm. In
addition, he worked for law firms located in New York and
Washington, D.C.
At all relevant times, petitioner’s family lived in Austin. In
so doing, petitioner’s children were able to complete high school in
the United States.
Petitioner’s personal belongings, as well as several
automobiles that he and his wife owned, were located in Austin.
Petitioner and his wife each held a driver’s license issued by the
State of Texas. Petitioner also maintained an Argentinean driver’s
license.
At all relevant times, petitioner and his wife maintained
savings and checking accounts in Austin. Petitioner did not
maintain a bank account in Argentina.
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On May 3, 1993, petitioner was issued a B-1/B-2 visa (which
type of visa is issued to a nonresident alien for entry into the
United States for business purposes), expiring on May 2, 2003.
Consulting Work
Lone Star Power Argentina-I, L.P. (Lone Star), a U.S.
partnership, retained petitioner, as a consultant, in connection
with its procuring permission from the Argentinean Government to
construct and operate an electrical power plant in Santa Fe
Province, Argentina (located approximately 400 kilometers from
Buenos Aires). For these services, Lone Star agreed to pay
petitioner $15,000 per month and reimburse him for expenses he
incurred in connection with his travel to (and stay in) Argentina.
Petitioner performed the majority of his services for Lone Star
in Argentina. During his business trips to Argentina petitioner
stayed at various hotels, took cabs, and dined at restaurants.
During 1993, Lone Star paid petitioner $50,000 in compensation and
reimbursed him for his expenses.
Falcon Seaboard Power Corp. (Falcon Seaboard), headquartered in
Houston, Texas, replaced Lone Star with regard to the proposed
construction of the power plant project. On February 2, 1994,
petitioner and Falcon Seaboard entered into an agreement similar to
that which petitioner had entered into with Lone Star (i.e.,
petitioner received $15,000 per month as a consulting fee and
reimbursement for his out-of-pocket expenditures).
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In November 1994, Falcon Seaboard established a presence in
Argentina by organizing a wholly owned subsidiary, Falcon Seaboard
Argentina, S.A. (Falcon Seaboard Argentina). Falcon Seaboard
Argentina did not maintain an office in Argentina; rather, it
utilized the office of its attorney, Ernesto Galante (Mr. Galante),
in Buenos Aires, on a space-available basis.
Petitioner’s business cards showed petitioner’s business
address to be both that of Falcon Seaboard in Houston and that of
Mr. Galante in Buenos Aires.
During 1994, Falcon Seaboard paid petitioner $180,000 as a
consulting fee and an unspecified amount as reimbursement for his
hotel, taxi, and meal expenses in Argentina.
Over time, Falcon Seaboard realized that construction of the
power plant project was not feasible, and ultimately abandoned the
project.
After petitioner’s consulting services were terminated, he
returned to Austin. Prior to his termination, petitioner traveled
to Austin as often as possible to be with his family. The following
summarizes petitioner’s entrances to and exits from the United
States during 1993 and 1994 from petitioner’s and governmental
records:
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1993
Entry Entry Exit Out Exit out Exit Entry Exit out Days Total
into into of U.S. of U.S. out into of withi Days
U.S. per U.S. per per P’s per INS of Argentina Argentina n the withi
INS VISA Memo U.S. per per U.S. n the
per Passport Passport U.S.
VISA
01/15/93 01/16/93 15
days
02/02/93 02/02/93 02/01/93
02/07/93 02/08/93 6
days
02/16/93 02/16/93 02/15/93
03/22/93 03/23/93 35
days
03/28/93 03/28/93
04/20/93 04/21/93 24
days
05/28/93 05/27/93
07/13/93 07/14/93 47
days
08/13/93 08/12/93
08/25/93 08/26/93 13
days
10/01/93 10/01/93
10/26/93 10/27/93 26
days
11/19/93 11/19/93 11/19/93
12/01/93 12/02/93 13
days
12/18/93 12/18/93 12/18/93 14
days
193
days
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1994
Entry into Entry into Exit out Exi Entry Exit out Days Total Days
U.S. per U.S. per of U.S. t into of within within the
INS VISA per INS out Argentina Argentina the U.S.
of per per U.S.
U.S Passport Passport
.
per
VIS
A
01/30/94 02/01/94 30 days
02/19/94 02/19/94 02/18/94
03/04/94 03/05/94 14 days
03/24/94
04/03/94 10 days
04/12/94 04/12/94 04/11/94
04/24/94 04/24/94 13 days
04/26/94
05/01/94 5 days
05/08/94 05/08/94 05/07/94
05/16/94 8 days
06/18/94 06/17/94
07/02/94 15 days
07/16/94 07/16/94 07/15/94
07/27/94 07/28/94 12 days
08/05/94 08/05/94
08/25/94 08/26/94 21 days
09/16/94 09/15/94
10/10/94 25 days
10/22/94 10/22/94 10/21/94
11/01/94 11 days
11/23/94 11/23/94 11/22/94
12/02/94 10 days
12/21/94 11 days
185 days
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Argentinean Activities
At all relevant times, petitioner maintained an Argentinean
driver’s license. Beginning in July 1993, he served as an adviser
to the Argentinean military and was active in several Argentinean
political groups.
Absence of Filing 1993 and 1994 Tax Returns
Petitioner did not file U.S. or Argentinean income tax returns
for 1993 or 1994. Moreover, he did not pay any U.S. estimated
income taxes for these years.
Notice of Deficiency
In the notice of deficiency, respondent determined that
petitioner was a resident alien for 1993 and 1994, which required
him to file U.S. income tax returns for those years, reflecting the
compensation he received ($50,000 for 1993 and $180,000 for 1994).
Respondent further determined that for both years, petitioner was
liable for the section 6654(a) addition to tax for failure to pay
estimated income tax.
OPINION
In general, all U.S. citizens, wherever resident, and all
resident alien individuals (citizens of a foreign country), are
liable for income taxes imposed by the Internal Revenue Code,
whether the income received is from sources within or without the
United States. See sec. 1.1-1(b), Income Tax Regs. An individual
is a nonresident alien, and generally not subject to U.S. income tax
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on foreign source income, if the individual is neither a U.S.
citizen nor a U.S. resident. See sec. 7701(b)(1)(B). An alien
individual is treated as a U.S. resident for any calendar year if at
any time during the year that individual: (1) Is a lawful U.S.
permanent resident (the green card test); (2) meets the substantial
presence test; or (3) makes an election to be treated as a lawful
U.S. resident. See sec. 7701(b)(1)(A); sec. 301.7701(b)-1(b),
Proced. & Admin. Regs.
There is no evidence in the record that petitioner was a lawful
U.S. permanent resident or that he made an election to be treated as
a resident pursuant to section 301.7701(b)-4(c)(3)(v), Proced. &
Admin. Regs. Accordingly, petitioner is considered a resident alien
only if he meets the section 7701(b)(3)(A) substantial presence
test.
The substantial presence test is an objective test: an alien
individual is treated as a U.S. resident alien with respect to any
year in which the alien is present in the United States on at least
31 days during the current calendar year and for at least 183 days
during the current year and the 2 preceding calendar years,
calculated pursuant to a weighted formula.1 See sec. 7701(b)(3)(A).
1
Pursuant to sec. 7701(b)(3)(A), (1) each day of
presence in the current year is counted as a full day, (2) each
day of presence in the first preceding year is counted as one-
third of a day, and (3) each day of presence in the second
preceding year is counted as one-sixth of a day. See also sec.
301.7701(b)-1(c)(1), Proced. & Admin. Regs. In sum, the
applicable multipliers are:
(continued...)
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An individual is treated as present in the United States on any day
that the individual is physically present in the United States at
any time during the day. See sec. 7701(b)(7)(A). As such, the day
of entry into the United States and the day of departure from the
United States are both counted.
The parties disagree as to the number of days petitioner was
present in the United States during 1993 and 1994. Although
petitioner does not dispute the entry dates in the Immigration and
Naturalization Service records, he disagrees with several departure
dates that respondent utilizes. We believe the departure dates
utilized by respondent are accurate.
Petitioner contends that he was not physically present in the
United States for 183 days in either 1993 or 1994. Petitioner
maintains that at most, he was present in the United States for 171
days in 1993 and 164 days in 1994. Respondent, on the other hand,
maintains that petitioner was in the United States for 193 days in
1993 and 185 days in 1994.2 The record supports respondent’s
1
(...continued)
Current year = 1
1st preceding year = 1/3
2nd preceding year = 1/6
2
During opening statement at trial, respondent’s counsel
referred to petitioner being present in the United States for 158
days in 1994, whereas on brief, respondent refers to petitioner
being present in the United States for 185 days in 1994. The
record supports a finding that petitioner was present in the
United States for 185 days in 1994, see supra p. 7.
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calculations. In determining the number of days, petitioner
incorrectly failed to include the day of entry into the United
States and the day of departure from the United States.
On the basis of the record before us, we conclude that
petitioner meets the substantial presence test for both years in
issue; accordingly, petitioner is deemed a U.S. resident alien for
1993 and 1994 and is subject to U.S. tax on the compensation he
received.
We now turn our attention to whether petitioner is liable for
the section 6654 addition to tax for the years in issue. The
section 6654 addition is imposed on an individual taxpayer who fails
to make timely payments of estimated tax. An underpayment of
estimated tax exists if a tax payment for any of the four
installment period due dates (usually quarterly) is less than the
amount of taxes required to be paid each installment. See sec.
6654(b)(1). The amount of the addition is determined by applying
the applicable interest rate to the amount of the underpayment for
the period of time that the underpayment exists. See sec. 6654(a).
Petitioner failed to make any estimated tax payments in 1993
and 1994, and he does not qualify for any exception to the section
6654 addition to tax. Consequently, he is liable for the section
6654 addition to tax for both years as determined by respondent.
In reaching our holdings, we have considered all of the
arguments petitioner presented for contrary holdings (including
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petitioner’s claim that he qualifies for the “closer connection
exception” of section 7701(b)(3)(B) and section 301.7701(b)-2(a),
Proced. & Admin. Regs.) and, to the extent not discussed above, find
them to be not relevant or without merit.
To reflect the foregoing,
Decision will be entered
for respondent.