T.C. Summary Opinion 2009-183
UNITED STATES TAX COURT
NANCY BADAYOS MAGIMOT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1590-08S. Filed December 3, 2009.
Keith S. Blair, John B. Snyder, and Jean Hartman (student),
for petitioner.
Noelle C. White, for respondent.
DEAN, Special Trial Judge: This case was heard under the
provisions of section 7463 of the Internal Revenue Code in effect
when the petition was filed. Pursuant to section 7463(b), the
decision to be entered is not reviewable by any other court, and
this opinion shall not be treated as precedent for any other
case. Unless otherwise indicated, subsequent section references
- 2 -
are to the Internal Revenue Code in effect for the years at
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
Respondent determined deficiencies in petitioner’s Federal
income taxes of $9,454 for 2003 and $8,856 for 2004. The issue
for decision is whether petitioner was eligible for an exemption
from income tax in 2003 and 2004 under the Convention With
Respect to Taxes on Income, U.S.-Phil., art. 21, Oct. 1, 1976, 34
U.S.T. 1277 (article 21).
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the exhibits received into evidence
are incorporated herein by reference. When petitioner filed her
petition, she resided in Maryland.
Petitioner electronically filed Forms 1040, U.S. Individual
Income Tax Return, for 2003 and 2004. On Schedule A, Itemized
Deductions, for 2003, she deducted $1,548 of State and local
income taxes and $55,174 of income as tax exempt under article
21. On Schedule A for 2004, she deducted $1,319 of State and
local income taxes and $55,096 of income as tax exempt under
article 21.
On November 2, 2007, respondent issued to petitioner a
notice of deficiency disallowing the article 21 deductions for
- 3 -
2003 and 2004 and the State and local income tax deduction for
2004.1
Petitioner is a citizen of the Philippines and is trained as
an educator with teaching experience in both the United States
and the Philippines. In 2002 the Ravenswood City School District
(Ravenswood) in California interviewed her in the Philippines and
hired her to teach in the United States. Petitioner agreed to
teach at Ravenswood and signed a 3-year teaching contract.
The Amity Institute (Amity), a nonprofit organization that
sponsors international educators to teach at schools in the
United States, agreed to sponsor petitioner’s teaching visa for a
3-year term. On May 13, 2002, petitioner signed a 3-year
contract with Amity for its services.
Petitioner then applied for an exchange visitor (J-1) visa,
requesting a 3-year period from July 25, 2002, through July 24,
2005. She was issued a visa effective June 3, 2002, through July
24, 2005.
Petitioner arrived in the United States on August 9, 2002,
and from August 2002 through June 2006 she taught at Ravenswood.
In 2003 and 2004 petitioner earned $55,174 and $55,096,
respectively, and on Schedule A she reported a miscellaneous
itemized deduction of $55,174 for 2003 and $55,096 for 2004.
1
Respondent also disallowed the standard deduction for 2003.
Respondent concedes that petitioner is entitled to the standard
deduction for both 2003 and 2004.
- 4 -
For 2003 and 2004 respondent determined that petitioner’s
Ravenswood salary was taxable income.
Discussion
Generally, the Commissioner’s determinations in a notice of
deficiency are presumed correct, and the taxpayer has the burden
of proving that those determinations are erroneous. See Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In certain
circumstances, however, section 7491(a)(1) places the burden of
proof on the Commissioner. Petitioner has not alleged that
section 7491 is applicable, nor has she established compliance
with the requirements of section 7491(a)(2)(A). Therefore, the
burden of proof does not shift to respondent.
The interpretation of treaty provisions must begin with the
language of the treaty. N.W. Life Assurance Co. of Can. v.
Commissioner, 107 T.C. 363, 378-379 (1996). The role of the
judiciary in interpreting treaty provisions is to decide their
underlying intent or purpose. Estate of Silver v. Commissioner,
120 T.C. 430, 434 (2003). The Court therefore will begin its
analysis by examining the treaty itself. Article 21, Teachers,
provides:
(1) Where a resident of one of the Contracting States
is invited by the Government of the other Contracting State,
a political subdivision or local authority thereof, or by a
university or other recognized educational institution in
that other Contracting State to come to that other
Contracting State for a period not expected to exceed 2
years for the purpose of teaching or engaging in research,
or both, at a university or other recognized educational
- 5 -
institution and such resident comes to that other
Contracting State primarily for such purpose, his income
from personal services for teaching or research at such
university or educational institution shall be exempt from
tax by that other Contracting State for a period not
exceeding 2 years from the date of his arrival in that other
Contracting State.
Respondent contends that petitioner fails to qualify for
benefits under article 21 because she did not establish that she
came to the United States “for a period not expected to exceed 2
years for the purpose of teaching”. In support, respondent cites
the Treasury Department Technical Explanation of article 21.
Treasury Department Technical Explanation of the Convention
Between the United States and the Philippines, 1984-2 C.B. 412,
424 (Treaty explanation). The Treaty explanation for article 21
states that “if the period of the visit had been expected to
exceed two years then the exemption does not apply to any of the
income earned.” Id. The plain language and the Treaty
explanation of article 21 specify that petitioner must establish
that she agreed to teach in the United States “for a period not
expected to exceed 2 years”. Id.
In support of her contention that she did not expect her
stay in the United States to exceed 2 years, petitioner alleges
that the length of the Amity contract and the term of her visa
stay are not indicative of her expectation. She asserts that she
was required to sign a 3-year contract with Amity because Amity
- 6 -
did not offer contract terms for less than 3 years and she was
unaware that she could request a visa for less than 3 years.
Petitioner testified that she did not expect to remain in
the United States for over 2 years. During her first 2 years in
the United States her family remained in the Philippines, and she
visited them during her winter and summer breaks. She signed
only yearly apartment leases in the United States, and in 2004
she purchased a home in the Philippines.
Notwithstanding whether petitioner had a choice regarding
the length of the Amity contract, she signed the contract. The
contract indicates that she expected to remain in the United
States for a period to exceed 2 years. Petitioner alleges that
had she not signed the contract, she would not have been able to
teach in the United States. But she did not provide the Court
with any credible evidence, beyond her testimony, demonstrating
that it was Amity’s policy to restrict contract offers to a 3-
year term. By signing a 3-year contract, petitioner acknowledged
that she would stay in the United States for more than 2 years.
Without more, the Court cannot find that she expected to remain
in the United States for less than 2 years.
In addition, petitioner applied for a visa and requested a
3-year term, indicating that she would remain in the United
States for over 2 years. The Amity contract and petitioner’s
request for a visa, both of which were in effect for a 3-year
- 7 -
period, indicate that petitioner expected to stay in the United
States for more than 2 years.
The record also indicates that Ravenswood expected
petitioner to teach at the school for 3 years under their
agreement.
The foregoing evidence indicates that all parties involved--
petitioner, Amity, and Ravenswood--expected petitioner’s stay in
the United States to extend for more than 2 years. Therefore
petitioner is not entitled to the benefit under article 21, and
respondent’s determination is sustained.
Other arguments made by the parties and not discussed herein
were considered and rejected as irrelevant, without merit, or
moot.
To reflect the foregoing,
Decision will be entered
under Rule 155.