T.C. Mem o. 2 01 5- 24 8

UNITED STAT ES TAX COURT SAMUEL STRIKER, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 27 88 4- 13 . Fi le d Dec em be r 28 , 20 15 .
Tho m as A. Klug , forpe ti ti on er. Ro be rt D. Hei tm ey er, fo r res po nd en t.

MEMORANDUM OPINION LAUBER, Ju dg e: The In te rn al Rev enue Serv ic e (IR S o r res po nd en t) d et erm in ed , for

20 10 an d 2 01 1, re sp ect iv el y , def ic ie nc ie s i n p et it io ne r’s Fed eral in co m e ta x o f $2 4,9 37 an d $ 26 ,63 6 a ndaccu racy-rela te d p en al ti es of $ 4,9 87 an d $5 ,32 7. Th e p art ie s fi le d ast ip ul at io n o f se tt le d i ss ue s b y whi chres po nd en t co nced edth e p en al ti es . The s ol e rem ai ni ng qu es ti on forde ci si on is whet he r pe ti ti on er- 2 -

[* 2] is en ti tl edto ex cl ud e fro m gro ss in co m e, as “ fo rei gnearn edin co m e” u nd er se ct io n 9 11 (a), the wage s h e earne d wh il e d ep lo y edto th e NorthAtl an ti c Treat y Org an iz at io n (NATO) m is si on inAfgh an is ta n. Becaus e we fi ndth atpe ti ti on er 1 was anem

pl oyee of th e Uni te d S ta te s wh enpe rfo rm in g t he se servi ces , we ho ld th atsec ti on 91 1( b) (1 )(B) (ii ) pr ev en ts hi s co m pe ns at io n fr om

be in g c ha ract eri zed as “ fo rei gn earn edin co m e.” Bac kg ro un d Thi s ca se was s ub m it te d fu ll y st ip ul at edun de r Ru le 12 2. Th e st ip ul at ed fact s an d e xh ib it s ar e in co rp or at edby thi s re fere nc e. Pet it io ne r res id edinMi ch iga n wh enhe pe ti ti on edth is Co urt. Pet it io ne r, a U.S. cit iz en , is a so ci al sci en ti stwith aPh .D. inhi s fi el d. Du rin g 2 01 0 a nd20 11 he pe rfo rm edservi ces as aciv il ia n dur in g t wo d ep lo ym en ts to Afg hani st an . The fi rs t d ep lo ym en t ra n fr om Octo be r 20 09 to Nov em

be r 20 10 , th e se co ndfro m

Nov em be r 20 10 to Octo be r 20 11 . Duri ng bo thde pl oym en ts he se rv edinun it s l edby NATO comm an de rs .

Unl es s s ta te d o th erwi se , all st atut ory refe ren ces are t o t he Int ern al Rev enue 1 Co de as i n e ffec t fo r th e ta xabl e y ears inis su e. All Ru le refe ren ces are t o t he Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. W e ro un d a ll m on et ary am ou nt s t o t he ne ares t d ol la r.- 3 -

[* 3] NATO curre nt ly has 48 m em be rs , in cl ud in g t he Uni te d S ta te s. NATO is fund edby dire ctan d i nd ire ctco nt rib ut io ns fro m it s m em be rs . Direc t co ntrib ut io ns co ve r th e ex pe ns es of NATO co m m an d s tru ctur es , all ianc e-wi de co m m un ic at io ns syste m s, NATO-wid e ai r de fen se , andsi m il ar fi xe d c os ts . Mem be rs co nt rib ut e to NATO ind ire ct ly by

pa rti ci pa ti ng inNATO-ledmis si on s an d o pe rat io ns . Whe nev er a m em

be r co un try vo lu nt eers m il it ary fo rces or c iv il ia n c on su lt an ts to pe rfo rm ina NATO-ledop erat io n, tha t m em be r co un try ty

pi cal ly pay s the co st s o f de pl oyin g i ts pe rs on ne l. NATO con du ct edit s m is si on inAfgh an is tan t hr ou gh a bo dy kn own as t he In te rn at io na l Se cu rit y

Ass is ta nc e Fo rce (I SAF). The NATO-ISAF m is si on was pa rt o f anov eral l ef

fo rt b y th e in te rn at io na l co m

m un ity m an da te d b y

th e Uni te d Nati on s Se cu rit y

Co un ci l. The ob

jecti ve of t hi s m is si on was t o e nabl e th e Afg ha n Gov ern m en t t o p ro vi de effe ct iv e se cu rit y acro ss th e co un try andth us co m ba t t erro ris m . NATO -ISAF d iv id edAfgh an is ta n i nt o fi ve di st in ctreg io na l co m m an ds an d a ss ig ne d o ne or m or e m em be r co un tri es to supe rv is e eac h re gi on al co m m an d. Pet it io ne r wis he d t o e m

pl oy his so ci al sci en ce s ki ll s t o a ss is t the NATO m is si on inIraqor Afg ha ni st an . He acco rd in gl y ap pl ie d t o t he U.S. Departm en t o f th e Arm y (Arm y ), a m il it ary de pa rtment wi th in th e Dep art m en t o f Defen se (DoD), with t he go al of o bt ai ni ng a po si ti on th atwou lden ab le hi m to parti ci pa te inon e o f- 4 -

[* 4] th es e co al it io n e ffo rts . The Arm y acce pt edpe ti ti on er fo r de pl oym en t an d subs eque nt ly ass ig ne d h im to a NATO po stinAfgh an is ta n. Afte r he was a ccep te d b y th e Arm y , pet it io ne r wen t t o F ort Lea ve nwo rth , Kan sa s, t o re cei ve tra in in g, s ecu rit y cle aran ces , andtra ve l o rd ers . His t rav el au th or iz at io n was setforth on a st an da rdform us edforDoD p ers on ne l. Thi s do cu m en t s ta te s tha t p et it io ne r’s “pe rm an en t dut y st at io n” was Fo rt Lea ve nwo rth , Kan sa s, an d t ha t the pu rp os e o f hi s trav el was “ sp eci al mis si on de pl oym en t.” It li st s h is “ or ga ni zat io na l el em en t” as “ TRADOC G2 TRIS A.” TRADOC is th e acro nym for th e U.S. Arm

y Train in g andDoct rin e Co m m an d; G2 d en ot es th e Arm y ’s Int el li ge nc e Div is io n; an d TRI SA de no te s the Int el li ge nc e Supp ort Acti vi ty for TRADOC. The Arm y de ci de d wh ere p et it io ne r was to be de pl oyed an d s pe ci fie d t he da te s, t im es , andot he r te rm s o f hi s d ep artur es to an d fr om Afgh an is ta n. Pe ti
ti on er’s trav el ord ers st at e th athe was t o fl y fro m Fo rt Lea ve nwo rth to Fo rt B en ni ng , Geor gi a; to fly from Fo rt B en ni ng to “ m il it ary ba se s n otinKabu l, Afg ha nis tan” ; an d t o re tu rnto Fo rt Lea ve nwo rth . Whe n p et it io ne r arri ve d i n F ort Lea ve nworth , he d idno t kno w wher e h e was ul ti m at el y go in g o r wha t h is ass ig nm en t wou ldbe . Whe n h is fli gh t l eftFo rt B en ni ng , he l ik ewis e d idno t kno w wher e h e wou ldbe ass ig ne d o r wha t h is sp eci fic m is si on wou ldbe .- 5 -

[* 5] Pet it io ne r arri ve d a t Ba gr am Airfi el d, the lar ge stU.S. m il it ary ba se in Afg hani st an , inOcto be r 20 09 . The Arm y th enass ig ne d h im

to th e NATO-ISAF Reg io na l Co m

m an d (S ou th ), whe re h e was st at io ne d a t Kan da ha r Airf ie ld . A Can ad ia n g en eral was the NATO bas e co m m an de r fo r th is reg io n. Pet it io ne r’s m is si on as aso ci al sci en ce ex pe rt wa s t o a ctas ali ai so n b etwee n t he NATO comm an d a ndth e lo cal pe op le of Kand ah ar an d i ts su rro un di ng area . He so ug htto he lp m il it ary of fic ers ga ina be tt er cu ltur al un de rs ta nd in g o f th is po pu la ti on . He als o g athe redan d a na lyzed i nf orm at io n c on cern in g l oc al co m m erce (in cl ud in g i ll ic itco m m erce ) with t he aim

of h el pi ng NATO creat e a s uc ces sf ul lo cal sec ur ity

ap pa ratus . Peti ti on er re gu la rly part ic ip at edinNATOsp on so redtra in in g a ndwork sh op s, s om e o f whi chwere m an da to ry . Pet it io ne r wor e a NATO-ISAF ci vi li annam e ta g a nda NATO bad ge when ren de rin g t he se servi ces , whi chhe pe rfo rm edas p artof aHum anTerrai n Tea m (HTT). The HTT was co m po se d o f ci ti zen s fr om

va rio us NATO cou ntrie s, an d th e te am ’s com

po si ti on ch an ge d a s p ers on ne l ca m e an d wen t. Each HTT hada te am lea de r who se m ai n ro le was t o e ns ur e th atreque st s fo r in fo rm at io n fr om NATO mil it ary of

fic ers were p ro pe rly addres se d. Th e te am lea de r co nduc te d pe ti ti on er’s p erfo rm an ce ev al ua ti on s b utha d n o aut ho rit y to di sc ip li ne hi m

or di sc ha rg e h im

fro m hi s p os t.- 6 -

[* 6] The NATO bas e co m m an de r ex erci se d u lt im at e o pe rat io na l co nt ro l o ve r pe ti ti on er’s m is si on . Whi le th e b as e co m m an de r co ul d n ottermin at e p et it io ne r fro m hi s p os it io n wi th th e Arm y , he c ou ldrefu se pe ti ti on er ac ces s t o t he ba se in Kan daha r. Thi s wo ul d h av e th e eff ectof r em ov in g p et it io ne r fro m th e reg io na l co m m an d a ndren de rin g h im

un ab le th en cefo rth to pe rfo rm th e m is si onto whi ch th e Arm y ha d a ss ig ne d h im . If th is were t o h ap pe n, p et it io ne r wou ldbe requi red to fly backto Fo rt Lea ve nwo rth an d e ithe r ap pl y for an ot he r de pl oym en t wi th th e Arm y or r eturn h om e. Upo n the co nc lu si on of h is fir stde pl oym en t, p et it io ne r returne d t o F ort Leav en worth . The Arm

y th enacce pt edhi m

for a se co ndde pl oym en t, wh ic h b ega n i n No ve m

be r 20 10 . As was tru e fo r hi s fi rs t d ep lo ym en t, p et it io ne r di d n ot kn ow wh athi s ex actm is si on or a ss ig nm en t wo ul d b e whe n h e le ft t he Uni te d St at es . This ti m e th e Arm y ass ig ne d h im

to th e NATO-ISAF J oi ntCo m m an d a nd st at io ne d h im

at aNATO mil it ary faci li ty near Kab ul . The term s an d c on di ti on s o f pe ti ti on er’s fi rs t an d s eco ndde pl oym en ts were si mil ar i n a ll m at eri al res pe ct s. He ag ai n s erv edas am em be r of anHTT andsuppl ie d m il it ary co m

m an de rs with acu ltur al un de rs ta nd in g o f th e lo cal po pu la ti on . He ad dr es se d que st io ns co nc ern in g t he Afgh anarm y ’s att rit io n ra te , vi ll ag e as se ss m en ts , andth e an al y si s o f ni gh t ra idcas ua lt ie s.- 7 -

[* 7] Dur in g b ot h d ep lo ym en ts pe ti ti on er re cei ve d fo rm al an d i nf orm al ev al uat io ns of h is workfro m

hi s HTT te am

lea de r. The fo rm al ev al ua ti on s, co nduc te d pu rs ua ntto th e Defen se Civ il ia n In te ll ig en ce Pe rs on ne l Syste m (DCIPS ), were re
qu ire d b y DoD fo r al l i nt el li ge nc e p ers on ne l. The Arm y di rect edth e HTT team le ad ers to co nduc t the se ev al ua ti on s. Whil e a t eam lea de r of an y na ti on al ity

co ul d ha ve pe rfo rm edth e ev al ua ti on s, b ot h o f th e te am lea de rs who pe rfo rm edpe ti ti on er’s DCIP S ev al ua ti on s wer e U.S. cit iz en s an d m em be rs of t he U.S. arm edfor ces . The reco rdin cl ud es a DCIPS ev al ua ti on of p et it io ne r fo r hi s s eco ndde pl oym en t. Itis 12 pa ge s l on g a ndrat es hi s o ve ral l p erfo rm an ce as “ ou ts tand in g.” The rat in g o ffi ci al who si gn edth is ev al ua ti on was aco lo ne l i n t he U.S. Arm y . The rev ie win g o ffi ci al who rev ie wedth is ev al ua ti on was ali ke wis e a U.S. Arm y of fic er an d was pa rt o f TRADOC, th e sa m e “ or ga ni zat io na l el em en t” to whi ch pe ti ti on er b el on ge d. The Arm y pa idpe ti ti on er o n t he ba si s o f st an da rdU.S. Gov ern m en t p ay sc al es . He hada GS-1 3 g rad e dur in g h is fir stde pl oym en t an d aGS-1 4 g rad e du rin g h is sec on d. Th e Arm y pro vi de d h im

with s ta nd ardDoD fri ng e b en efi ts , in cl ud in g h eal than d re ti rem en t b en efi ts . The Arm y furni sh edhi m

with abi
week ly “ Ci vi li anLeav e an d Earni ng s St at em en t” sh owi ng hi s g ro ss pay an d d edu ct io ns . The Arm

y rep orte d p et it io ne r’s wag es to th e IRS onFo rm s W-2, Wage- 8 -

[* 8] an d Tax Sta te m en t, an d wi th he ldfro m hi s p ay ch eck s the requi redFed eral in co m e an d e m

pl oym en t t ax es . Pet it io ne r fi le d F ed eral in co m e ta x re tu rn s o n F orm s 1 04 0, U.S. In di vi du al In co m e Tax Return, fo r 20 10 an d 2 01 1. Pe ti ti on er d idno t m ai nt ai n ape rm an en t res id en ce i n t he Uni te d S ta te s dur in g t he se y ears an d l is te d h is m ot he r’s res id en ce as hi s ad dr es s o n t he se returns . Both re tu rn s wer e p rep aredby a qu al ifi edin co m e ta x re turnpre pa rer. Pet it io ne r at ta ch edto hi s re tu rn s Fo rm s 2 55 5, Fo rei gn Earn edInc om e, on whi chhe cla im edun de r se ct io n 9 11 ex cl us io ns of $ 91 ,50 0 a nd$9 2,9 00 for20 10 an d 2 01 1, re sp ect iv el y . (His actua l wag es forpe rfo rm in g s erv ic es inAfgh an is ta n were h ig he r; t he ex cl us io ns he cla im edrep res en te d the m ax im um am ou nt s al lo wed fo r eac h year.) On the Fo rm s 2 55 5 p et it io ne r li st edhi s o ccupa ti onas “ Defen se Co nt ract or ”; li st edhi s emplo y er as “ Defen se Fin an ce & Acc ou nt in g S erv ic es ”; st at edth athi s emplo y er was a “ U.S. com pa ny”; l is te d h is em

pl oyer’s U.S. addres s as a lo cat io n i n C le ve la nd , Ohi o; an d l is te d h is em pl oyer’s for ei gn ad dr es s as a lo cat io n i n Kab ul , Afgh an is ta n. The IRS ex am in edpe ti ti on er’s 2 01 0 a nd20 11 returns an d d is al lo wedth e fo rei gnearn edin co m e ex cl us io ns on th e g ro un d t ha t h e was , du rin g b ot h d ep lo y m en ts , an e m

pl oyee of th e U.S. Gov ern m en t. As aco ro ll ary of th es e ad jus tm en ts ,- 9 -

[* 9] th e IRS m ad e co m

pu tati on al ad

jus tm en ts to pe ti ti on er’s i te m iz edde du ct io ns an d a lt ern at iv e m in im

um tax . The IR S o n Au gu st29 , 20 13 , is su edpe ti ti on er a ti m el y no ti ce o f de fic ie nc y , andhe ti m el y pe ti ti on edth is Co urt. Dis cu ss io n I. Bu rd enof P ro of The Co m m is si on er’s d et erm in at io ns ina no ti ce o f de fic ie nc y are g en eral ly pr es um edco rrec t, an d t he tax pa y er b ears th e b ur de n o f pr ov in g the m erro ne ou s. Ru le 14 2( a)(1 ); Welc h v . Helv eri ng , 29 0 U.S. 1 11 , 11 5 (1 93 3) . Thatth is cas e was subm it te d fu ll y

st ip ul at edch an ge s n ei th er the bu rd enof p ro of no r th e eff

ectof a fai lu re o f pr oo f. Ru le 12 2( b) ; Bo rch ers v. Co m mis si on er, 9 5 T.C. 8 2, 9 1 (1 99 0) , aff’d, 9 43 F.2d22 (8t h C ir. 1 99 1) . Alth ou gh fact s m ay be est ab li sh edby sti pu la
ti on , a st ip ul at io n o f fac ts do es no t re li ev e th e p arty be ari ng th e b ur de n o f pr oo f fro m pro du ci ng ev id en ce t o s up po rt f actua l fi nd in gs no t ad equa te ly establ is he d b y th e st ip ul at io n. Ru le 14 9( b) . Fail ur e to pro du ce ev id en ce i n s up po rt o f anis su e o f factm ay be a gr ou ndforres ol vi ng th atis su e ag ai ns t tha t p arty . Ibi d. II. Fo rei gn Earn edInc om e Exc lu si on Sect io n 6 1( a) p ro vi de s tha t g ro ss in co m e m ean s “ al l i nc om e fro m what ev er so ur ce d eri ve d.” Cit iz en s o f th e Uni te d S ta te s ar e ta xe d o n t he ir wo rldwid e in
co m e unl es s a s pe ci fic ex cl us io n app li es . Eram v. Co m m is si on er, T.C. Mem o.- 10 -

[* 10 ] 20 14 -6 0, at*1 0. Ex cl us io ns fro m gro ss in co m e are co ns tru edna rro wly, an d a ta xp ay er m

us t cl earl y

est ab li sh hi s en ti tl em en t t o a ny suc h e xc lu si on . Ibi d. Sect io n 9 11 (a) p ro vi de s tha t a “ qu al ifi edin di vi du al ” m ay ele ctto ex cl ud e fro m gro ss in co m e, subjec t t o l im it at io ns setforth insubs ect io n (b )(2 ), hi s o r he r

“ fo rei gn earn edin co m e.” To b e en ti tl edto th is ex cl us io n, a t ax pa y er m us t s at is fy two di st in ctrequi rem en ts . Firs t, h e m us t b e anin di vi du al “ who se tax ho m e is ina fo rei gnco un try.” Sec. 91 1( d) (1 ). Seco nd , he m us t ei th er b e a “bo nafid e res id en t” of on e o r m or e fo rei gn co un tri es or b e p hysic al ly pres en t i n s uc h c ou nt rie s dur in g atlea st33 0 d ay s i n a12 -m on th pe rio d. Ib id . Res po nd en t ag rees th atpe ti ti on er m eet s the se ge ne ral requi rem en ts . Sect io n 9 11 (b )(1 )(B) (ii ) ex cl ud es fro m for ei gn earn edin co m e am ou nt s

“pa idby the Uni te d S ta te s o r anag en cy th ereo f to anem

pl oyee of th e Uni te d St at es or a n a ge nc y

th ereo f.” Whe th er p et it io ne r is en ti tl edto th e fo rei gnearn ed in co m e ex cl us io n t hu s turns on whet he r he was e m pl oyed b y th e Uni te d S ta te s du rin g 2 01 0 a nd20 11 . Whe th er a t ax pay er i s an“ em pl oyee” is a qu es ti on of f act . Mat th ews v. Co m m is si on er, 9 2 T.C. 3 51 , 36 0 (1 98 9) , aff’d, 9 07 F.2d11 73 (D.C. Cir . 19 90 ); Pro fes si on al & Exe c. Leas in g, In c. v. Co m m is si on er, 8 9 T.C. 2 25 , 23 2 (1 98 7) , aff’d, 8 62 F.2d75 1 (9 th Cir . 19 88 ). In d et erm in in g wh ethe r a p ers on is an“ em -- 11 -

[* 11 ] pl oyee” o f th e Uni te d S ta te s wi th in th e m ean in g o f se ct io n 9 11 (b )(1 )(B) (ii ), we “ lo okto th e co m

m on law t o d et erm in e th e rel at io ns hi p.” Mat th ews , 92 T.C. at 36 0. “ Inde te rm in in g t he ex is te nc e o f a co m m on law em

pl oyer-em

pl oyee rel at io nsh ip , ‘ th e cru ci al tes t l ie s i n t he rig htof c on tro l, o r la ckof i t, wh ic h t he em pl oyer m ay ex erci se res pe ct in g t he m an ne r in whi chth e se rv ic e is to be pe rfo rm ed .’ ” Id . at36 1 (quo ti ng Reedv. Co m m is si on er, 1 3 B .T.A. 513 (19 28 ), rev ’d an d rem an de d, 3 4 F .2d26 3 (3 d C ir. 1 92 9) , rev ’d pe r cu riam , 28 1 U.S. 6 99 (19 30 )). The fact s o f th is cas e cl os el y res em bl e th os e in Gil li s v . Comm is si on er, T.C. Mem o. 1 98 6- 57 6, 5 2 T.C.M . (CCH) 1 12 8. Th e ta xp ay er the re was a li eu te na nt co lo ne l i n t he U.S. Air Fo rce wh o “ was ass ig ne d t o NATO * * * i n Germ an y an d worke d u nd er the supe rv is io n o f a Germ ange ne ral .” Ib id . The Ai r Fo rce p ai d h is sa la ry . Id. at11 29 . The t axpa y er n ev erthe le ss co nt en de d t ha t “ he was e m pl oyed by NA TO andth e so ur ce o f hi s p aym en ts was NATO.” Ib id . W e reject edth e ta xp ay er’s arg um en t an d h el d t ha t h is wage s wer e n ot ex cl ud ab le un de r se ct io n 9 11 (a). We reas on edas f ol lo ws: Pet it io ne r di d n otsh ow tha t h e h ada se pa rat e co nt ractwith NATO. He was ass ig ne d t o NATO by the Air Fo rce. NATO di d n otha ve th e au th or ity to hi re p et it io ne r orto fir e h im fro m th e AirFo rce. Furth erm or e, pe ti ti on er’s p ay ch eckwas m ad e o utby the Air Fo rce r athe r th anNATO. Ther efo re, ev enif p et it io ne r co ul d p ro ve th atNATO was th e o rig in al so ur ce o f th e fu nd s u se d t o p ay hi s s al ary, he was- 12 -

[* 12 ] con tro ll edan d p ai d d ire ct ly by th e AirFo rce. [Gi ll is , 52 T.C.M. (CCH) at 1 12 9.] Insh ort, ev enth ou ghth e ta xp ay er i n Gi ll is was s ub ject t o t he da y -to -d ay

supe rvi si on of aGerm anNATO com m an de r, we co nc lu de d tha t h e was “ co nt ro ll ed * * * b y th e AirFo rce” be cau se th e AirFo rce h ire d h im , pai d h is sal ary, ass ig ne d hi m to th e NATO po st , andha d the ex cl us iv e au th or ity to di sc ha rg e h im

fro m m il it ary se rv ic e. Ib id . The pu rp os e o f th e se ct io n 9 11 (b )(1 )(B) (ii ) ex cep ti on is to “pr ev en t a wi nd
fal l t o Un it edSta te s g ov ern m en t em pl oyees i n fo rei gn co un tri es .” Sm ith v . Com m is si on er, 7 01 F.2d80 7, 8 09 (9t h C ir. 1 98 3) , aff’g 7 7 T.C. 1 18 1 (1 98 1) . W e co ncl ud edinGil li s, 5 2 T.C.M . (CCH) at11 29 , th atth e ta xp ay er “ sh ou ldno t b e al lo weda win df

al l m erel y be cau se he is st at io ne d o ve rs eas inanall ie d c omm an d.” W e fo un d n o e vi de nc e th ata ta xp ay er wh om th e U.S. m il it ary ha s as si gn edto a NATO comm an d “ sh ou ldbe tre at edan y di ffer en tl y

fro m an y ot he r m il it ary pe rso nn el servi ng ov ers eas .” Ib id . W e rea ch eda di ffer en t co nc lu si on inAdai r v. C omm is si on er, T.C. Mem o. 19 95 -4 93 , 70 T.C.M. (CCH) 9 98 , acq ., 19 96 -1 C.B. 1 . In tha t ca se , NATO po st ed no ti ce o f anex pe ct edva can cy onit s h ead qu art ers st aff i n B ru ss el s, Be lg iu m . Secr et ari es of NATO de le ga ti on s wer e in vi te d t o s ub m itna m es of qua li fie d c an di
-- 13 -

[* 13 ] da te s. Th e n ot ic e st at edth atth e su cces sf ul can di da te wou ldbe off ereda th ree- y ear d efi ni te du rat io n c on tra ct , ren ewab le by m utua l co ns en t fo r an ad di ti on al th ree years. 7 0 T.C.M . (CCH) at10 01 . The tax pa y er, the n apro gr am an al y stwith t he U.S. Arm y , app li edforth e adve rti se d NATO po st . He was i nt erv ie wedby NATO pers on ne l atNATO head
qu art ers inBru ss el s; NATO pai d a ll ex pe ns es rel at in g t o t hi s i nt erv ie w. NAT O subs eque nt ly info rm edth e U.S. Mi ss io n t o NATO th atitha d d eci de d t o app oi nt th e ta xp ay er as a se ni orst at is ti ci an . He accep te d t hi s o ffer , andDoD fo rm al ly tra ns ferr edhi m

to hi s n ew po si ti on with NATO fo r a thr ee-year te rm . This tra ns fer was m ad e p ur su an t t o the Lon do n Ag reem en t, ex ecu te d b etweenth e Uni te d St at es an d t he Nort h At lant ic Co un ci l i n 1 95 1, an d 5 U.S.C. sec . 35 81 (4 ), go ve rn in g t he tra ns fer o f U.S. ag en cy em pl oyees t o i nt ern at io na l o rg an iz at io ns . See Ada ir, 7 0 T.C.M . (CCH) at10 00 -1 00 2. As a NATO in te rn at io na l s ta ff m em be r, th e ta xp ay er i n Ad ai r was requi red to pe rfo rm

servi ces so le ly for NATO du rin g h is term of t ran sf er. As re qu ire d b y NATO regu la ti on s, h e to oka lo y al ty oath wh ereb y he swo re t o p erfo rm

hi s dut ie s

“ with t he in te res ts of NATO on ly in v ie w” an d a gr eedth athe wou ldno t “ se ekor acce ptin st ru ct io ns * * * fr om an y go ve rn m en t o r fro m

an y au th or ity othe r th an * * * [NATO].” Adair , 70 T.C.M. (CCH) a t 1 00 2. As requi redby its pe rs on ne l- 14 -

[* 14 ] reg ul at io ns , NATO pr ov id edth e ta xp ay er wi thin su ran ce co ve rag e an d educ at io na l al lo wan ces pa iddi rect ly by NATO. The t ax pa y er’s job pe rfo rm an ce

“ was reg ul arl y

ev al ua te d b y

hi s NATO supe rv is or s.” Id . at 1 00 6. NATO hadth e po wer t o fi re the tax pay er fo r un sa ti sf act ory job pe rfo rm an ce o r in th e ev en t o f di sc ip li na ry

act io n. Id . at 1 00 2- 10 03 . Tak in g a ll th es e fac ts in to acco un t, we co nc lu de d t ha t the tax pa y er i n Ad ai r was anem

pl oyee of NATO foll owi ng hi s tran sf er fro m th e Arm y . In s o h ol di ng , we rel ie d p rin ci pa ll y

onth e fac t tha t h e h adbe enform al ly “ tra ns ferr ed ” to NATO, pu rs ua ntto anin te rn at io na l ag reem en t an d d om es ti c U.S. law, as op po se d t o b ei ng

“ de ta il ed ,” in whi chcas e h e wou ldha ve rem ai ne d “ anem pl oyee of hi s ag en cy

for al l p ur po se s.” Ad ai r, 70 T.C.M. (CCH) a t 1 00 0, 1 00 5- 10 06 . W e al so rel ie d o n t he fact s tha t the tax pa y er: (1) ha d aform al th ree- y ear r en ewab le co nt ractwith NATO; (2 ) was requi redto tak e a l oyalty oa th to NATO andrefu se to acce pt in st ru ct io ns fro m

th e U.S. Gov ern m en t; (3) co ul d b e te rm in at edby NATO for p oo r job pe rfo rm an ce; (4) rece iv edbe ne fit s fr om NATO as requi redby its pe rs on ne l reg ul at io ns ; an d (5 ) was subjec t t o p erfo rm an ce ev al ua ti on s an d d ire ct io n fr om NATO sup erv is or s re ga rd in g h is da il y act iv it ie s, the seque nc e o f hi s t as ks , andth e m ean s b y whi chth e d es ire d re su lt s wer e to be ach ie ve d. Id . at 1 00 6.- 15 -

[* 15 ] W e fi ndth e in st an t ca se to ha ve m uc h i n c omm on with Gi ll is an d v ery li tt le in co m m on with Ad ai r. The t ax pa y er i n Ad ai r ap pl ie d fo r a s pe ci fic po si ti on at NATO head qu art ers an d, fo ll owi ng anin te rv ie w andrece ip t o f anoff er, was for
m al ly tran sf

erre d b y th e Arm y to th atNATO pos it io n. Pe ti ti on er d idno t ap pl y for a sp eci fic NATO pos it io n; in de ed , he h adno id ea wh enhe lef t the Uni te d S ta te s whe re h e wou ldbe st at io ne d o r wha t h is m is si on wou ldbe . Unl ik e th e ta xp ay er i n Ada ir, p et it io ne r di d n otha ve a co nt ractwith NATO; h e was no t fo rm al ly tran sferr edto NATO pur su an t t o a n i nt ern at io na l ag reem en t o r U.S. do m es ti c law; h e rece iv edno be ne fit s und er NATO per so nn el reg ul at io ns ; h e to okno oa th of l oyalty to NATO; an d h e was subjec t t o re gu lar DoD p erfo rm an ce ev al ua ti on s tha t ar e requi redforall DoD i nt el li ge nc e p ers on ne l an d wer e co nduc te d a t the Arm y ’s di rect io n. Cf

. Am aral v. Co m

mis si on er, 9 0 T.C. 8 02 , 80 9- 81 0 (1 98 8) (di st in gu is hin g, fo r pu rp os es of t he Lon do n Ag reem en t an d arel at edin te rn at io na l treaty , betwee n aU.S. em

pl oyee who is “ se co nd ed ” to NATO anda “ di recthi re” o f NATO who is “ ap po in te d t o t he in te rn at io na l s ta ff o f NATO purs ua ntto anem pl oym en t co nt ract ”). As we h av e o fte n n ot ed : “ The ‘ rig ht -to -co nt ro l’ tes t i s the cru ci al tes t t o de te rm in e th e n atur e o f a wo rk in g re la ti on sh ip .” W eb er v . Comm is si on er, 1 03 T.C. 37 8, 3 87 (19 94 ) (quo ti ng Mat th ews , 92 T.C. at 3 61 ), aff’d p er cu ria m , 60- 16 -

[* 16 ] F.3 d 1 10 4 (4 th Cir . 19 95 ). Bu t “ th e d eg ree o f co nt ro l n eces sa ry to fin d em pl oyee st atus varie s ac co rd in g t o t he na tu re o f th e se rv ic es pro vi de d.” W eb er, 10 3 T.C. at38 8 (n ot in g tha t em pl oyer “ ne edno t s ta ndov er the em pl oyee an d di rect[hi s] eve ry

m ov e” i n o rd er t o e xe rci se th e requi si te co nt ro l); see sec . 31 .34 01 (c)- 1( b) , Em

pl oym en t Tax Reg s. (“ [I]t is no t n eces sa ry th atth e em

pl oyer actua ll y di rector c on tro l the m an ne r in whi chth e se rv ic es are p erfo rm ed ; i t i s su ffi ci en t i f he ha s the rig htto do so .”). W e co nc lu de he re, as we co nc lu de d i n Gil li s, tha t the Arm

y ha d t he rig htto co ntro l, an d a ctua ll y di d c on tro l, p et it io ne r’s work. Th e Arm

y ha d e xc lu si ve au th or ity

to hi re, d is ci pl in e, an d fi re p et it io ne r; i t pa idhi s s al ary an d p ro vi de d a ll hi s b en efi ts ; i t d ire ct edwher e h e wou ldbe de
pl oyed an d t he pe rio ds of h is servi ce; an d i t s ub jecte d p et it io ne r to th e sa m e pe rio di c DCIPS pe rfo rm an ce ev al ua ti on s t o wh ic h a ll DoD i nt el li ge nc e p ers on ne l were s ub ject. 2

Acco rd , e.g., Erenv. Co m m is si on er, T.C. Mem o. 1 99 5- 55 5, 7 0 T.C.M . 2 (CCH) 13 94 , 13 97 , 13 98 (ho ld in g t ha t St at e Dep art m en t co ntract orwas an em pl oyee of th e Uni te d S tate s wh ere a ge nc y “ ha d t he rig htto ex erci se co nt ro l o ve r pe ti ti on er” e ve n t ho ug h i t ex erci se d l im it edco ntro l o ve r hi s d ai ly acti vi ti es ), aff’d, 18 0 F .3d59 4 (4 thCir . 19 99 ); M arckward t v . Comm is si on er, T.C. Mem o. 1 99 1- 34 7, 6 2 T.C.M . (CCH) 2 62 , 26 6 (h ol di ng th atUSAID co nt ract orwas an e m pl oyee of th e Uni te d S ta te s wh ere a ge nc y ha d t he rig htto co nt ro l the tax pa y er’s wo rk ev enth ou gh hi s wo rk“ was no t s up erv is edor c on tro ll edon a da y -to -d ay ba si s” ).- 17 -

[* 17 ] Pet it io ne r co rrec tl y no te s tha t NATO off

ic ers supe rv is edhi s ac ti vi ti es on a da il y ba si s, an d t ha t the NATO comm an de r, by excl ud in g h im fro m th e b as e, co ul d e ffec ti ve ly brin g h is m is si on to anen d. Bu t the same was true inGil li s, 5 2 T.C.M. (CC H) at11 28 , wher e th e ta xp ay er “ was ass ig ne d t o NATO * * * i n Germ any an d wo rk edun de r th e supe rv is io n o f a Germ ange ne ral .” W e n ev erthe
le ss he ldth atth e ta xp ay er was “ co nt ro ll ed* * * b y th e Air Fo rce” be cau se th e Air Fo rce h ire d h im , pai d h is sal ary, ass ig ne d h im to th e NATO po st , andha d e xc lu
si ve au th or ity

to di sc harg e h im

fro m m il it ary se rv ic e. Id . at 1 12 9. We reach th e sa m e co nc lu si on he re. 3

Ourpre ced en ts ha ve id en ti fie d n um ero us fact or s tha t m ay be rel ev an t i n 3 de te rm in in g wh ethe r anem pl oym en t re la ti on sh ip ex is ts . See, e.g ., W eb er, 1 03 T.C. at 3 87 ; J ul iardv. Co m m is si on er, T.C. Mem o. 1 99 1- 23 0, 6 1 T.C.M . (CCH) 26 83 , 26 88 . The “ rig ht -to -co nt ro l” fact oris th e m os t i m po rta nt , and“ [t]he rel at iv e im po rta nc e o f eac h fa ct or* * * i s v ie wedun de r th e fac ts an d c irc um st an ces of each cas e.” Jul ia rd , 61 T.C.M. (CCH) a t 2 68 8. Pe ti ti on er urg es th atsev eral of th es e fac to rs po in t t o h is st atus as a n e m pl oyee: h e d idno t o fferservi ces to th e ge ne ral publ ic ; h e p ro vi de d n o c ap it al an d h adno op po rtu ni ty for p ro fitan d l os s; an d h e d idno t p ro vi de hi s o wn t oo ls or wo rk sp ace. Bu t the se fact or s ar e ch ie fly rel ev an t i n d et erm in in g wh ethe r a p ers on is anin de pe nd en t co nt ract oras o pp os ed to anem pl oyee; the y

sh edli tt le li gh t o n wh ethe r pe ti ti on er, co nc ed ed ly an em
pl oyee, was an em

pl oyee of th e Arm y or o f NATO. T he co m

m on law fa ct or s m os t rel ev an t t o t he lat te r de te rm in at io n a re the rig htto co nt ro l, the rig htto di sc ha rg e, th e p erm an en cy

of t he rel at io ns hi p, an d t he natu re o f th e rel at io ns hi p the pa rti es be li ev edth ey

were cr eat in g. Th es e fac to rs po in t cl earl y to th e co nc lu si on th at pe ti ti on er re m ai ne d a n Army em pl oyee du rin g h is de pl oym en t t o Afg ha ni st an . See g en eral ly A da ir, 7 0 T.C.M . (CCH) at10 05 ; J ul ia rd , 61 T.C.M. (CCH) a t 2 68 8.- 18 -

[* 18 ] The U.S. in vo lv em en t i n Afg ha ni st anwas c on du ct edas p artof aco al it io n. Lik e o th er NATO m em

be rs , th e Uni te d S tate s p art ic ip at es inNATO-ledm is si on s by vo lunt eeri ng tro op s an d c iv il ia n p ers on ne l. The factth atth e Uni te d S ta te s p arti ci pa te s i n NATO-l edop erat io ns by vol un te eri ng it s p ers on ne l i nd ic at es th atth e Uni te d S tate s ex erci se s co nt ro l o ve r th os e who are thu s co nt rib ut ed . Peti ti on er h as no t s ho wn tha t h is po si ti on up on de pl oym en t t o Afg ha ni st andi ffer edinany m at eria l way from

th e p os it io n o ccupi edby hun dr ed s o f th ou sa nd s o f othe r Arm y m il ita ry an d c iv il ia n e m

pl oyees wh o h av e b eende pl oyed o r se co nd edto NATO and ot he r al li edco m

m an ds worl dwi de . In d et erm in in g wh ethe r hi s wag es are ex cl ud
ab le un de r se ct io n 9 11 (b )(1 )(B) (ii ), itis no t d is po si ti ve th athe was “ st at io ne d ov ers eas inanall ie d c omm an d” rathe r th anst at io ne d o ve rs eas ina U.S. Arm y ba se . Gill is , 52 T.C.M. (CCH) a t 1 12 9. Pet it io ne r ha s n otcarr ie d h is bu rd enof p ro vi ng th athe was an e m pl oyee of NATO rath er tha n t he Arm y du rin g 2 01 0 a nd20 11 . As anem pl oyee of th e Uni te d St at es du rin g tho se y ears , he i s s ub ject t o t he ex cep ti on setforthinsec ti on 91 1( b) (1 )(B) (ii ) an d i s n oten ti tl edto a fo rei gn earn edin co m e ex cl us io n.- 19 -

[* 19 ] To re fle ctth e fo reg oi ng , Deci si on wil l b e en te redfor res po nd en t as to th e ta x d efi ci en ci es an d fo r pe ti ti on er as to th e p en al ti es .