T.C. M em o . 2 0 1 9 -1 3 5

UNITED STATES TAX COURT

J OSEPH S. BELLW OOD AND J ACQUELINE E. BELLW OOD, Pet i ti o n ers v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 3 2 26 -1 7
. Fi l edOct o b er 7 , 2 01 9
.

In 2 0 1 3 , 2 0 1 4 , an d 2 0 1 5 , P-H fl ew h el ico p t ers i n Sau di Arab i a fo r a U.S. co m

pan y th atp ro v i d edai r am

b u l an ce s erv i ces fo r t he Sau d i RedCres cen t Au t h o ri t y . P-H wo rk edi n Sau d i Arab i a o n a rep eat in g “ 2 8 & 2 8” s ch edu l e, m ean i n g 2 8 d ay s o n du t y fo l l o wedb y 2 8 d ay s o ff du ty . Duri ng th e 2 8 d ay s o n du t y , P-H l i v ed i n Sau d i Arab i a an d res i d ed in em

p lo y er-p ro vi d edh o u s i n g wh en h e was n o to t h erwi s e wo rk i n g . Duri n g t h e 2 8 d ay s o ff du t y , P-H t rav el edt o th e Un i ted St at es an dres i d edi n h is o wnh om e i n Geo rg i a wi th P-W an d t h ei r y o u n g es ts o n . Duri n g 2 0 1 3, 2 0 1 4 , an d2 0 1 5, P-H ret ai n ed h i s U.S. ci t i zen s h i p , dri v er’ s l i cen s e, v o t er reg i st rat i o n , b an k acco u n t, an d h eal th care i n th e Un i t ed St at es . Fo r 2 0 1 3, 2 0 1 4 , an d2 0 1 5, P-H u s edt ax p rep arat io n s o ft ware t o co m p let e t h e co up l e’ s t ax return s , an d o n each return th ey cl ai m eda “ fo rei g n earn ed i n co m e” ex cl u s i o n (“ FEIE”) u nd er I.R.C. s ec. 9 1 1 (a) fo r t h e i n co m e P-H earn edwh i l e wo rk in g i n Sau di Arab i a. Th e retu rn s al s o cl ai m edd edu ct i o n s fo r 2 0 1 3 , 2 0 14 , an d2 0 1 5 fo r- 2
-

[* 2 ] u n rei m

b urs edem

p l o ym en tex p en s es rel at edt o P-H’ s wo rki n Sau di Arab i a. Up o n ex am i n at i o n o f Ps ’ return s , R d is al l owedth e FEIEs an d t h e d edu ct i o n s fo r u n rei m b u rs edem

p l o ym en t ex p en s es , an dR d et erm i neda t ax d efi ci en cy ag ai n s t Ps fo r each o f 2 0 1 3 , 2 0 1 4, an d 2 0 1 5 . Ad d i t i o nal l y , R d et erm i n edan accu racy -rel at ed p en al t y ag ai n s t Ps fo r each y ear. Hel d : Fo r 2 0 1 3 , 2 0 1 4 , an d2 0 1 5 , P-H was n o ta “ qu al i fi ed i n d i vi du al ” fo r p u rp o s es o f t h e FEIE b ecau s e Ps fai l edt o s h o w th atPH’ s “ ab o d e” was n o t “ wi t h i n t h e Un i t edSt at es ” an dth ath e was a “ b o n a fi d e res id en t ” o f Sau d i Arab i a fo r p u rp o s es o f I.R.C. s ec. 9 1 1 (d )(1 )(A). Hel d , fu rt h er, Ps fai l edt o s ub s t an t i at e u nrei m bu rs ed em p l o ym en t ex p en s es u n d erl y i ng d edu ct i o n s t h atth ey cl ai m edfo r 2 0 1 3 , 2 0 1 4 , an d 2 0 1 5 an dth us are n o ten t i t l edt o s u ch d edu ct i o n s. Hel d , fu rt h er, Ps fai l edt o s h o w reas o n ab l e cau s e fo r t h ei r s ub s t an t i al u n ders t at em en t s o f i n co m e t ax an dare t h u s l i ab l e fo r accu racy -rel at edp en al ti es u n d er I.R.C. s ec. 6 6 6 2 (a) fo r 2 0 1 3, 2 0 1 4 , an d2 0 1 5.

J o s ep h S. Bel l w oo dan dJ acq uel i n e E. Bel l wo o d , fo r t h em s el v es . Eri k a B. Co rm i er, fo r res p o n d en t.- 3
-

[* 3 ] M EM O RANDUM FINDINGS OF FACT AND OPINION GUSTAFSON, J ud ge: Pu rs u an tt o s ect i o n 6 2 12 (a), 1 o n M arch 1 4 , 2 0 1 7 , th e In t ern al Rev en u e Serv i ce (“ IRS”) i s s u edt o p et i t i o ners , J os ep h S. Bel l wo o d an d J acq u el i n e E. Bel l wo o d, a n o t ice o f d efi ci en cy , wh i ch d et erm i n edth e fo l l o wi n g d efi ci en ci es i n t ax an daccu racy -rel at edp en al t i es u n der s ect i o n 6 6 6 2 (a):

Year Defi ci en cy Pen al t y s ec. 6 66 2 (a) 2 0 1 3 $ 1 6,2 2 5 $ 3 ,2 4 5 2 0 1 4 2 2 ,6 5 0 4 ,5 3 0 2 0 1 5 2 6 ,5 9 7 5 ,3 1 9 M r. an dM rs . Bel l wo o dt i m el y fi l eda p et i t i o n u n der s ect io n 6 2 1 3 (a) fo r red et erm i n at i o n o f t h e d efi ci en ci es an dth e p en al t i es . Th e i s s u es th atrem ai n fo r d eci s i o n 2 are: (1 ) wh et h er fo r 2 0 1 3 , 2 01 4 , o r 2 0 1 5 , M r. Bel l wo o d was a “ qu al i fi ed i n di vi dual ” fo r p urp o s es o f t he fo rei g n

1 Un l es s o t h erwi s e i nd i cat ed , al l s ect i o n referen ces are t o th e In t ern al Rev en u e Co de o f 1 98 6 (2 6 U.S.C.) as am en d edan di n effect fo r t h e rel ev an tt i m es , an d al l Ru l e referen ces are t o th e Tax Co u rtRu l es o f Pract i ce an dPro cedure. Al l d o l l ar am o u n t s are ro u n d edt o t h e n eares td o l l ar.

2 Th e Co m

m i ss i o n er al s o d et erm i n ed t h atth e Bel l wo o d s h adu n rep o rt ed i n co m e o f $ 76 6 fo r 2 01 4 an d$ 8 ,3 1 4 fo r 2 0 1 5 ; h o w ev er, t h e Bel l w o o d s co n ced ed t h e $ 7 66 ad

ju st m en t fo r 2 0 1 4 , an dth e Co m m i s s i o n er co n ced ed t he $ 8 , 3 1 4 ad ju s t m en tfo r 2 0 1 5
.- 4
-

[* 4 ] earn edi n co m e ex cl u s i o n (“ FEIE”) o f s ect i o n 9 1 1 (we h o l d t h ath e was n o t ); (2 ) wh et h er t h e Bel l wo o d s were en t i t l edt o d edu ctu n rei m b u rs edem

p lo ym en t
ex p en s es fo r 2 0 1 3 , 2 0 14 , o r 2 0 1 5 (we h ol d t h atth ey were n o t ); an d(3 ) wh et h er t h e Bel l wo o ds are l i ab l e fo r accu racy -rel at edp en al ti es fo r t h ei r 2 0 13 , 2 0 1 4 , an d 2 0 1 5 retu rn s (we h ol d t h atth e Bel lwo o d s are l iab l e fo r s u ch p en al ti es ). FINDINGS OF FACT M r. Bel lwo odi s a U.S. ci t i zen . He was b o rn i n M ai n e, an dh i s p aren t s
co n ti n u e t o l i v e t h ere. In 1 9 8 7 h e jo i n edth e U.S. Arm y an ds erv ed h i s co u n t ry

as a h el i co p t er p il o t fo r 2 2 y ears b efo re ret i ri n g i n 2 0 0 9
. Wh en h e ret i red , M r. Bel l wo odretu rn edt o M ai n e wh ere h e l i v edwi t h h i s wi fe, M rs . Bel l wo o d , an d t h ei r y o u ng es t s on , wh o was an av i dt en n i s p l ay er. (Th e Bel l wo o d s h av e an o l d er
s o n wh o l i vedi n New J ers ey , b u ti t i s u n cl ear wh en h e m o v edt o New J ers ey o r wh et h er h e l i v edwi t h h is p aren t s i n M ai n e i n 2 0 0 9 .) In 2 01 2 M r. Bel l wo o d recei v edan o ffer fro m

a U.S. co m

p an y , PHI, In c. (“ PHI”), t o fl y h el i co p t ers o n
as s i g n m en ti n Ha’ i l , Sau d i Arab i a. M r. Bel l wo o daccep t ed t h e o ffer, an dats o m e p o i n tb efo re h i s d ep artu re i n 2 01 3 , M r. an d M rs . Bel l wo o dm o v edfro m M ai n e t o Geo rg i a, wh ere t h ey b el i ev edth ei r y o u ng s o n wo u l d h av e b et t er o p p ortu n it i es t o d ev el o p as a t en n i s p l ay er. Fro m 2 0 1 3 th ro u g h 2 0 1 5 , M rs . Bel l wo o dan d t h ei r- 5
-

[* 5 ] y o u n g s o n l i v ed i n th e fam i l y ’ s h o m e i n Geo rg i a wh i l e M r. Bel l wo o d t rav el ed b et ween Geo rg i a an dSau d i Arab i a fo r wo rk
. M r. Bel l wo o d ’ s em

p lo ym en t arran g em en t s wi t h PHI Th e o ffer l et t er fro m

PHI s t at edth atM r. Bel l wo o d ’ s i n i ti al s t artd at e wo u l d b e M arch 1 4 , 2 0 1 2, an dthath e wo u l db e em p lo y edi n th e Un it edSt at es at 5 0 % p ay u n t i l h e was u l t i m at el y

d ep l o y edt o Sau d i Arab i a. M r. Bel l wo o d t es t i fi edthat du ri n g th e i n i t i al s t ag es o f h i s em p l o y m en twi t h PHI i n 2 0 1 2 , h e was k ep t o n ret ai n er i n th e Un i t edSt at es at a red u cedrat e o f p ay wh i l e PHI s ecu redco n t ract s fo r wo rk i n Sau d i Arab i a. On ce t h e co n t ract s were s ecu red , p res u m ab l y s om et i m e i n 2 0 1 2, PHI n o m i n al l y

tran s ferred M r. Bel l wo o d t o Ha’ il , Sau di Arab i a, effect i v e Decem b er 3 1 , 2 0 12 , th o u g h M r. Bel l wo o d d i dn o tactu al l y d ep artfo r Sau d i Arab i a
u n t i l J an u ary

1 8 , 2 0 1 3
. As s t at ed i n PHI’ s o ffer l et t er, M r. Bel lwo o d was co n t ract edt o wo rko n a rep eat i ng “ 2 8 & 2 8 s ch edu l e”--m ean i n g ap p ro x i m at el y 2 8 d ay s o n du t y

fo l l o wed b y 2 8 day s o ff du ty , s ub

jectt o v ari at io n acco rd i n g t o PHI’ s n eed s . In ad d i t i o n , th e
o ffer l et t er i n fo rm ed M r. Bel l wo o do f PHI’ s i n t en tt o rep at ri at e h i m t o th e Un i t ed St at es i n th e ev en t t h at h i s as s i g n m en t i n Sau d i Arab i a en d ed , wh i ch h ap p en ed
s o m et i m e i n 2 0 1 6 . Nev ert h el es s , fro m 2 01 3 th ro u g h 2 01 5 , M r. Bel l wo o dwas a fu l l -t i m e em

p l o y ee, b as edo u t o f Sau di Arab i a. Du ri n g h is em pl o ym en t- 6
-

[* 6 ] M r. Bel l wo odwo u ldtrav el t o Sau di Arab i a fo r h i s 2 8 d ay s o n dut y , an dth en h e wo u l dretu rn t o hi s h o m e i n Geo rg i a wh ere h e wo u l ds p en d h i s 2 8 d ay s o ff du t y . He rep eat edth i s p ro ces s wi t h l i t tl e v ari at i o n fro m J an u ary 2 0 1 3 th ro u g h Decem b er 2 0 1 5 (t h o u g h t h ere was a s t i n ti n earl y 2 0 1 5 i n wh i ch h i s wo rk

an d t rav el were l i m i t edb ecau s e o f i l l n es s ). Du ri n g h i s d ay s o n du t y , M r. Bel l w o o dd i d
n o tl eav e Sau d i Arab i a; an ddu ri n g h is d ay s o ff du t y , h e d i d n o ts t ay i n Sau d i Arab i a. M r. Bel l wo o d ’ s h o us i ng i n Sau d i Arab i a Wh en M r. Bel l wo o dwas i n Sau d i Arab i a, h e l i v edi n h o u s i n g p ro v i dedb y PHI. Fro m

J an u ary 1 8 , 2 01 3 , u n t i l s o m et i m e i n Feb ru ary 2 0 1 4 , PHI p ro v i dedM r. Bel l wo odwi th a d ed i cat edh ot el ro o m wh ere h e s t ay ed wh en h e was i n Sau d i Arab i a an dwh ere h e l efth i s b el o n g i n gs wh en h e ret u rn edt o t h e Un i t edSt at es . So m et im e i n Feb ru ary 2 0 1 4 , PHI co n st ru ct eda co m p o un dwi t h “ effi ci en cy ap art m en t s ” i n wh i ch M r. Bel l wo o dan d o t h er em pl o y ees s tay ed wh i l e th ey were i n Sau di Arab ia. Th e co m p o un dco n s i s t edo f 1 4 s i n gl e-s to ry effi ci en cy ap art m en t s i n a U-s h ap e aro u n da p o ol an d was s urro u n ded b y a 1 5-fo o t -h i g h wal l wi th a g at eden tran ce. M r. Bel lwo o dt es t i fi edth atth e ap art m en t s were fu rn i s h edfo r t h e
em pl o y ees an dth at , ex cep t fo r m i n o r t hi n gs s u ch as a t o as t er o v en , h e d i d n o t p u rch as e an yth i n g fo r h i s ap art m en t. M r. Bel lwo o ds t ay edi n th e s am e ap art m en t- 7
-

[* 7 ] each t im e h e ret urn edt o Sau d i Arab ia du ri n g the rem ai n der o f 2 01 4 an d du ri n g 2 0 1 5 , an dh e l efth is b el o n g i n g s i n th e ap art m en teach t i m e h e l eft Sau d i Arab i a. M r. Bel l wo o d ’ s s o ci al act i v i t i es i n Sau d i Arab i a Al t h ou g h PHI’ s em

p l o y ees l i v ed i n a g at edco m p ou n d , th ey

were free t o t rav el o u t s i d e t h e co m

p o u n d. M r. Bel l wo o dt es t i fi edth ath i s act i v i t i es i n Sau d i Arab i a i n cl u dedtrav el in g t o t h e g ro cery , eat i n g atl o cal res t au ran t s i n th e ci t y , v i s i t i n g a b arb er wh en n eed ed , an ds o ci al izi n g wi t h t h e l o cal s fro m t i m e t o t i m e. He was p ro h i b i t edfro m

p art i ci p at i n g i n ci v i c act i v it i es b ecau s e h e was n o ta ci t i zen . M r. Bel l wo o d ’ s ret ai n edco nn ect i o n s t o t h e Un i t edSt at es Du ri n g 2 0 1 3 , 2 01 4, an d2 0 1 5 , M r. an d M rs . Bel l wo odco n t i n u edt o o wn t h ei r h om e i n Geo rg i a wh ere M rs . Bel l wo o dl i v edwi th th ei r y o u n ges ts o n ; du ri n g t h ats am e t i m e, t h ei r o l d er s o n l i v edi n New J ers ey , an d M r. Bel l w o o d’ s p aren t s l i vedi n M ai n e. M r. Bel l wo o do b t ai n eda d ri v er’ s l i cen s e an dreg i s t ered h i s
v eh icl e i n Geo rg i a; h e ret ai n edh i s U.S. ci ti zen s h i p an dreg i s t ered t o v o t e i n Geo rg i a; an dh e s o ug h tm ed i cal care each y ear wh i l e h e was i n Geo rg i a, wh i ch we i n fer i n cl u d ed J an u ary

th ro ug h M arch 2 0 15 , wh en h e was t o o i l l t o wo rki n Sau d i Arab i a. M r. Bel l wo o d ’ s s o l e b an kacco u ntwas thro u g h a cred i t u n io n i n M ai n e,- 8
-

[* 8 ] an d h e g en eral l y

co ndu ct edh i s affai rs i n di rect l y th ro u g h h i s Geo rg i a ad dres s wh i le h e was i n Sau d i Arab i a o r d i rect ly wh il e i n Geo rg i a du ri n g h i s d ay s o ff du t y . M r. Bel l wo o dwas u nab l e t o recei v e m ai l o r m ak e p h o n e cal ls wh i l e h e was i n Sau di Arab i a, an dh e co n t i n u al l y u s edh i s Geo rg i a ad dres s as h i s m ai l i ng ad dres s. M r. Bel l wo o d ’ s t i m e s pen ti n th e Un i t edSt at es an dSau di Arab ia M r. Bel lwo odwas i n Sau d i Arab i a fo r wo rko n ap p ro x i m at el y 2 0 4 d ay s i n 2 0 1 3 , 2 1 0 d ay s i n 2 0 1 4 , an d 1 6 1 d ay s i n 2 0 1 5
. He g en eral l y wo rk ed1 2 -h o u r
s h i ft s ; an db ecau s e o f t h e d em an d i n g n atu re o f h i s wo rk , h e s p en tm o s t o f h i s
o ff-d u t y t i m e ei th er res t i n g o r p rep ari ng fo r t he n ex ts h ift . Duri n g t ho s e s am e y ears , M r. Bel l wo o d was i n th e Un i t ed St at es o n h i s d ay s o ff o n ap p ro x i m at el y 1 6 7 d ay s i n 2 0 1 3 , 1 5 2 d ay s i n 2 0 1 4 , an d 2 0 9 d ay s i n 2 01 5
. 3 When i n t h e Un i t ed St at es , h e s p en tt im e wi t h h is fam i l y o r o n h o b bi es (wh i ch h e co ul dn o td o i n Sau di Arab i a); h e t en d edt o h i s h eal t h care; an d , p res u m ab ly , h e s p en ts o m e t i m e at t h e en do f each o ff-dut y

p eri odp rep ari n g t o retu rn t o wo rk
.

3 Th e p art i es s t i p u lat eda s ch edu l e o f d ay s th atM r. Bel l wo o ds p en ti n th e Un i ted St at es o r Sau d i Arab i a i n each y ear. Fo r s o m e d ay s , h e ev i den t l y s p en tp art o f t h e d ay i n b o t h co u nt ri es , an ds uch a d ay i s d o ubl e-co u n t edas b o t h o n e d ay i n t h e Un i t edSt at es an do ne d ay i n Sau d i Arab i a. Fo r o n e y ear (2 0 1 4 ), a few d ay s are n o tacco u n t edfo r. As a res u l tth e p art i es h av e effect i v el y s t i p ul at edth at M r. Bel l wo o d ’ s 2 0 13 y ear i n cl u d ed3 7 1 d ay s , h i s 2 0 14 y ear i n cl ud ed3 6 2 d ay s , an d h i s 2 0 15 y ear i n cl u d ed3 7 0 d ay s . W e d o n o tat t em p tt o co rrectth es e n u m

b ers o r t o reco n ci l e t h em

t o a 3 6 5-d ay

y ear.- 9
-

[* 9 ] Tax retu rn s an d n o ti ce o f d efi ci en cy A. Turb o T ax an dFo rm

2 5 5 5 Th e Bel l wo o d s t i m el y

fi l edFo rm s 1 0 4 0 , “ U.S. In d iv i du al In co m e Tax Ret u rn ”, fo r 2 0 1 3 , 2 0 1 4 , an d2 0 1 5 . M r. Bel l wo o d t es t i fi edth ath e u s edTu rb o Tax
s o ft ware each y ear t o h el p h i m p rep are t h e retu rn s an dth ateach y ear t h e s o ft ware g u i d edh i m

t o cl ai m th e FEIEs fo r t h e i n co m e h e earn edwo rk i ng i n Sau d i Arab i a. Th e Bel l w o o d s at tach edFo rm s 2 5 5 5 , “ Fo rei g n Earn edIn co m e”, t o each retu rn . On th e Fo rm

2 5 55 fo r 2 0 1 3 , 4 M r. Bel l wo o dco m p l et edPartI o f t h e fo rm
an d p ro v i d edg en eral i n fo rm at i o n i n cl u d i n g : h i s fo rei g n ad dres s i n Ha’ i l , Sau d i Arab i a; the fact th ath i s em p lo y er was a U.S. co m

p an y ; an d t h e fact t h ath e was a U.S. ci t i zen . Ho wev er, i n the p o rt i o n o f Part I t h at d i rect s a t ax p ay er t o l i s th i s o r h er “ tax h o m e(s )” an d“ d at e(s ) es t ab l i s h ed ”, M r. Bel l wo o dl is t ed“ M ai n e”,
es t ab l i s h edo n “ 0 1- 0 1 - 2 0 13 ”, an dh e d i dn o t l i s t ei t h er Sau di Arab i a o r Geo rg i a
as a t ax h o m e. Un d er Part II o f th e Fo rm 2 5 5 5 , M r. Bel lwo o ds t at edth ath i s fo rei gn res i d en ce b eg an “ 0 1 -0 1 -2 0 1 3” an d “ CONTINUE[D] ”; h e l i s t edv ari o u s d at es thath e was p res en ti n the Un i tedSt at es du ri n g 2 0 1 3 (t h o u g h th o s e d at es

4 Th e Fo rm

2 5 5 5 i s s t ru ctu reds o t hatth e t ax p ay er wi l l co m p l et e Part I,
“ Gen eral In fo rm at i o n ”, an d t h en ei t h er Part II, “ T ax p ay ers Qu al i fy i n g Un d er Bo n a Fi d e Res id en ce Tes t ”, o r PartIII, “ Tax p ay ers Qu al i fy in g Un der Ph y s i cal Pres en ce Tes t ”; th e rem ai n i n g Part s IV-IX d i rect t h e qu al i fy i ng t ax p ay er i n t h e cal cu l at i o n o f t h e FEIE.- 1 0 -

[* 1 0 ] were i n co n si s t en twi t h an Au g u s t2 0 1 6 s ch edu l e h e l at er p rep ared an d
s ub m i t t edt o t h e IRS); h e ch eck edb o x es i n d icat i n g h e was em p l o y edab ro adan d
en t ered th e fo rei g n co u n t ry u n d er a wo rkv i s a an d t h atth e v i s a l i m i tedh i s s t ay i n t h e fo rei gn co u n t ry

(t h o ug h h e d i dn o tp ro v id e t h e req u es t ed “ ex p l an at io n ” as t o t h e n atu re o f t h e l i m i t at io n); an dh e ch eck ed t h e b o x t o i n d i cat e h e m ai n t ai n eda h o m e i n th e Un i tedSt at es wh i l e l i v i n g ab ro adtho u g h h e d i dn o tp ro v i d e t h e req u es t ed“ ex p l an at i o n ” reg ard i n g th e h o m e (fo r ex am p l e, t h e ad dres s, wh et h er i t
was ren t ed , th e n am es o f an y o ccup an t s , an d t h ei r rel at i o n s h i p t o M r. Bel l wo o d ). Aft er p ro v i d in g t h e g en eral i n fo rm at i o n i n Part I an dth e qu al i fy in g i n fo rm at i o n i n Part II, M r. Bel l w o od ’ s Fo rm 2 5 5 5 p ro ceed s wi t h h i s cal cu l at io n o f th e FEIE fo r 2 0 1 3 , wh i ch h e d et erm i nedt o b e $ 7 7 ,6 5 0 5 an drep o rt edas n eg at iv e i n co m e o n l i n e 2 1 o f t h e Bel l wo o d s ’ Fo rm 1 0 4 0
. On th e Fo rm

2 5 55 fo r 2 0 1 4 , M r. Bel l wo odco m pl et edPartI o f t h e fo rm

i n a
s i m i l ar m an n er as i n t h e p ri o r y ear, s t at i ng th at h is t ax h o m e was “ M ai n e” b u t g i v i n g an es t ab l is h edd at e o f “ 01 -0 1 -2 0 1 4 ” an dag ai n fai li ng t o l i s tGeo rg i a o r Sau di Arab i a as a t ax h o m e. Fo r 2 0 1 4 , h o wev er, M r. Bel l wo o d d i dn o t co m p l et e

5 Th e cal cu l at i o n b eg an wi t h M r. Bel l wo od ’ s fo rei g n earn edi nco m e fo r 2 0 1 3 ($ 1 6 2,7 4 8 ), wh i ch w ou l dh av e al l o weda m ax i m u m FEIE o f $ 9 7 ,6 0 0 (i .e., th e cap fo r 2 0 1 3 ); h o wev er, t h e Bel l w o o d s redu cedth e $ 97 ,6 0 0 am o un tb y $ 1 9 ,9 5 0 fo r “ [u ] npai dp er d iem ” d educt i o n s thatth ey wo u l d l at er cl ai m

u n der Sch edu le A,
“ It em izedDeduct i o n s”, o f t h ei r ret u rn .- 1 1 -

[* 1 1 ] PartII o f t h e fo rm

b u t in s t eadco m

p let edPartIII, fo r t h e “ Ph y s i cal Pres en ce Tes t ” (rat h er t h an Part II fo r t h e “ Bo n a Fi d e Res i d en ce Tes t”). Un d er Part III M r. Bel l wo o dl i st edSau d i A rab i a as h i s p ri n ci p al co u n t ry o f em p l o ym en t du ri n g t h atp eri o d ; an d h e p ro vi d ed “ 0 1 -0 1 -2 0 1 4 ” th ro u g h “ 1 2-3 1 -2 01 4 ” as th e s up p o s ed p eri o do f h i s “p h y s i cal p res en ce” i n Sau d i Arab ia; b u th e t h en i n cl ud ed a d at a t ab l e s tat i n g th ath e was p h y si cal l y p res en ti n t h e Un i t edSt at es o n 1 4 7 fu ll d ay s du ri n g 2 0 1 4 (an dth erefo re p res en ti n Sau d i Arab i a fo r n o m o re th an 2 1 8 d ay s ), wh ereas th e p h y s ical p res en ce t es to f s ect i o n 9 1 1 (d )(1 )(B) req u i res t ax p ay ers t o b e p res en ti n th e fo rei g n co u n t ry fo r 3 3 0 fu l l d ay s i n a 1 2 -m o n t h p eri o d. Un d er Part s IV-IX, M r. Bel l wo o dcal cu lat edh i s FEIE fo r 2 0 1 4 t o b e $ 99 ,2 0 0 6 (t he m ax i m u m fo r t h aty ear), an dh e rep o rt edth at am o u n tas n eg at i ve i nco m e o n l i ne 2 1 o f t h e Bel l wo od s ’ Fo rm

1 0 40
. On th e Fo rm

2 5 55 fo r 2 0 1 5 , M r. Bel l wo odrep o rt ed i n PartI, as i n t h e p ri o r y ears : th ath i s fo rei g n ad dres s was i n Ha’ i l , Sau d i Arab i a; th ath i s em p l o y er was a U.S. co m p an y ; an dthath e was a U.S. ci t i zen . Ag ai n h e l is ted“ M ai ne” as h i s t ax h o m e, b u th e ch an g edth e d at e es t ab l i s h ed t o “ 08 -0 3 -2 0 1 2 ”; an d ag ai n h e d i dn o t l i stSau d i Arab i a o r Geo rg i a as a t ax h om e. As i n 2 0 1 3 h e cl ai m edth e FEIE u n d er Part II (fo r t h e “ Bo n a Fi de Res i d en ce Tes t ”) an ds t at edth ath i s b o n a fi d e res i d en ce

6 Th e Bel l wo o d s d i dn o t redu ce t h e FEIE fo r an y u np ai dp er d iem i n 2 0 1 4
.- 1 2 -

[* 1 2 ] b eg an “ 0 8 -0 3 -2 0 1 2 ” an d“ CONTINUE[D] ”. M r. Bel l wo o d l i s t edd at es o f h i s p res en ce i n t h e Un it edSt at es fro m J an u ary th ro u g h Decem

b er o f 2 0 1 5 ; h o wev er, t h o s e d at es ap p ear i n co n s i s t en twi t h h i s ex p en s e rei m b u rs em en t
v o u ch ers fro m

PHI, an dh i s Au g u s t2 0 1 6 s ch edu l e i nd i cat ed t h ati l l n es s p rev en t ed h i s p res en ce i n Sau d i Arab ia u n t i l M arch 2 01 5 . As i n 2 0 1 4 M r. Bel l wo o d cl ai m ed t h e m ax im

u m FEIE ($ 1 0 0 ,8 0 0 fo r 2 0 1 5 ) an drep o rt ed t hatam o u n t as n eg at i v e i n co m e o n th e Bel l w o od s ’ Fo rm 1 0 4 0
. B. Un rei m

bu rs edem

p l o ym en tex p en s es PHI p ai dM r. Bel l wo o d a $ 5 0 p er d i em fo r ex p en s es , wh i ch h e d i dn o t rep o rtas i n co m e (an dwh i ch i s n o tati s s ue h ere). Ho wev er, M r. Bel l wo o d b el i ev edth atth e U.S. St at e Dep art m en tp ai di ts em pl o y ees i n Sau d i Arab i a a l arg er p er d i em of $ 1 5 5
. He co n s i d eredth e $ 10 5 d i fferen ce t o co n s t i tu t e “ u np ai d p er d i em ” i n h i s cas e, an do n h i s retu rn h e d edu ct ed t hatam ou n tas an
u n rei m b u rs edem

p l o ym en tex p en s e. Th at i s , M r. Bel l wo o dap paren t l y p res u m ed t h ath e h adi ncu rredth e s am e ex p en s es th ata St at e Dep art m en t em p lo y ee wo u l d h av e i n cu rredb u t reck o n ed t h ati n h i s cas e th os e ex p en s es were u n rei m b u rs edt o t h e ex t en to f t h e “ un p ai d” $ 1 0 5 p er d ay . Th i s res u l t ed i n M r. Bel l wo o d ’ s cl ai m i n g- 1 3 -

[* 1 3 ] u n rei m

bu rs edem

p l o ym en tex p en s es o f $ 1 9 , 9 5 0 fo r 2 0 1 3 ; $ 2 2 , 7 8 5 fo r 2 0 1 4 ;
an d $ 2 5 ,0 4 2 fo r 2 0 1 5
. 7 C. No ti ce o f d efi ci en cy On M arch 1 4 , 2 0 1 7 , th e IRS i s s u ed M r. an dM rs . Bel l w o o d t h e n o t ice o f d efi ci en cy

fo r 2 0 1 3 , 2 0 1 4 , an d2 0 1 5 . Fo r each y ear t he IRS d et erm in edan
u n d erp aym en t o f t ax an d an accu racy -rel at edp en al t y u n d er s ect i o n 6 6 62 (a); an d t h ree m o n t h s earl ier t h atp en al ty d et erm i nat i o n h adb een p ers o n al ly ap p ro v edi n wri t in g b y

th e s up erv i so r’ s s i g n i n g a “ Ci v i l Pen al t y Ap p ro v al Fo rm ” o n Decem b er 6 , 2 0 1 6. M r. an dM rs . Bel l wo o d t i m el y p et i t io n ed t hi s Co u rto n J u n e 1 2 , 2 0 1 7 . Atthatt im e, t h ey res i d edi n Geo rg ia. OPINION I. Bu rd en o f p ro of In g en eral , an IRS n o t i ce o f d efi ci en cy i s p res u m ed co rrect , “ an d t h e p et i t i o n er h as th e b u rd en o f p ro v i n g i tt o b e wro n g ”. W el ch v . Hel v eri n g , 2 9 0 U.S. 1 1 1 , 1 1 5 (1 9 3 3 ); s ee al s o Ru l e 1 4 2 (a). M o reo v er, wi t h res pect t o th e “ b o n a

7 Th e am o un t s M r. Bel l wo o drep o rt edas u nrei m bu rs ed em

p lo ym en t ex p en s es are n o t co n si s t en t wi t h th e n u m b er o f d ay s h e s p en ti n Sau di Arab i a acco rd i n g t o th e Au g u s t2 01 6 s ch edu l e t h atth e p art i es s ti p u lat ed
. Fo r ex am p l e, t h e $ 1 9,9 5 0 th ath e rep o rt edfo r 2 0 1 3 , i f d i v id edb y $ 1 0 5 , y i el d s 1 9 0 d ay s s p en t i n Sau di Arab i a i n 2 0 13 rat h er t h anth e 2 0 4 d ay s i n di cat edo n h is Au g u s t2 01 6 s ch edu l e. Th i s d i s crep an cy d o es n o taffect th e o ut co m e o f t h i s cas e, s o we d o n o t at t em p tt o res o l v e i t. W e accep tth e p art i es ’ s t i p u l at i on .- 1 4 -

[* 1 4 ] fi d e res i d en ce” i s s u e d i s cu s s edb el o w i n p artIV, the Bel l wo o d s b ear a
s o m ewh ath i g h er b u rd en th an m ere p rep on d eran ce o f t h e ev id en ce. A t ax p ay er wh o qu al i fi es u n d er s ect i o n 9 1 1 (d )(1 )(A) i s n o ts i m p l y s o m eo n e wh o “p ro v es ” t h at h e h as been a b o n a fi d e res i d en to f a fo rei g n co un t ry b u trat h er i s s o m eo n e wh o

“ es tab li s h es t o the s at is fact i o n o f t h e Secret ary t h ath e h as b een a b o n a fi de
res i den t o f a fo rei g n co un try ”. (Em p h as is ad d ed
. ) W e h av e co n s tru ed t hi s
s t atu to ry p h ras e t o s eta h i g h er-t h an -o rd in ary s t an d ardo f p ro o f--i
. e., “ s t ro n g p ro o f”--o f b on a fi d e res id en ts t atu s i n a fo rei gn co un t ry , Sch o n eb erg er v . Co m m i s s i o n er, 7 4 T.C. 1 01 6 , 1 0 2 4 (1 9 80 ), wh i ch i s n o tas h i g h a s t an d ardas

“ b ey o n d reas o n ab l e d oubt ” b uti s h i g h er t h an p rep o n d eran ce o f t h e ev id en ce. II. Bas i c p ri n ci pl es o f t h e FEIE Sect io n 6 1 (a) p ro v i des t h e fo l l o wi n g b ro add efi n it i on o f t h e t erm “ g ro s s i n co m e”: “ Ex cep tas o t h erwi s e p ro v i dedi n th i s s ub t i tl e, g ro s s i n co m e m ean s al l i n co m e fro m

wh at ev er s ou rce d eri ved ”. Ho wev er, s ect i o n 9 1 1 (a) p ro v i d es th ata

“ qu al i fi edi n d i v i dual ” m ay el ectt o ex cl ud e fro m

g ro s s i n co m e h i s “ fo rei g n earn ed i n co m e”. To qu al i fy

fo r t h e FEIE, t he t ax p ay er m u s ts at i s fy

th ree co nd i t i o ns , th e fi rs ttwo o f wh i ch , i f s at is fi ed , ren d er t h e t ax p ay er a “ qu al ifi edi n di v i du al ”, an dth e t h i rd o f wh i ch rel at es t o th e t y p e o f i n co m e t he t ax p ay er recei v es :- 1 5 -

[* 1 5 ] (1 ) Th e t ax p ay er’ s “ t ax h o m e” fo r t h e p eri o dm u s t b e “ in a fo rei g n
co u nt ry ”. Sec. 9 1 1 (d )(1 ). (2 ) Th e t ax p ay er m

us tb e (a) a U.S. ci t i zen wh o i s “ a b o n a fi d e res i d en to f a fo rei g n co u n t ry

* * * fo r * * * an en t i re t ax ab l e y ear”, s ec. 9 1 1 (d )(1 )(A), o r (b ) a U.S. ci t i zen o r res i d en t wh o i s “p res en ti n a fo rei g n co u n t ry o r co u n tri es du ri n g at l eas t 33 0 fu l l d ay s ” o f a 1 2 -m o n t h p eri o d , s ec. 9 1 1(d )(1 )(B). An d

-- (3 ) Th e t ax p ay er m

us th av e “ fo rei g n earn edi n co m e”--i .e., i n co m e earn ed fro m p ers o n al s erv i ces ren d ered i n a fo rei gn co u n try . Sec. 9 1 1 (a)(1 ), (b )(1 )(A), (d )(2 ). Th e Co m m is s i o n er d o es n o t d i s p u t e t h atthe co m p en s at i on M r. Bel l wo o d recei v edfo r fl y i n g h el ico p t ers i n Sau d i Arab i a was “ fo rei g n earn edi n co m e”, an d
co n seq u en t l y

we as s u m e t h ati t was . Thu s , i f du ri ng 2 0 1 3 , 2 0 1 4 , an d2 0 1 5 M r. Bel l wo o dm etth e fi rs ttw o co n d i t i o n s l is t edab o ve an dwas th erefo re a

“ qu al i fi edi n d i v i dual ” fo r p urp os es o f s ect i o n 9 1 1, t hen h e was en ti t l edt o ex cl u d e a p o rt i on o f t h e co m

p en sat io n h e recei v edfro m PHI fro m

g ro s s i n co m e fo r t h o s e y ears . Th e u nd i s p u t edfact s s h o w th atM r. Bel l wo o dwas n o t“p res en ti n a fo rei g n
co u nt ry o r co u n t ri es duri ng atl eas t3 30 fu l l d ay s” o f an y 1 2 -m o n th p eri o ddu ri n g t h e y ears ati s s u e b u t was i n s t ead , u n d er h is rep eat i n g “ 2 8 & 2 8 s ch edu l e”, p res en t- 1 6 -

[* 1 6 ] i n th e Un i t edSt at es fo r m o re t h an 1 5 0 fu l l d ay s du ri n g each y ear i n i s s u e, s o t h e 3 3 0-d ay

t es to f s ect i o n 91 1 (d )(1 )(B) i s n o ts at i s fi edi n th is cas e. Co n seq u en t l y , th e Bel l wo o d s fi rs tm us ts h ow--b y

a p rep o n deran ce o f
ev i d en ce--t h atM r. Bel l wo o d ’ s “ t ax h o m e” was i n a fo rei g n co u nt ry , wi t h i n th e
m ean i n g o f s ect i o n 9 1 1 (d )(1 ); 8 an ds eco n d , th ey b ear t h e i n creas edb u rd eno f g i v i n g “ s t ro n g p ro o f” t h ath e was a “ b o n a fi d e res i d en t ”, wi t h i n th e m ean i n g o f
s ect i on 9 1 1 (d )(1 )(A), o f o n e o r m o re fo rei g n co u n t ri es fo r an u n i n t erru p t edp eri o d i n cl u d i n g a fu l l t ax ab l e y ear. Th es e t wo req u i rem en t s cal l fo r o v erl ap pi n g i n qu i ri es , b u twe ad dres s each i n tu rn . III. “ Tax h o m e” an d“ ab o d e” Un d er s ect i o n 9 11 (d )(1 ) t h e FEIE i s av ai l ab l e o n ly t o an i nd i v i du al “ wh o se t ax h o m e i s i n a fo rei g n co u n t ry ”. Sect io n 9 11 (d )(3 ) d efi n es th e t erm “ t ax h o m e”
as “ [an ] i n d i vi du al ’ s h o m e fo r p u rp o s es o f s ect i o n 1 6 2 (a)(2 ) (rel at i n g t o trav el i n g
ex p en s es wh i l e awayfro m h om e)”, wh i ch i s t y

p i cal l y co ns i d ered t o b e t h e l o cat i o n
o f t h e i n d i vi du al ’ s p ri n ci p al p l ace o f b u s i n es s , Harri n g t o n v . Co m m is s i o n er, 9 3 T.C. 2 9 7 , 3 0 7 (1 9 8 9 ), an d , o f co u rs e, Sau d i Arab i a was M r. Bel l wo o d ’ s p ri n ci p al

8 “ [T] h e t ax p ay er m

us t p res en t‘ st ro n g p ro o f’ th ath e was a b o n a fi d e res i d en t o f a fo rei g n co u n t ry , wh ereas h e n eed o n l y es t ab l i s h t h ath i s t ax h om e was i n a fo rei gn co u n t ry b y

a p rep o n d eran ce o f ev i d en ce.” Ri t ch i e v . Co m m i s s i o ner, T.C. M em o. 1 9 8 9 -4 2 6 , 1 9 89 Tax Ct . M em o LEXIS 4 2 4, at* 25
.- 1 7 -

[* 1 7 ] p l ace o f b u s i n es s . Ho wev er, s ect i o n 9 1 1(d )(3 ) fu rth er p ro v i d es : “ An i n d i v i du al s h al l n otb e t reat edas h av i n g a t ax h o m e i n a fo rei g n co u nt ry fo r an y p eri o dfo r wh i ch h i s ab od e i s wi t h in th e Un i t edSt at es .” (Em p has i s ad d ed .) Co n s eq u en t l y , i f M r. Bel l wo o d ’ s “ ab o d e” was i n th e Un i t edSt at es du ri n g th e y ears i n i s s u e, h e d oes n o ts at i sfy th e “ t ax h o m e” req u i rem en to f s ect io n 9 1 1 (d )(1 ),
n o t wi t h s t an d i n g th atSau d i Arab i a was h i s p ri n ci pal p l ace o f b u si nes s . Sect i o n 9 1 1 (d )(3 ) d o es n o td efi n e t h e t erm “ ab o de”, s o we l oo k t o o t h er au t h ori t ies fo r a d efi n i t i o n . On e’ s “ ab o de” i s wh ere h e “ ab i d es ”. Aco n e v . Co m m i s s i o n er, T.C. M em o . 2 0 1 7 -1 6 2 , at* 12 . Ho wev er, an i n d i v i du al ’ s ab od e can no tb e d et erm i n edb y
s i m p l y i den t i fy i ng th e l o cat i o n wh ere h e s p en t t h e g reat es tn u m b er o f d ay s du ri n g a g i v en p eri o d , es p eci al l y i f a l o cat i o n wh ere h e s p en t fewer d ay s was h i s fam i l y h o m e wh ere h e s p en t t h o s e d ay s wi t h h is wi fe an d y o u n ges ts o n. Th is Co u rtan d atl eas t o n e Co u rt o f Ap p eal s h av e reco g n i zed a d o m es t i c-v s .-v o cat i o nal d i s t i n ct i o n fo r d et erm i ni n g o n e’ s “ ab o de” u n d er s ect i o n 9 1 1:

“ Ab o d e” h as b een v ari o u s l y d efi nedas o n e’ s h o m e, h ab i t at io n , res i d en ce, d o m i ci l e, o r p l ace o f d wel l i n g . Bl ack ’ s Law Di ct i o nary7 (5 t h ed . 1 9 7 9). Wh i l e an ex actd efi n i t i o n o f “ ab o de” d ep en d s up o n t h e co nt ex ti n wh i ch t h e wo rdi s u s ed , i t cl earl y d o es n o tm ean o n e’ s p ri n ci p al p lace o f b u s i n es s . Thu s , “ ab o d e” h as a d o m es t i c rat h er t h an v o cat i o n al m ean i n g , an ds t an d s i n co n t ras tt o “ t ax h om e” as d efi n ed fo r p u rp o s es o f s ect i on 1 6 2 (a)(2 ).- 1 8 -

[* 1 8 ] Bu jo l v . Co m

m i ss i o n er, T.C. M em o . 1 98 7 -2 3 0 , 1 9 8 7 Tax Ct . M em o LEXIS 2 3 4 , at * 8 -* 9, aff’ dwi t h o u tp ub l i s h edo p i ni o n , 8 42 F.2 d 3 2 8 (5 t h Ci r. 1 9 8 8 ), ci t ed wi t h ap p ro v al i n Lem ay v . Co m m i s s i o n er, 8 3 7 F.2 d6 8 1 , 6 8 3 -6 84 (5 t h Ci r. 1 9 8 8 ), aff’ g T.C. M em o . 1 9 8 7 -2 5 6 . Co n s eq u en t l y , wh en o ne o f t he l o cat i o n s wi t h wh i ch
an i n d iv i du al i s co n n ect edi s i n th e Un i t edSt at es (e.g ., wh en duri n g t h e rel ev an t p eri o d s th e t ax p ay er o wn s a h o m e i n th e Un it edSt at es an ds p en d s n u m ero u s d ay s atthat ho m e, an d wh en th e t ax p ay er’ s s p o u se an dy o u n g es t ch i ldl i v e atthath o m e du ri n g th e rel ev an t p eri o d s ), we co n s i d er t h e d o m es t i c o r v o cat i o n al n atu re o f t h e t i m e s p en ti n each l o cat i o n i n ad d i t i o n t o co u nt i n g th e nu m b er o f d ay s . Acco rd in g ly , we co m

p are t h e d o m es ti c an dv o cat i o n al qu al i t i es o f M r. Bel l wo o d ’ s
res p ect i ve d w el li n g s , an d t h e t i m e h e s pen tateach , t o h el p d et erm i n e wh eth er h i s

“ ab o d e” rem ai n edi n th e Un i tedSt at es . M r. Bel lwo odo w n eda h o m e i n Geo rg i a wh ere h e res id eddu ri n g h i s d ay s
o ff du t y i n 2 0 1 3 , 2 01 4 , an d2 0 1 5 . Wh enwo rk i n g i n Sau d i Arab i a, M r. Bel l wo o d
s t ay edi n a h o t el ro o m

du ri n g 2 0 1 3 an di n an effi ci en cy ap art m en tdu ri ng 2 0 1 4 an d 2 0 1 5 n ei t h er o f wh i ch h e o wn edan db o th o f wh i ch were p ro v i d edb y h i s
em pl o y er. “ Mai n t en an ce o f a d wel l i n g i n th e Un i t edSt at es ” d o es n o t n eces s ari l y
es t ab l i s h o n e’ s ab o d e h ere, ev en i f “ t hatdwel l i n g i s u s ed b y th e i n d iv i du al ’ s
s p o u se an dd ep en d en t s ”, 2 6 C.F.R. s ec. 1 .9 1 1 -2 (b ), In co m e Tax Reg s . , n o r d o es- 1 9 -

[* 1 9 ] s t ay i n g i n a h o t el ro o m o r an effi ci en cy ap art m en t n eces s ari l y d is qu al i fy

an i n d i v i du al fro m es t ab l i s h i n g h i s ab o de i n a fo rei g n co u n t ry . Nev ert h el es s , we d o
n o to v erl o o kth e d o m es t i c o r v o cat i o n al qu al i t i es o f th o s e d wel l i n g s ; an di ti s cl ear t h atM r. Bel l w o od ’ s s t ro n g er d o m es t ic co nn ect i o n was wi t h th e Geo rg ia h o u s e an d
n o tth e Sau d i Arab ian h o t el an d ap art m en t. Du ri n g th e t i m e M r. Bel l wo o ds p en ti n Sau d i Arab ia, h i s reg u l ar act i v i t i es were p ri m ari l y v o cat i o n al . M r. Bel l wo o d t es t i fi ed t h ath i s n o n -wo rk -rel at ed act i vi t i es i n Sau d i Arab ia were l i m i t edb ecau s e o f t h e d em an d i n g n atu re o f h i s
wo rk --h e wen tt o th e b arb er o r g ro cerys t o re as n eed edan dv i s i t edth e o ccas i o n al
res t au ran t , b u t m o s t o f h i s t i m e i n Sau d i Arab i a was s p en tei th er wo rk i n g o r
res t in g an dp rep ari ng fo r h i s n ex ts h i ft . Th at i s t ru e, b u to n l y b ecau s e wh en M r. Bel l wo o dh ads p are t im e, h e d i dn o twi s h t o s p en di ti n Sau d i Arab i a. Rat her, du ri n g h i s d ay s o ff du t y , M r. Bel lwo o dretu rn edt o h is h o m e i n t h e Un i t edSt at es wh ere h e s p en t t i m e wi t h h i s fam i l y , p u rs uedh i s h o b bi es , an dm an ag edth e d ay -t o d ay affai rs o f h i s p ers o n al l i fe. In Geo rg i a h e m ai n t ai n edh i s reg i s t rat i on t o v o t e, recei v edh i s m ai l , up d at edh i s d ri v er’ s l i cen s e, an dreg is t eredh i s v eh i cl e. Th u s , t h e n atu re o f M r. Bel l wo o d ’ s res p ect i v e d wel l i n g s an dth e m an n er i n wh i ch h e
s p en t h i s t i m e ateach i n d i cat e t h at h i s “ ab o d e” was i n th e Un i t edSt at es , an dth at h e t rav el edt o Sau d i Arab i a fo r wo rko n l y .- 2 0 -

[* 2 0 ] Th e s t ren g t h o f a t ax p ay er’ s t i es t o th e Un i t edSt at es m ay fu rt h er i n d i cat e wh et h er h i s o r h er “ ab o d e” rem ai n s i n th e Un i t edSt at es , es p eci al l y wh en th e t ax p ay er’ s t i es t o a fo rei gn co u n t ry are t ran s it o ry o r l i m i t ed
. Harri n g t o n v . Co m m i s s i o n er, 9 3 T.C. at 3 0 8
. Wh en we co m p are t h e t i es M r. Bel l wo o dret ai n ed i n the Un i t edSt at es ag ai n sth i s t i es t o Sau d i Arab i a, we are fu rt her co nv i n cedth at h i s “ ab o d e” was i n t h e Un i t edSt at es . As we h av e n o t ed , M r. Bel l wo o dret ai n ed h i s U.S. ci t i zen s h i p . InGeo rg ia M r. Bel l wo o do wn eda h o m e wh ere h i s wi fe an d y o u n g s o n l i v ed ; h e ret ai n ed h i s v o t er’ s reg i s t rat i o n , v eh i cl e reg i st rat i o n , an d dri v er’ s l i cen s e; h e ret ai n edh is d o ct o r, d en ti s t, an d p h arm aci s t . Hi s m ai l i n g ad dres s was i n Geo rg i a; h i s o n l y b an kacco un twas i n M ai n e; an d h i s o ld es ts o n
an d p aren t s rem ai nedi n t h e Un i t edSt at es . In co n t ras t , M r. Bel l wo o d ’ s o n l y t i es t o Sau di Arab i a were h i s co n t ractfo r em p l o ym en t wi t h PHI an da t o as t er o v en th at h e p u rch as edfo r h i s ap art m en t. Ev en tho u g h we accep th i s t es t i m o n y th at h e m ad e fri en ds i n Sau d i Arab i a
an d v i si t edl o cal s h o p s an d res t au ran t s o n o ccas i o n , M r. Bel lwo o d fai l edt o
es t ab l i s h t h e s i g ni fi can ce o f an y t i e t o Sau d i Arab i a b ey o n dh i s co n t ract wi t h PHI. As fo r th at co n t ract , th e s i g n i fi can ce o f t h i s t i e i s weak en edb ecau s e, fi rs t , th e
co n tract was co n t i n g en tup on M r. Bel l wo o d ’ s ret ai n i n g p ro fes s i o n al l icen s es i n t h e Un i t edSt at es an d , s eco nd , PHI s t at edth at i n t h e ev en t M r. Bel lwo o dwas n o- 2 1 -

[* 2 1 ] l o n g er as s ig n edt o Sau di Arab i a, PHI i n ten d ed t o rep atri at e h i m t o th e Un i ted St at es an dreas s i gn h im el sewh ere (wh ich u l t i m at el y h ap p en edi n 2 0 1 6 ). Th u s, s ig n ifi can t t i es thatM r. Bel l wo o d ret ai n edi n t h e Un i t edSt at es , wh en
co m p ared t o th e rel at i v e l acko f s u ch t i es t o Sau d i Arab i a, i n d i cat e t h at M r. Bel l wo od ’ s “ ab o de” rem ai n edi n th e Un i t edSt at es du ri ng 2 0 1 3, 2 0 1 4 , an d2 0 1 5
. On th e b as is o f th e fo reg o i n g , we co n cl u de t hatth e Bel l wo od s fai l t o s at i s fy t h e “ tax h o m e” req u i rem en t an dare t h u s u n ab l e t o cl ai m th e FEIE fo r an y

o f t h e rel ev an t y ears . Al t h o u g h o u r FEIE d i scu s s io n co u l den dh ere, we n o wp ro ceed t o d i s cu s s b o n a fi d e res i d en ce i n p artIV. IV. Bo n a fi d e res i den ce Wh et h er an i n di v i du al h as t ak en up b o n a fi de res i d en ce i n a fo rei g n co u n t ry d ep en d s o n th e fact s an dci rcu m s t an ces o f t h e cas e. Th e fact o rs th atco u rt s h av e
co n si d ered i n an al y zi n g th o s e fact s an dci rcu m s t an ces i n cl ud e t h e fo ll o wi ng :

(1 ) i n t en t i o n o f t h e t ax pay er; (2 ) es t ab l i sh m en to f h i s h om e t em po rari l y i n th e fo rei g n co u n t ry fo r an i n d efi n it e p eri o d ; (3 ) p art i ci pat i o n i n the act iv i t i es o f h i s ch o s en co m m un i t y o n s o ci al an dcu l tu ral l ev el s, i d en t i fi cat i o n wi t h t h e d ai l y l i v es o f t h e p eo p l e an d , i n g en eral , as s i m i l at i o n i n t o t h e fo rei g n en v i ro n m en t ; (4 ) p hy s ical p res en ce i n t he fo rei g n co u nt ry co n s i s ten twi th h i s em pl o ym en t ; (5 ) n ature, ex t en tan dreas o n s fo r t em p o raryab s en ces fro m h i s t em p o raryfo rei g n ho m e;- 2 2 -

[* 2 2 ] (6 ) as s um p t i o n o f eco no m i c b u rd en s an dp aym en t o f t ax es t o t h e fo rei g n co u n t ry ; (7 ) s t atu s o f res i d en tco n t ras t edt o th at o f t ran s i en t o r s o jo urn er; (8 ) t reat m en tacco rd edh i s i n co m e t ax s t atu s b y h is em p l o y er; (9 ) m ari t al s t atu s an dres i d en ce o f h is fam i l y ; (1 0 ) n ature an d du rat i o n o f h is em pl o y m en t ; wh et h er h i s as s i g n m en t ab ro ad co u l d b e p ro m p tl y acco m p l i s h ed wi t h i n a d efi n i t e o r s p eci fi edt i m e; (1 1 ) g oo dfai t h i n m ak i n g h i s t ri p ab ro ad ; wh et h er fo r p u rp os e o f t ax ev as io n. So ch u rekv . Co m

m i s s i o n er, 3 0 0 F.2 d3 4 , 3 8 (7 t h Ci r. 1 9 6 2 ), rev ’ g an d rem an d in g 3 6 T.C. 1 3 1 (1 9 61 ). Th i s Co urtco n s u l t s th o se “ So ch urekfact o rs ” i n d et erm i n i n g b o n a fi d e res i den ts t atu s , s ee Es t at e o f San d ers v . Co m m is s i o n er, 1 44 T.C. 6 3 , 8 2
- 8 3 (2 01 5 ), v acat edan drem an d edo n o th er g ro u n ds , 8 3 4 F.3 d1 2 6 9 (1 1 t h Ci r. 2 0 1 6 ); Sch o n eb erg er v . Co m m i s s i o n er, 7 4 T.C. at1 0 2 3 , an dwe co n s i d er t h em
n o w. 1
. In t en t i on . Th e Co u rt o f Ap peal s i n J o nes v . Co m m is s i o n er, 9 2 7 F.2 d 8 4 9 , 8 5 4 (5 t h Ci r. 1 9 9 1 ), rev ’ g T.C. M em o . 1 9 8 9-6 1 6 , n o t edth at “ i n t en tp lay s p erh ap s t h e m os ti m

p o rt an tp arti n d et erm in i n g th e es t ab l i s h m en tan dm ai n t en an ce
o f a fo rei g n res i d en ce”. W e t ak e as s i n cere M r. Bel l wo o d ’ s t es t i m o ny th ath e i n t en d edt o “ rem ai n em

p l o y ed i n Sau d i Arab i a”, b utth e rel ev an ti n t en ti o n fo r wh i ch we l o o ki s, o f co u rs e, n o tm erel y th e i n t en ti on t o b e em

p l o y edi n a fo rei g n- 2 3 -

[* 2 3 ] co un t ry . Rat h er, we l o o kfo r o b ject i v e i nd i ci a o f an i nt en t io n t o act u al l y
es t ab l i s h res i d en ce i n th e fo rei g n co u n t ry . InJ o nes th e t ax p ay er v ol u n t ari l y d ecl i neda res i d en cy

p aym en tfro m t h e St at e o f Al as k a, an dthe co u rtfo u n d t h i s t o b e a s u ffi ci en td em o n s t rat i o n o f t h e t ax p ay er’ s o b j ect i v e i nt en t t o es tab l i s h h i s
res i den ce i n a fo rei g n co u n t ry . Id . W e h av e al s o h el dth at ev i d en ce o f “ s peci fi c,
co n tem p o ran eo u s d o cu m en t at i o n ” o f a “ p erm an en t t ran s fer” fo r a “ s u ffi ci en t l y
s ub s t an t i al p eri o do f t i m e” can p ers uad e t h i s Co urtth ata t ax p ay er i n t en d edt o b e a
res i den t o f a fo rei g n co un try . Co b b v . Co m m i s s i o n er, T.C. M em o . 1 9 9 1 -3 7 6 , 1 9 9 1 Tax Ct . M em o LEXIS 4 2 0 , at* 1 6
. M r. Bel lwo odp res en t edn o ev i d en ce t h at h i s s itu at i o n i n Sau d i Arab i a ev er i n v o l v ed an o b

ject i v e co n s eq u en ce rem o t el y equ i v al en tt o d ecl i n i ng a res id en cy p aym en t as i n J o n es , n o r are we co n v i n cedth atM r. Bel l wo od ’ s as s ig n m en twas ak i n t o a “ perm an en t t ran s fer” fo r a “ s u ffi ci en t l y s ub s tan t i al p eri o do f t i m e” as i n Co b b . Adm i t ted l y , M r. Bel l wo o dwas a “ fu l l-t i m e” h el i co p t er p i l otfo r PHI an d
was “ b as edi n th e Ki ng d o m o f Sau d i Arab i a”. Ho wev er, we are u n co n v i n cedth at h i s as s i g n m en twas i n deed “p erm an en t ” o r fo r a “ su ffi ci en tl y s ub s t an t ial p eri o do f t i m e” t o refl ectan i n t en ti o n t o b eco m e a res i d en to f Sau d i Arab i a. Th e o ffer l et t er fro m PHI fi rs trefers t o M r. Bel l wo o das b ei n g as s i g n edi n th e Un i tedSt at es du ri n g an i n t ro du ct ory p eri o dan dth at h e wo ul d b e “ reas si gn [ed ] t o Sau d i Arab i a”;- 2 4 -

[* 2 4 ] th e l et t er th en d es cri b es v ari o u s co nt i n g en ci es th atco u ldt erm i n at e M r. Bel l wo od ’ s em

p l o ym en t; th e l et t er t h en s t at es that“ [i ] t i s PHI’ s i n t en ti o n t o rep at ri at e * * * [M r. Bel lwo o d ] i n the ev en t t h at * * * [h e i s ] n o l o n g er as s i g n edt o Sau di Arab i a”. (M r. Bel l wo od ’ s t es t i m o n y s u g g es t s th ats u ch a rep atri at i o n
u l t i m at el y

o ccu rreds o m et i m e i n 2 0 1 6 .) Th i s fact o r o f i n ten t i o n i s ad v ers e t o M r. Bel l wo od
. 2
. Es t ab l is h m en to f h o m e. M r. Bel l wo o dd i dn o tes t ab l i s h a h o m e i n Sau di Arab i a fo r an y

p eri o d , l etal o n e an i n defi n i t e o n e. M r. Bel l wo o ds t ay edi n wh at ev er acco m

m o d at i o n s PHI p ro vi d edh i m du ri n g h is 2 8 -d ay

s t i n t s o n du t y

i n Sau di Arab i a, an dh e m ov edfro m o n e acco m

m o dat i on (a h o tel ro o m ) t o an o t h er (an effi ci en cy

ap art m en t ) atPHI’ s d i rect i on . Al t h o u g h h e l eftb el on g in g s i n th e
acco m m o d at i o n s du ri n g h i s o ff-d u t y p eri o d s --wh en h e ret u rn edt o h i s h o us e i n Geo rg i a--we are n o tp ers u ad edth ats u ch acco m m o d at i o n s co u l d b e co n si d ered

“ es tab li s h m en to f h i s h o m e” fo r p u rp o s es o f b o na fi de res i d en ce. Th is fact o r i s ad v ers e t o M r. Bel l wo o d
. 3
. Act i vi ti es an d as s i m i l at i o n . M r. Bel l wo odt es t i fi edth ath e m ad e fri en ds i n Sau d i Arab i a an dth ath e t rav el edaro u n d Ha’ i l wh ere h e wo rk ed . He
v i s i t edth e b arb er as n eed edan dtrav el edab o u t t he ci ty fo r v ari o u s t as k s b et ween h i s 1 2 -h o u r wo rks h i ft s . Ho wev er, M r. Bel l wo o d al s o t es ti fi ed t h atb ecau s e o f t h e- 2 5 -

[* 2 5 ] d em an d i n g n ature o f h i s wo rk , m os to f h i s t i m e o ff du t y was s p en tres t i n g o r p rep ari n g fo r h i s n ex t s h i ft . Ul t i m at el y , th e reco rdd o es n otes t ab l i s h t h atM r. Bel l wo odp art ici p at edi n act i v it i es o r at t em p tedt o as s i m i l at e t he l o cal cu l tu re i n a
m an n er t h atwo u l di n d i cat e b o ne fi d e res i d en ce. Th u s , th i s fact o r i s ad v ers e t o M r. Bel l wo od
. 4
. Ph y s i cal p res en ce co n s i s t en t wi t h em p lo ym en t . Al t h o ug h the ex act
n u m b ers are u n cl ear, t h e reco rdi nd i cat es th atM r. Bel lwo o d was p h y s i cal l y p res en ti n Sau d i Arab i a o n ap p ro x i m at el y 2 0 4 d ay s du ri n g 2 0 1 3 , 2 1 0 d ay s du ri n g 2 0 1 4 , an d1 6 1 d ay s du ri n g 2 0 1 5 ; an dh e was p h y s i cal ly p res en ti n t h e Un i t ed St at es o n ap p ro x i m at el y 1 6 7 d ay s i n 2 0 1 3 , 1 5 2 d ay s i n 2 01 4 , an d2 0 9 d ay s i n 2 0 1 5 (n o t i ng th ath e t es t i fi edt o s p en d i n g m o s t o f t h e fi rs tth ree m o n t h s o f 2 0 1 5 i n th e Un i ted St at es b ecau s e o f i l l n es s ). “ Th e p h ras e ‘ co n s i s t en twi t h h i s em p l o ym en t ’
s h o u ldex cu s e an em

p l o ym en t -rel at edab sen ce fro m t h e co un t ry o f s up p o sed
res i den ce; i ts h o ul dn o t* * * s etth e l i m ito n h i s p res en ce i n t he fo rei g n co u n t ry .” Aco ne v . Co m

m i s s i o n er, at* 18 . By

th e n um b ers , M r. Bel l wo o ds p en tm o re d ay s i n Sau di Arab ia du ri n g 2 0 1 3 an d2 0 1 4 , b u t h e d i dn o tap p ear t o s p en dan y o f h i s
o ff-d u t y d ay s th ere. In o t h er wo rd s , M r. Bel l wo o dwas i n Sau d i Arab i a wh en
wo rkreq ui redh i m

t o b e t h ere, b u t h e was i n t h e Un i t edSt at es wh en ev er h e co u l d b e t h ere. Th i s fact o r i s ad v ers e t o M r. Bel l w o o d
.- 2 6 -

[* 2 6 ] 5
. Tem

p o raryab sen ces . Th e “ n atu re, ex t en t an d reas o n s fo r * * * [M r. Bel l wo o d ’ s ] t em

p o rary ab s en ces fro m ” Sau d i Arab ia are ad v ers e t o h i s cl ai m
o f b o na fi d e res id en ts t atu s . M r. Bel l wo o d s pen tal l o f h i s o ff-d u t y d ay s i n , o r i n t ran s itt o , th e Un it edSt at es . Al t h o u g h M r. Bel l wo odd i d n o t p ro v i d e an y ev i d en ce
s h o wi n g th ats o m e o f t h e d ay s i n the Un i t edSt at es were s p en ti n co n nect i o n wi t h h i s wo rk , e.g ., m ai n t ai ni n g h i s p i l o t ’ s l i cen s e, et c., th e Co u rtp res u m es thi s t o b e t ru e; nev ert h el es s , s u ch d ay s wo u l d b e m i n im al i n co m p ari s o n t o the n u m

b er o f d ay s s p en ti n th e Un i t edSt at es o ff du t y . As M r. Bel l w o o dt es t i fi ed , th ere i s
n o t h i n g i n th e FEIE requi rem en t s th atwo u l d p ro h i bi ta t ax p ay er fro m l eav i n g h i s
o r h er fo rei g n co u n t ry

“ fo r b ri ef o r t em

po rarytri p s b ackt o th e Un it ed St at es fo r
v acat i o n o r b u s i n es s ”, b u tM r. Bel l wo o dh as fai ledt o s h ow s u ch t ri p s were ei t h er

“ b ri ef o r t em

p o rary ”. In d eed , h e s p en tm o re t han o n e-t h i rdo f each y ear i n th e Un i ted St at es , an dfo r ro u g hl y 2 8 d ay s ata t i m e. Th i s fact o r i s ad v ers e t o M r. Bel l wo od
. 6
. Eco n o m i c b u rd en s an dt ax es . M r. Bel l w oo dap p ears t o h av e as s u m ed few eco no m i c b u rd en s an d h as p ai dn o t ax i n Sau d i Arab i a. Hi s em p l o y er p ro v id edh i s l o d g i n g an drei m b u rs edh i m

$ 5 0 fo r each d ay

h e s p en ti n Sau d i Arab i a. M r. Bel l wo o do ffered n o ev i d en ce t o s h o w th e co s to f an y m eal s th ath e p ai dfo r wh i l e i n Sau d i Arab i a, an dh e cert ai n l y d i dn o ts h o w thatPHI’ s p er d i em- 2 7 -

[* 2 7 ] d i dn o t co v er m o s t i f n o t al l o f s u ch ex p en s es . Rat h er, h e t es t i fi edthatth e l o cat io n was a “ th i rd -wo rl dco u n t ry ”, fro m wh i ch we i n fer t hath e p ercei vedh i s
co s to f l iv i n g t o b e l o w. Th i s fact o r i s ad v ers e t o M r. Bel l w oo d
. 7
. St atu s o f res i d en tv s . tran s i en ts o jo u rn er. W e are u n ab le t o d et erm i n e M r. Bel l wo o d ’ s l eg al s t atu s u n d er Sau d i Arab i an l aw. M r. Bel l wo o dt es t i fi edth at h e was i n Sau d i Arab i a u n d er a wo rkv i s a, b u tth e v i s a was n oti n t ro du ced i n t o th e
reco rd . M r. Bel lwo o dack n o wl ed g edth ath e co u l d n o tp art i ci p at e i n ci v i c l i fe i n Sau di Arab i a b ecau s e h e was n o ta ci t i zen . As fo r t h e i s s u e o f t ran s i en ce, M r. Bel l wo odt es t i fi edth ath e i n t en d edt o rem ai n i n Sau d i Arab i a fo r as l o n g as h i s
em pl o y m en tco n t ract l as t ed , b u tn o tb ey on dth att i m e; fu rt h erm o re, h e t es t i fi ed t h ath e n ev er i nt en d edt o b ri n g h i s fam i l y t o Sau di Arab i a, an dth ath e al way s i n t en d edt o retu rnt o h is h o m e i n Geo rg i a. Th e fact s t en dt o i n d i cat e t hatM r. Bel l wo odwas th u s a “ t ran s ien t ” i n Sau d i Arab i a. Th i s fact o r i s ad v ers e t o M r. Bel l wo od
. 8
. Em p lo y er’ s t ax treat m en t. Th e reco rdd o es n o t i n cl ud e t ax retu rn s t h atPHI fi l edi n Sau d i Arab i a. Each o f M r. Bel l w o o d’ s Fo rm s W -2 , “ W ag e an d Tax St at em en t ”, s h ow M r. Bel l wo od ’ s ad dres s i n Geo rg i a, b u t t h ey d o n o ts h o w
an yt h i n g reg ard i n g Sau d i Arab i a o r M r. Bel l wo o d ’ s s t atus as a res i d en to f t h at
co u nt ry . Es p eci al l y

g i v en th e Fo rm s W -2 , we can n ott el l wh et h er PHI’ s t ax- 2 8 -

[* 2 8 ] treat m en to f M r. Bel l wo o dwas d ifferen tfro m i t s t ax treat m en to f an y
em pl o y ee wh o wo rk ed s tri ct l y wi t h i n th e Un i t edSt at es . Th i s fact o r i s ad v ers e t o M r. Bel l wo o d
. 9
. M arri ag e an dfam i l y . M r. Bel l wo o d ’ s fam i l y was o b vi o us l y i m p o rt an tt o h i m

du ri n g t h e rel ev an ty ears ; an d du ri n g th att i m e h i s wi fe an d y o u n g es ts o n l i v ed i n Geo rg i a, h i s o l d es ts o n l i vedi n New J ers ey , an dh i s p aren t s l i vedi n M ai n e. M r. Bel l wo o d ’ s fam i l y n ev er cam e t o v i s i th i m

i n Sau d i Arab i a,
an d h e n ev er i n t en dedt o b ri n g th em t o Sau d i Arab i a. Th i s fact o r i s ad v ers e t o M r. Bel l wo od
. 1 0
. Natu re an ddu rat i o n o f em p l o ym en t . M r. Bel lwo o d’ s em p l o y m en t as
an ai r am b u l an ce p i l o t fo r PHI’ s cu s t o m er, th e Sau di Red Cres cen t Au t h o ri t y , was
u n d o ub t ed l y

fu ll -t i m e em

p l o ym en tb as edi n Sau d i Arab i a du ri n g th e rel ev an t y ears . M r. Bel l wo o dt es t ifi edcred i b l y th ath e i n ten d edt o , an dh e i n fact d i d , ret ai n th i s p o si t io n u n t il PHI’ s co n t ract i n Ha’ i l en d ed , s o m et i m e du ri n g 2 0 1 6
. Th i s fact or i s fav o rab l e t o M r. Bel l wo o d
. 1 1
. Go o d fai t h v s. t ax ev as i o n . W e s ee n o i nd i cat i o n o f b adfai t h, b u t
o n l y g o o d fai t h, i n M r. Bel l wo o d ’ s t ak i n g h i s jo b fo r PHI an dwo rk i n g i n Ha’ i l , Sau di Arab i a. No t h i ng i n th e reco rdi n d i cat es th atM r. Bel l wo o d t o o k t h e jo b
o u t s i d e o f t h e Un i t ed St at es fo r an y t ax -rel at edreas o n , m

uch l es s fo r a m o t i v e o f- 2 9 -

[* 2 9 ] t ax ev as i o n. In d eed , M r. Bel l w o o d t es t i fi edcred ib l y th at h e cl ai m edth e FEIE o n l y

b ecau s e t h e Tu rb o Tax s o ft ware s h o w edi tt o b e ap p ro pri at e an db ecau s e
o f h i s u n d ers tan d i n g t h ath e qu al i fi ed fo r t h e cred i t
. Th i s fact or i s fav orab l e t o M r. Bel l wo od
. In s u m , n i n e So ch u rekfact o rs wei g h ag ai n s tfi n d i n g b o n a fi d e res i d en ce i n Sau di Arab i a, an dtwo wei g h i n fav o r. Th es e two fav orab l e fact o rs d o n o t
co n st i tu t e th e “ s t ro n g p ro o f” o f b o n a fi d e res id en ce t h ata t ax p ay er m u s tp ro v i d e. Th u s, M r. Bel lwo odwas n o ta b o n a fi d e res i den to f a fo rei g n co u n t ry du ri n g th e y ears i n i s s u e, an dco n s eq u en t ly , h e i s n o t el i g i bl e fo r t h e FEIE. V. Un rei m

b urs edem

pl o ym en tex p en ses Sect io n 1 6 2 (a) al l o ws a d edu ct i o n fo r o rd in ary an dn eces s ary

b u s i n es s
ex p en s es p ai d o r i n cu rreddu ri n g the t ax ab l e y ear i n carry in g o n an y trad e o r b u s i n es s . Su ch d edu ct io n s m ay i n cl u de u n rei m

b u rs edem

p l o ym en tex p en s es , s u ch as ex p en s es i n cu rredwh il e awayfro m h o m e i n th e p u rs u i to f a t rad e o r b u s i n es s . Sec. 1 6 2 (a)(2 ). Ho wev er, t h e t ax p ay er b ears th e b u rd en o f p ro v i n g
en t i t l em en tt o an y

d edu ct io n cl ai m ed . Ru l e 1 4 2 (a); New Co l o n i al Ice Co . v . Hel v eri n g , 2 9 2 U.S. 4 3 5 , 4 40 (1 9 34 ). Th is i n cl u d es t he b u rd en o f s ub st an t i at i o n . Hrad es ky v . Co m m i s s io ner, 6 5 T.C. 8 7 , 8 9-9 0 (1 9 75 ), aff’ dp er cu ri am , 5 4 0 F.2 d 8 2 1 (5 th Ci r. 1 9 76 ).- 3 0 -

[* 3 0 ] As a g en eral m at t er, t rav el , m eal s , an den t ert ai n m en tex p en ses are s ub jectt o
es p eci al ly s t ri ct s ub s t an t i at i o n ru l es . See s ec. 2 7 4 (d ) (fl u s h l an g u ag e). Nev ert h el es s , th e Co m

m i s s io n er h as p res cri bedru l es fo r cert ai n p er d i em al l o wan ces t o b e reg ard edas equ i v al en tt o s ub s t an t i at i o n i n s o m e i n st an ces . See 2 6 C.F.R. s ec. 1
. 2 7 4 -5 (g ), In co m e Tax Reg s .; Rev
. Pro c. 2 0 11 -4 7 , 2 0 11 -4 2 I.R.B. 5 2 0 . Un der s u ch ru l es , an em p l o y ee m ay b e ab le t o d edu ct cert ai n ex p en s es atth e Fed eral p er d i em

rat e b as edo n th e l o cal i t y o f t h e em

p l o y ee’ s trav el ; h o w ev er, i f t h e em p lo y ee’ s em

p l o y er p ro vi d es a p er d i em al l o wan ce t o th e em

pl o y ee, t h en th e
am ou n tthati s d eem eds ub s t an ti at edi s l i m i tedt o the l es s er o f t h e em p l o y er’ s p er d i em o r t h e Fed eral p er d i em . Rev . Pro c. 2 0 1 1-4 7 , s ec. 4 .0 1 , 4 .0 2 , 2 0 1 1 -4 2 I.R.B. at5 2 2
. Th e Bel l wo o d s cl ai m edd edu ct io n s fo r u n rei m b urs edem

p l o y m en t ex p en s es . M r. Bel l wo o dt es t i fi edth ath e cal cu l at edth o s e am o u n t s u s i n g th e d i fferen ce b et ween th e St at e Dep art m en t ’ s p er d i em al l o wan ce (wh i ch i s u n s ub st an t i at edi n t h e reco rd ) fo r t h e l o cal it y wh ere h e wo rk ed an dth e p er d i em al l o wan ce h e recei v edfro m

PHI. Ev en i f we p res u m e t h atPHI wo u l dn o th av e p ro v i d edfu rt h er rei m b u rs em en tup o n M r. Bel l wo o d ’ s req u es t , M r. Bel lwo o d was l i m it edt o t h e l es s er o f t h e PHI p er d i em o r t h e Fed eral (St at e Dep art m en t ) p er d i em , u n l es s h e- 3 1 -

[* 3 1 ] co ul ds ub st an t i at e t he ex ces s am o u n t . Thus , b ecau s e t h e Bel lwo o d s fai l edt o
s ub s t an t i at e t h e ex ces s ex p en s es , th e d edu ct i o n s are d i sal l o wed
. VI. Accu racy -rel at edp en al ti es W e n o wco n s i d er wh et h er t h e Bel l wo od s are l i ab l e fo r accu racy -rel at ed p en al t i es . See s ec. 6 66 2 (a). A t ax p ay er i s l i ab l e fo r an accu racy -rel at edp en al t y as t o an y p o rt i o n o f an u n d erp aym en tat t ri bu t ab le t o, am o n g o t h er t h i n g s, a
s ub s t an t i al u n ders t at em en to f i nco m e t ax o r n eg l i g en ce. Sec. 6 6 6 2(a) an d(b )(1 )
an d (2 ). Th ere i s a s ub s t an t i al u n d ers t at em en to f i nco m e t ax i f t h e am o u n to f t h e
u n d ers t at em en tex ceed s th e g reat er o f 1 0 % o f th e t ax req u i redt o b e s h own o n th e retu rn o r $ 5,0 0 0 . Sec. 6 6 6 2(d )(1 )(A); 2 6 C.F.R. s ec. 1 .6 6 6 2 -4 (b )(1 ), In co m e Tax Reg s. Th e n o t i ce o f d efi ci en cy , wh i ch m ad e d et erm i nat i on s we h av e s u s tai n ed , d et erm i n edan u n derp aym en t du e t o a s ub s t an t i al u nd ers t at em en to f i n co m e t ax req u i redt o b e s h o wn o n th e Bel l wo o d s ’ retu rn fo r each o f 2 01 3 , 2 0 1 4 , an d2 0 1 5
. Th e Co m m is s i o n er h as th e b u rd en o f p ro duct i o n an dm u s t p res en ts u ffi ci en t
ev i d en ce t h ati ti s ap p ro p ri at e t o i m p o s e a p en al t y . See s ec. 7 4 9 1(c); Hi g b ee v . Co m m i s s i o n er, 1 1 6 T.C. 4 3 8 , 4 4 6 (2 0 0 1). Th e b u rd en o f p ro du ct i o n wi t h res p ect t o p en al t i es u n d er s ect i o n 7 4 9 1 (c) i n cl u d es ev i d en ce o f wri t t ens up erv i so ry ap p ro v al as req u i redb y

s ect i o n 6 7 5 1 (b )(1 ), Graev v . Co m m i s s i o ner, 1 4 9 T.C. 4 8 5 , 4 9 3 (2 01 7 ), s upp l em en t in g an do v erru li n g i n p art1 4 7 T.C. 4 60 (2 0 16 ), an dth e- 3 2 -

[* 3 2 ] Co m

m i s si o n er h as s u s tai n edth atb urd en b y p ro v i d in g a co p y o f t h e Ci v i l Pen al t y Ap p ro v al Fo rm , s i g n edb y a s up erv i s o r ap p ro vi n g th e i n i t i al d et erm i n at i o n . Iti s cl ear t h atth e am o u nt s o f t h e u n d ers t at em en t s , ev en wh en th e d efi ci en ci es are reco m

p u t edu n d er Ru l e 1 55 wi t h res p ectt o t h e co nced edam o u n ts , s ee s up ra n o t e 2 , wi l l rem ai n “ s ub s t an t i al ” fo r p urp o s es o f s ect i o n 6 6 6 2 (d )(1 )(A). On ce t h e Co m

m i s s io n er h as m etth e b u rd eno f p ro du ct i o n , th e t ax pay er
m u stco m e fo rward wi t h p ers u as i v e ev i d en ce t hatth e p en al t y i s i n ap p ro p ri at e b ecau s e, fo r ex am

p l e, h e o r s h e act edwi t h reas o nab l e cau s e an di n g o odfai t h
. Sec. 6 6 64 (c)(1 ); Hi g b ee v . Co m m is s i o n er, 1 1 6 T.C. at4 4 8 -4 4 9 . Th e d eci s i o n as t o wh eth er a t ax pay er act edwi t h reas o n ab l e cau s e an di n g o o dfai t h i s m ad e o n a
cas e-b y -cas e b as i s , t ak in g i nt o acco u n tal l p ert i n en tfact s an dci rcu m s tan ces . See 2 6 C.F.R. s ec. 1
. 6 6 6 4-4 (b )(1 ), In co m e Tax Reg s . Gen eral ly , th e m o s ti m po rt an t fact or i s th e ex t en to f t h e t ax p ay er’ s effo rtt o as s es s h er o r h i s p ro p er t ax l i ab i l i t y . Id . Oth er ci rcu m s t an ces i n cl ud e t h e ex p eri en ce, kn o w l ed g e, an dedu cat i o n o f t h e t ax p ay er, as wel l as th e ex t en t t o wh i ch th e t ax p ay er reas o n ab l y an di n g o o dfai t h rel i edo n th e ad v i ce o f a co m p et en tp ro fes s i o n al t ax ad v i s er. Id . p ara. (c)(1 ); s ee Neo nat ol o gy

As so cs ., P.A. v . Co m

m i ss i on er, 1 1 5 T.C. 4 3 , 9 9 (2 0 0 0 ), aff’ d , 2 9 9 F.3 d2 2 1 (3 dCi r. 2 0 02 ).- 3 3 -

[* 3 3 ] Tax p ay ers o ft en i n v o k e t h i s “ reas o n ab le cau s e” d efen s e b y s h o wi n g rel i an ce
o n th e ad v ice o f a t ax p ro fes s i o n al . E.g ., W oo d s u m v . Co m m i s s i o ner, 1 3 6 T.C. 5 8 5 , 5 9 2 (2 0 1 1). Su ch a co n t en t i o n req u i res th e t ax pay er t o s h o w th ree t h i n g s b y a p rep o n d eran ce o f t h e ev i d en ce: “ (1 ) Th e ad v i s er was a co m p et en tp ro fes s i o n al wh o h ad s u ffi ci en tex pert i s e t o ju s t i fy rel i an ce, (2 ) t h e t ax p ay er p ro v i d ed
n eces s ary an daccu rat e i n fo rm at i o n t o th e ad v i s er, an d(3 ) t h e t ax p ay er act u al l y rel i edi n g o o dfai th o n t h e ad v i s er’ s ju d g m en t
. ” Neo nat o l o g y As s o cs ., P.A. v
. Co m m i s s i o n er, 1 1 5 T.C. at9 9
. Wh en as k edab o u tretu rn p rep arat io n attri al , M r. Bel l wo o d s tat edth ath e rel i edo n Tu rb o Tax s o ft w are fo r p rep ari n g h i s retu rn s an d t h ath e i np u tth e i n fo rm at i o n req u es t ed
. Al t ho u g h th i s Co u rth as n o t h el dth atTu rb o Tax o r o t h er t ax p rep arat i o n s o ft w are wo u l dqu al i fy o r fai l t o qu al i fy

as ad v i ce o f a “ co m

p et en t p ro fes s i on al ”, we h av e h el dth at“ [t ] ax p rep arat i o n s o ft ware s u ch as Tu rb oTax i s
o n l y as g o o das t h e i n fo rm at io n th e t ax pay er p u t s i n t o i t. Th e m i s u s e o f t ax p rep arat i o n s o ft ware, ev en i f u n i n t en t i o n al o r acci d en t al , i s n o d efen s e t o
accu racy -rel at edp en al ti es u n d er s ect i o n 6 6 6 2.” Lan g l ey v . Co m m i s s io n er, T.C. M em o. 2 0 1 3 -2 2 , at* 9 -* 1 0 (ci tat i o n s o m i t t ed ). Des p i t e M r. Bel l wo o d ’ s t es t i m o n y
as t o th e i n fo rm at i o n h e i np u ti n t o Tu rb o Tax , th ere are v ari o u s fo o tfau l t s ev i d en t
o n h i s retu rn s th ati n d icat e erro rs i n h i s u se o f t h e s o ft ware. Fo r ex am p l e, o n each- 3 4 -

[* 3 4 ] o f h i s Fo rm s 2 55 5 , M r. Bel l wo o dl i st ed“ M ai n e” as h i s t ax h om e (b utd i d
n o tl i s t ei t h er Geo rg i a o r Sau d i Arab i a), wh ich wo u lds eem t o co n t rad i ctb o t h h i s t es t i m o ny th ath e m o v edfro m M ai n e t o Geo rg ia i n 2 0 1 3 an dthath e m ai n t ai n eda fo rei gn t ax h om e fo r 2 0 13 th ro u g h 2 0 1 5 . Onh i s Fo rm 2 5 5 5 fo r 2 0 1 4 , M r. Bel l wo odco m

p l et edPartIII fo r t h e 3 3 0 -d ay Ph y s i cal Pres en ce Tes t , b u th e l i s t ed d at es thats h o wedh e was i n Sau d i Arab i a fo r o n ly 2 1 0 d ay s duri n g 2 01 4 , 1 2 0 d ay s fewer t h an th e t es treq u ired . Onh i s Fo rm 2 5 5 5 fo r 2 0 1 5 , M r. Bel lwo o d co m p l et ed Part II fo r t h e b o n a fi d e res id en cy t es tan dl i s tedd ay s o f p h y s ical p res en ce i n Sau di Arab i a i ncl u d in g “ 0 1 -1 4 -2 01 5 ” t o “ 0 2-1 5 -2 0 1 5” an d“ 03 -1 1 -2 0 1 5” t o

“ 0 4 -1 2 -2 0 1 5 ”, b u t t h es e d at es s eem p l ai nl y wro n g : On h i s Au g u s t2 01 6 s ch edu l e, h e d i d no tl i s tan y

d ay s i n Sau d i Arab i a p ri o r t o M arch 2 4 , 2 0 1 5 , b u ts t at ed

“ [i ] l l n es s fro m

l at e J AN th ruearl y

M AY 2 0 15 ”; an dh i s ex p en s e v o uch ers fo r 2 0 1 5 al s o i n d i cat e t h atn o v o u ch er was s ub m i t tedfo r Feb ru ary 2 0 1 5 “ du e t o
m i s s i n g wo rkfo r t h e en ti re m o n t h ”. Th es e i n co n s is t en ci es o r i n accu raci es o n th e retu rn s s h o w s ev eral res p ect s i n wh ich M r. Bel lwo o d fai l edt o p ro p erl y i np u t i n fo rm at i o n i n t o Tu rb o Tax , an dwe can n o tfau ltTu rb o Tax fo r h i s u n warran t ed cl ai m o f t h e FEIE. Th erefo re, ev en i f t ax p rep arat i o n s o ft ware s h o ul db e th o u g h t
o f as th e eq u i v al en to f a “ co m p et en t p ro fes s i o n al ”, t h e Bel l w o o d s wo u l dn o tb e- 3 5 -

[* 3 5 ] ab le t o s ho w ju s ti fi edrel i an ce o n ad v i ce fro m s u ch a p ro fes si o n al t o cl ai m t h e FEIE. As fo r t h e u n rei m

b u rs edem

p l o ym en t ex p en ses d edu ct edfo r each y ear, M r. Bel l wo o dfai l edt o p ro v i d e an y s ub s t an t iat i o n fo r d edu ct in g th os e ex p en s es . Fu rt h erm o re, M r. Bel l wo o dt es t i fi edth ath i s reas o n fo r d edu ct i n g s u ch ex p en s es
was t h ats o m eo n e--wh o m h e co u l dn o trem em

ber at tri al --t o l dh i m t he d edu ct i o n s were al l o wed . Su ch fact s d o n o tes tab l i s h reas o n ab l e cau s e. On th e b as is o f th e ev i d en ce, t h e Bel l w oo d s fai l edt o s ho w th e Co u rtth at t h e accu racy -rel at edp en al t ies d et erm i n edb y th e IRS were i n ap pro p ri at e. To refl ectthe fo reg o i n g , Anap p ro p ri at e d eci s i o n wi l l b e
en t ered
.