T.C. Sum m ary Opi ni on 20 16 -3 7

UNITED STAT ES TAX COURT

MIC HAEL D. HIRSCH AND JANE HIRS CH, Pet it io ne rs v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 28 40 2- 13 S. Fi le d Au gu st8, 2 01 6.

Mi ch ael D. Hirs chan d J an e Hir sc h, p ro ses e. Ro se E. Gole , Jan e J. Ki m , andEli ezerKlei n, fo r res po nd en t.

SUMM ARY OPINION PANUTHOS, Chi ef Sp eci al Trial Ju dg e: Thi s ca se was h eardpu rs ua ntto th e p ro vi si on s o f se ct io n 7 46 3 o f th e In te rn al Rev enue Co de ineffe ctwhen th e pe ti ti on was fi le d. Pur su an t t o s ect io n 7 46 3( b) , th e d eci si onto be en te redis no t 1
Unl es s o th erwi se in di cat ed , subs eque ntsec ti onrefe ren ces are t o the 1 (co nt in ue d...)2

rev ie wab le by any

ot he r co urt, an d thi s o pi ni on sh al l n otbe tre at edas p rece de nt fo r an y ot he r cas e. Res po nd en t d et erm in edFed eral in co m e ta x d efi ci en ci es an d a ccu racyrel at edpe na lt ie s as fol lo ws:

Year Defi ci en cy Pen al ty se c. 66 62 (a) 20 09 $2 1,6 47 $4 ,32 9 20 10 32 ,58 4 6,5 17 20 11 15 ,11 2 3,0 22 Afte r co nc es si on s, th e is su es forde ci si on are: (1) whet he r pe ti ti on ers are 2 en ti tl edto for ei gn earn edin co m e ex cl us io ns of $ 87 ,13 6, $ 91 ,50 0, an d $ 52 ,15 4 fo r
(...co nt in ue d) 1 In te rn al Rev enue Co de (Co de ) in effe ctforth e y ears inis su e, an d a ll Ru le refe ren ces are t o t he Tax C ou rt Rul es of P ract ic e an d P ro cedur e. Res po nd en t co nc ed es th atpe ti ti on ers are en ti tl edto de du ct$7 ,11 4, $ 7,7 88 , 2 an d $ 3,7 15 of h om e m ortg ag e in te res t fo r ta x years 2 00 9, 2 01 0, an d 2 01 1, res pe ct iv el y , and$4 ,08 8, $ 5,1 80 , and$2 ,83 1 o f rea l es ta te tax es fortax y ears 20 09 , 20 10 , and20 11 , res pe ct iv el y . Add it io na ll y pe ti ti on ers are en ti tl edto de du ct $8 ,67 0 o f St at e an d l oc al in co m e ta xe s p ai d fo r 20 09 . Alth ou ghat t ria l re sp on de nt to okis su e wit h t he cap it al lo ss carry fo rward s o f $3 ,00 0 fo r eac h o f th e 2 00 9, 20 10 , and20 11 y ears , he c on ced edth is is su e in hi s m em or an du m of l aw. Pet it io ne rs co nc ed e th atth ey rece iv ed$7 40 inun rep orte d t ax ab le in te res t i nc om e fo r ta x year 20 11 , and$3 ,07 9 a nd$3 ,20 6 i n u nr ep orte d t ax ab le Sta te in co m e ta x refu nd s fr om

th e St at es of Ne w Yorkan d New J ers ey , res pe ct iv el y , fortax y ear 20 10 .3

ta x years 2 00 9, 2 01 0, an d 2 01 1, re sp ect iv el y ; (2) whethe r pe ti ti on ers are en ti tl ed 3 to em pl oyee bu si ne ss ex pe ns e d educ ti on s cl ai m edon Sch edul es A, Item iz ed Deduc ti on s, fo r pe ti ti on er Mi ch ael D. Hirs ch ’s tra ve l ex pe ns es be twee n Is rael an d th e Uni te d S ta te s o f $3 9,0 50 , $3 0,2 66 , and$3 6,9 38 fortax y ears 20 09 , 20 10 , and 20 11 , res pe ct iv el y ; an d (3 ) whe th er p et it io ne rs are l iabl e fo r acc ur acy-relate d pe na lt ie s und er s ect io n 6 66 2 o f $4 ,32 9, $ 6,5 17 , and$3 ,02 2 fo r ta x years 2 00 9, 20 10 , and20 11 , res pe ct iv el y . Bac kg ro un d So m e o f th e fac ts ha ve be enst ip ul at ed , andwe in co rp or at e th e st ip ul at io n an d t he acco m

panyin g e xh ib it s b y

th is refer en ce. At the ti m e th e p et it io n was ti m el y fil edpe ti ti on ers res id edinIsr ael . Duri ng th e y ears inis su e Mi ch ael D. Hirs ch(pe ti ti on er), a U.S. ci ti zen , was em pl oyed fu ll ti m e b y

Merr il l Ly

nc h, Pi erce , Fen ne r & Sm ith In c. (Me rri ll Ly nc h) , as ateam

m em be r of th e Lynn ve st Gro up with t he job ti tl e o f in ve st m en t as so ci at e. Pet it io ne r se rv ic edon ly clie nt s o f th e Lynn ve stGroup. Pe ti ti on er was in it ia ll y hi redby A dv es t, In c. (Adve st ), in 19 99 as a n i nv es tm en t ad vi se r; a ndaft er Me rri ll Ly nc h a cqui redAdv es t i n 2 00 5,
Pet it io ne rs cla im edfor ei gn earn edin co m e ex cl us io ns of $ 91 ,40 0 and 3 $7 3,2 17 fortax y ears 20 09 an d 2 01 1, re sp ect iv el y , bu t co nc ed edth atth ey are n ot en ti tl edto for ei gn earn edin co m e ex cl us io ns inex ces s o f $8 7,1 36 an d $ 52 ,15 4 fo r ta x years 2 00 9 a nd20 11 , res pe ct iv el y .4

pe ti ti on er b ecame an em

pl oyee of Merr il l Lync h. Pe ti ti on er re si gn edfro m Merr il l Ly nc h i n Dec em

be r 20 12 . Dur in g t he y ears inis su e th e Lynn ve stGroup’s o ffi ces were i n New J ers ey . App ro xi m at el y

80 % of t he Ly

nn ve stGroup’s cl ie nt s wer e b as edinth e Uni te d St at es an d app ro xi m at el y 75 % of the Ly

nn ve stGroup’s i nc om e was fro m in ve st m en t m an ag em en t fe es pa idby clie nt s. Whi le work in g fo r Merril l Lync h p et it io ne r sp eci al iz edinm ul ti fund po rtf ol io s. Pet it io ne r’s res po ns ib il it ie s i nc lu de d m eet in g a ndco ns ul ti ng with pr os pe ct iv e an d c urren t cl ie nt s, s el ect in g fu nd s i n wh ic h t o i nv es t, an d re vi ewin g al l p ortfo li os at l eas t m on th ly. Pet it io ne r al so pe rfo rm edqu an ti ta ti ve an d qu al it at iv e res earc h i nt o m utua l fu nd s fo r cl ie ntin ve st m en ts , whi chin cl ud ed te le ph on e an d i n- pe rs on di sc us si on s wi th fun d m an ag ers . Pet it io ne rs m ov edto Isr ael in19 93 . At th e ti m e o f th e m ov e p et it io ne r was 4 em pl oyed b y Rep ub li c Nat io na l Ba nkas c hi ef i nv es tm en t o ffi cer. Pe ti ti on ers own eda ho m e in Isr ael whi chwas the ir p rimary res id en ce an d p ai d re al est at e ta xe s o n t hi s p ro pe rty. Peti ti on ers were ci ti zen s o f bo th Isr ael an d t he Uni te d St at es , andth ey

vo te d i n Is rael i l oc al an d n at io na l el ect io ns inad di ti on to ab se nt ee
The pa rti es ag ree t ha t the m ov e to Isr ael in19 93 was fo r bo th pe rs on al an d 4 bu si ne ss reas on s.5

vo ti ng inU.S. elec ti on s. Pet it io ne rs were n otm em be rs of any clubs or or ga ni zat io ns ba se d i n t he Uni te d S ta te s b utwere m em be rs of asynag og ue an d t he Eng li sh Sp eak ers Res id en ts Ass oc ia ti on (ESRA) i n Is rael . Peti ti on er’s d eci si on to li ve inIsr ael du rin g t he y ears inis su e was m ot iv at edby his pe rs on al pre fere nc e to res id e th ere. Pe ti ti on er co nt in ue d t o re si de inIsr ael aft er h is em pl oym en t wi th Rep ub li c Nat io na l Banken de d. Whenpe ti ti on er b eg anwork in g fo r Merril l Lync h in 20 05 , th e co m

pa ny was wel l awa re tha t h e was li vi ng inIsr ael ; h owe ve r, Merril l Ly nc h d idno t re qu ire th athe li ve inIsr ael . Pet it io ne r sp li t h is workti m e b etweenIsr ael an d the Uni te d S tate s, s pe nd in g ap pr ox im at el y

two -th ird s o f hi s t im e inIsr ael an d o ne -th irdof h is ti m e inth e Uni te d S tate s. Pet it io ne r was inth e Uni te d S ta te s fo r atlea st12 2, 8 5, an d 1 05 da y s i n 2 00 9, 2 01 0, an d 2 01 1, re sp ect iv el y . Peti ti on er d idno t h av e a reg ul ar sc he du le bu t trie d t o b e inth e Uni te d S ta te s atlea ston ce a m on th , sk ip pi ng m on th s s uc h a s Dec em

be r whe n c li en ts m ig htno t b e av ai labl e. A ty pi cal tri p t o th e Uni te d S ta te s l as te d abo ut10 da y s, wi th pe ti ti on er d ep art in g fr om Isr ael on th e Sund ay of t he fir stweekan d re tu rn in g o n Wedn es da y ev en in g o f th e se co ndweek . If p et it io ne r ha d c li en ts inMan ha tt an , he wo ul d wo rkou t o f th e Ci ti co rp Cen te r of fic e, whi chwas d es ig na te d t he in te rn at io na l o ffi ce fo r em pl oyees b as ed6

ov ers eas . Duri ng th es e tr ip s p et it io ne r wou ldst ay at h is daug ht er’s h om e in New York. Pet it io ne r us edhi s s is te r-i n- law’ s ad dr es s i n New Yo rkas h is m ai li ng ad dr es s fo r Merril l Lync h. Pe ti ti on er’s Fo rm s W-2, Wage an d Tax Sta te m en t, is su edby Merri ll Ly

nc h fo r th e rel ev an t t ax y ears , were m ai le d t o h is si st er-i nlaw’ s ad dr es s, an d t he same addres s was li st edas p et it io ne r’s pe rs on al ad dr es s i n Merril l Lync h p ers on ne l re co rd s. Ad di ti on al ly, pe ti ti on er o wne d acar i n t he Uni te d S tate s wh ic h was reg is te redinhi s n am e u si ng hi s s is te r-i n- la w’ s ad dr es s i n New York . Pet it io ne r was li m it edby the firm an d h is li cen si ng as t o wh ere h e co ul d co nduc t b us in es s. Acco rd in g t o M erri ll Ly nc h’s re co rd s, p et it io ne r was au th or iz edto workon ly outof t he bra nc h o ffi ces wher e th e Ly nn ve stGroup was lo cat edan d M erri ll Ly

nc h’s v ari ou s o ffi ce l oc at io ns inNew Jer se y an d New Yo rk . Pet it io ne r’s ho m e in Isr ael was n otli st edinMerr il l Lync h e m pl oyee reco rd s as an al te rn at e work l oc at io n. Ad di ti on al ly, pe ti ti on er was no t au th or iz edto workou t o f th e Me rri ll Ly

nc h o ffi ce i n Tel Avi v, Is rael , andMerr il l Lync h d idno t p ro vi de pe ti ti on er wi th anIsr ael i t el ep ho ne nu m be r whe n h e was work in g i n Is rael . Pet it io ne r was no t l ic en se d t o c on du ctbu si ne ss inIsr ael an d was no t re gi st eredby Merril l Lync h wi th th e Fi na nc ia l In du st ry Nati on al Reg ul at ory

Ass oc ia ti on7

(FINRA) inIsr ael . Reg is tra ti on is requi redfor in ve stm en t as so ci at es an d fi na nc ia l advi se rs inco un tri es inwhi chth ey co nduc t b us in es s. Pet it io ne r’s ab il ity

to co nduc t b us in es s was li mit edby laws o n U.S. ci ti zen s worki ng ab ro ad , in cl ud in g i n Is rael . On Jul y 1, 2 00 5, Adve stis su eda 5 m em or an du m

to pe ti ti on er l im it in g h is ab il ity to co nt actor m eetwith c li en ts in Is rael . Whi le inIsr ael , pet it io ne r co ul d n otso li ci t, co nt act , m eetwith, o r have di sc us si on s o r co m

m un ic at io ns with e xi st in g o r po te nt ia l cl ie nt s. Fu rth er, pe ti ti on er co ul d n otad d a ny new cl ie ntacco un ts or o pe n n ew acc ou nt s re la te d t o ex is ti ng cli en ts inIsr ael , reg ard le ss of p et it io ne r’s lo cat io n. Th is po li cy rem ai ne d in pl ace wh enMerr il l Lync h a cqui redAdv es t, an d M erri ll Ly nc h i ss ue d a m em or an du m

on May 25, 2 00 6, t o t ha t ef fect . Whi le inIsr ael , pet it io ne r was li mit edto rev ie win g a ndm on it or in g trad es an d c li en t p ortfo li os an d re la y in g t hi s in fo rm at io n t o t he bra nc h o ffi ce. Bec au se of t he se res tri ct io ns , pet it io ne r co ul d no t s eekou t cl ie nt s o r work wi th cli en ts inIsr ael ; h e co ul d o nl y res po ndto cli en ts se ek in g o uthi s s erv ic es . Peti ti on er co ul d n otcal l a c li en t o r a p ro sp ect , or adve rti se inan y

way ; h e co ul d o nl y

reac t t o acli en t b y

an swe rin g atel ep ho ne cal l orm eet in g wi th a pe rs on th atso ug hthi m ou t i n Is rael if h e o r sh e wan te d t o m eet
The pa rti es ag ree t ha t p os t-9 /1 1 l aws reg ul at in g U.S. ci ti zen s wo rk in g 5 ab ro adli m it edpe ti ti on er’s ab il ity to co nduc t b us in es s i n Is rael .8

th ere. Pe ti ti on er co ul d n otreturn m is se d c al ls when inIsr ael ; h e co ul d o nl y an swe r th e te le ph on e whe n acli en t ca ll ed . Befo re p et it io ne r st art in g wo rk in g a t Adve stin19 99 , he e st ab li sh edan arra ng em en t wi th Ch arl es Lip to n. Th is arrang em en t co nt in ue d t hr ou gh ou t the y ears inis su e. As p artof t hi s arran ge m en t, Mr . Lip to n was res po ns ib le for op erat io na l an d a dm in is tra ti ve m at te rs an d was inch arg e o f sa le s, an d p et it io ne r ha d t he rol e o f in ve st m en t m an ag er. Pet it io ne r an d M r. Lip to n d eci de d t o wo rk un de r on e b ro ke r nu m

be r, with t he nu m

be r in Mr. Lip to n’s n am e in th e U.S., and pe ti ti on er an d M r. Lip to n s pl itpro fit s ev en ly. Dur in g h is ti m e in Isr ael pe ti ti on er p erfo rm edin ve st m en t m an ag em en t res earc h andpo rtf

ol io m an ag em en t wo rk . Merri ll Ly nc h’s o pe rat in g s y st em

was in st al le d o n alap to p, an d p et it io ne r ha d fu ll acce ss to th e Me rri ll Ly nc h s y st em

to ch eckda il y

act iv ity or n ew cl ie ntacco un ts , in fo rm at io n h e n eed edto pe rfo rm hi s in ve st m en t re se arch an d p ortfo li o m an ag em en t wo rkinIsr ael . Peti ti on er k ep t work fi le s i n h is ho m e in Isr ael whi chco ns is te d o f no te s fr om pri orm eet in gs an d cal ls with p ortfo li o m an ag ers of v ari ou s fu nd s. Th e fi le s athi s h om e in Isr ael co ul d h av e b eenm ov edto th e Uni te d S ta te s an d s to redth ere. Merril l Lync h d idno t re im bu rs e tr av el an d o th er ex pe ns es forin ve st m en t as so ci at es , in cl ud in g p et it io ne r, fo r th e y ears inis su e.9

Pet it io ne rs ti m el y

fil edth ei r joi ntFed eral in co m e ta x re tu rn s fo r 20 09 , 20 10 , and20 11 . Res po nd en t i ss ue d ano ti ce o f de fic ie nc y di sa ll owi ng pe ti ti on ers ’ fo rei gnearn edin co m e ex cl us io ns an d u nr ei m bu rs edem

pl oyee ex pe ns e de du ct io ns , am on g o th er i te m s. Pet it io ne rs ti m el y fil edwith t he Co urt a p et it io n 6 se ek in g re de te rm in at io n o f th e d efi ci en ci es as we ll as t he accu racy-rela te d pe na lt ie s. Fo r th e rep orte d u nr ei m

bu rs edem

pl oyee expe ns es pe ti ti on er p ro vi de d co pi es of a irp lane tra ve l i nv oi ces to res po nd en t i n t he am ou nt s o f $1 5,6 44 , $2 2,0 89 , and$1 6,6 15 for20 09 , 20 10 , and20 11 , res pe ct iv el y . Peti ti on er al so pr oduc edco pi es of r ecei pt s fo r ta xi cab s, p ark in g, t ol ls , andot he r fee s, b utth ere are d is crep an ci es with s om e o f th e rec ei pt s. 7 Dis cu ss io n I. Bu rd enof P ro of Inge ne ral , th e Co m

m is si on er’s d et erm in at io n s etforthina no ti ce o f de fic ie nc y

is pre su m edco rrec t, an d the tax pa y er h as th e b ur de n o f pr ov in g See s up ra n ot e 1 fora di sc us si on of o th er i nc om e an d e xp en se it em s i n t he 6 no ti ce o f de fic ie nc y

th atwere co nc ed edby the pa rti es . Pet it io ne r pr ov id edres po nd en t wi th co pi es of trav el rece ip ts , in cl ud in g 7 ta xi cab , parki ng , andto ll fees , as Ex hi bi t 1 1- P. Pet it io ne r of fere d t he rece ip ts as ev id en ce. Whil e res po nd en t o bjec te d t o s om e o f th e rec ei pt s o n g ro un ds of he ars ay an d aut he nt ic ity , we nee d n otm ak e an y rul in g g iv enou r ho ld in g i nf ra.10

ot he rwis e. Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. 11 1, 1 15 (19 33 ). Pur su an t to sec ti on 74 91 (a), the bu rd enof p ro of as t o fa ctua l m at te rs sh ift s t o t he Co m m is si on er u nd er ce rta in cir cu m st an ces . Peti ti on ers di d n otall eg e o r ot he rwis e sh ow tha t s ect io n 7 49 1( a) ap pl ie s. See sec . 74 91 (a)( 2) (A) an d (B ). Ther efo re, pe ti ti on ers be ar the bu rd enof p ro of on th e is su es rai se d i n t he no ti ces of de fic ie nc y . See Ru le 14 2( a). II. Fo rei gn Earn edInc om e Exc lu si on Sect io n 6 1( a) s pe ci fie s tha t “ [e]xce ptas o th erwi se pro vi de d” , gro ss in co m e in cl ud es “ al l i nc om e fro m what ev er s ou rces de riv ed ”. The Un it edSta te s emplo y s a wor ldwid e ta x s y st em , tax in g i ts cit iz en s o n t he ir i nc om e reg ard le ss of i ts ge og rap hi c so ur ces . There are ex cep ti on s t o t he ge ne ral rul e, su chas t he for ei gn earn edin co m e ex cl us io n u nd er s ect io n 9 11 . Howev er, ex em pt io ns an d e xc lu si on s fro m tax ab le in co m e are co ns tru edna rro wly, an d t he tax pa y ers m us t b rin g th em se lv es withi n t he cle ar s co pe of t he ex cl us io ns . See, e.g ., Comm is si on er v . Ja co bs on , 33 6 U.S. 2 8 (1 94 9) . 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”. Fo rei gn earn edin co m e is th e in co m e earne d fr om se rv ic es pe rfo rm edwithi n afor ei gn co un try. Sec. 91 1( b) (1 )(A). To b e en ti tl edto11

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 gn co un try.” Sec. 91 1( d) (1 ). Seco nd , he m us t b e ei th er a “bo nafid e res id en t o f a fo rei gnco un try or co un tri es foran un in te rrupt edpe rio d wh ic h i nc lu de s an en ti re t ax ab le y ear” or aU.S. resi de ntor ci ti zenpre se ntina fo rei gn co un try durin g a t l eas t 3 30 da y s i n a12 -m on thpe rio d. Sec. 9 11 (d )(1 )(A) an d (B ). Si nc e th e p art ie s ag ree t ha t p et it io ne rs are b on a fi de res id en ts of I sr ael , a fo rei gnco un try, we needno t co ns id er wh ethe r pe ti ti on er qua li fie s as a “bo nafid e res id en t o f a fo rei gn co un try or co un tri es foranun in te rrupt edpe rio d wh ic h in cl ud es anen ti re t ax ab le y ear” . See s ec. 9 11 (d )(1 )(A). Thu s we c on si de r whe th er p et it io ne r’s “ ta x h om e” dur in g t he y ears 20 09 th ro ug h 2 01 1 was inIsr ael un de r se ct io n 9 11 (d )(1 ). Sect io n 9 11 (d )(3 ) de fin es th e te rm “ ta x h om e” fo r anin di vi du al tax pa y er as hi s “ ho m e fo r pu rp os es of s ect io n 1 62 (a)( 2) ”. Und er s ect io n 1 62 (a)( 2) a ta xp ay er’s t ax ho m e is ge ne ral ly con si de redto be th e lo cat io n o f hi s re gu la r or pr in ci pa l p la ce o f bu si ne ss , andno t wh ere h is pe rs on al res id en ce i s l oc at ed . Mi tc he ll v. Co m

m is si on er, 7 4 T.C. 5 78 , 58 1 (1 98 0) . A tax pay er’s “ ab od e” i s h is pe rs on al res id en ce, an d fo r pu rp os es of s ect io n 9 11 (d )(3 ) “ ab od e” h as a “ do m es ti c rathe r th anvo cat io na l m ean in g” . Bujo l v . Comm is si on er, T.C. Mem o. 1 98 7- 23 0,12

53 T.C.M. (CCH) 7 62 , 76 3- 76 4 (1 98 7) , aff’d wit ho utpubl is he d o pi ni on , 84 2 F .2d 32 8 (5 thCir . 19 88 ). The C ou rt d et erm in es th e ta xp ay er’s co un try of ab od e b y co ns id eri ng wher e h e h as th e st ro ng es t ec on om ic , fam il y , andpe rs on al ti es . Id., 53 T.C.M. (CCH) a t 7 64 ; s ee Ev an s v . Commis si on er, T.C. Mem o. 2 01 5- 12 , at * 9. A pri nc ip al pl ace o f bu si ne ss canbe id en ti fie d b y lo ok in g at the em

pl oyer’s pr act ic es an d t he pl ace t he em pl oyer ha s i de nt ifi edas t he tax pa y er’s p rin ci pa l pl ace o f bu si ne ss init s re co rd s. See Bjorn st adv. Co m mis si on er, T.C. Mem o. 20 02 -4 7, 2 00 2 WL 23 85 07 , at * 2; Sis li k v . Comm is si on er, T.C. Mem o. 1 98 9- 49 5, 58 T.C.M. (CCH) 1 15 (19 89 ), aff’d p er curia m , 19 92 U.S. App . LEXIS 15 69 1 (D.C. Ci r. May 22, 1 99 2) . In Si sl ik , th e ta xp ay er, a co m m erci al pi lo t fo r PanAm , 8 was a bo nafid e res id en t o f Nas sau, Ba ha m as , for so le ly pers on al reas on s. Si sl ik v. Co m m is si on er, 5 8 T.C.M . (CCH) at11 5- 11 6. Th e ta xp ay er’s “ba se st at io n,” whe re Pan Am

co ns id eredhi s fl ig ht s t o o rig in at e, was Jo hn F. Kenn edy In te rn at io na l Ai rp ort (J FK) in New York . Id. at11 6. Onpape r a Pan Am pi lo t’s fli gh t p at te rn s o rig in at edan d re tu rn edto hi s b as e st at io n, an d h is adm in is tra ti ve Si nc e p et it io ne r res id edinIsr ael at t he ti m e th e p et it io n was fil ed , app eal of 8 an y de ci si on (if

a de ci si on inth is cas e were app eal ab le ) wou ldbe to th e Co urt o f App eal s fo r th e Dis tri ctof C ol um bi a Ci rcu it . See s ecs . 74 63 (b ), 74 82 (b )(1 )(A), 77 01 (a)( 39 )(A). W e h av e p rev io us ly hel d t ha t ev enth ou gh a cas e is de si gn at eda sm al l t ax cas e an d n otsubjec t t o app eal , th e Co urt’s h ol di ng inGol se n wi ll ap pl y . See Go ls env. Co m

mis si on er, 5 4 T.C. 7 42 , 75 7 (1 97 0) , aff’d, 4 45 F.2d98 5 (1 0t h Ci r. 19 71 ).13

reco rd s wer e m ai nt ai ne d t he re. Id . Add it io na ll y , th e ta xp ay er was un de r th e adm in is tra ti ve supe rv is io n o f hi s b as e st at io n e xc ep t wh eninfli gh t, wh enhe was supe rv is edby the ne ares t Pa n Am ba se st at io n. Id . The Co urt h el d fo r th es e reas on s the tax pa y er’s “ id en ti fiabl e p rin ci pa l p la ce o f bu si ne ss ”, an d t hu s h is tax ho m e, was JFK i n New Yo rk . Id. at11 9. Furth er, i n B

jorn st adv. Co m

m is si on er, 2 00 2 WL 23 85 07 , at * 1, the ta xp ay er was em

pl oyed as a m

us ic ia n wi th a ba ndba se d i n C hi cag o, Il li no is , bu t ch os e to li ve inSto ug ht on , W is co ns in , with h is paren ts so he co ul d s av e m on ey . The tax pa y er wo ul d re gu larly trav el by bus to Ch ic ag o fo r a l on g wee ke nd , le av in g o n Th ur sd ay

or F rid ay an d re tu rn in g o n M on da y . Id. The tax pa y er tra ve le d t o C hi cag o b ecau se th e b an d p erfo rm edreg ul ar s ho ws i n the cit y , in cl ud in g areg ul ar s ho w Sun da y ni gh ts at ani gh tc lub, an d t he ba ndwou ldde pa rt fro m Ch ic ag o wh enittra ve le d t o o th er ci ti es foren ga ge m en ts . Id. Fo r th es e reas on s the Co urt h el d t ha t the tax pa y er’s reg ul ar p la ce o f bu si ne ss was i n Ch ic ag o, an d t hu s C hi cag o was th e ta xp ay er’s t ax ho m e. Id . at * 5- *6 . W e fi ndth atpe ti ti on er’s ab od e was inIsr ael . Peti ti on ers li ve d i n Is rael an d own eda ho us e o n wh ic h the y pa idreal est at e ta xe s. Pet it io ne rs ha d Is rael i ci ti zen sh ip , vo te d i n Is rael i el ect io ns , andwere m em be rs of asynag og ue an d ESRA in Isr ael . Peti ti on er trav el edto th e Uni te d S ta te s o nl y to m eetwith c li en ts14

an d p erfo rm

ot he r work- rel at eddu ti es . Peti ti on er d idno t m ai nt ai n ares id en ce i n th e Uni te d S ta te s. Whenhe was i n t own for work , he s ta y edat h is daug ht er’s ho us e inNew York . Thu s, p et it io ne r’s st ro ng es t ec on om ic , fam il y , andpe rs on al ti es were i n Is rael . See Ev an s v . Comm is si on er, at*9 ; Bu jol v. Co m

m is si on er, 5 3 T.C.M. (CC H) at76 3- 76 4. W e co nc lu de th atpe ti ti on er’s t ax ho m e was inth e Uni te d S ta te s an d n ot Is rael . Sim il ar t o t he tax pa y er’s em pl oyer inSis li k, wh ic h d es ig na te d J FK ai rp ort in New Yorkas t he ba se of o pe rat io ns , pet it io ne r’s em pl oyer id en ti fie d t he Ly nn ve stGroup’s New J ers ey off ic es as p et it io ne r’s au th or iz edworklo cat io n, h is pr in ci pa l p la ce o f bu si ne ss . Accor di ng to Merr il l Lync h’s re co rd s, p et it io ne r worke d o utof t he New Jer se y off ic es an d h adanad dr es s wh ere h e rec ei ve d h is m ai l fr om Merr il l Lync h, i nc lu di ng hi s Fo rm s W-2, i n n earb y New York . Pet it io ne r was als o autho riz edto workou t o f ot he r lo cat io ns inNew Jer se y an d New York , bu t ac co rd in g t o e m pl oym en t re co rd s h e was no t au th or iz edto work ou t o f hi s h om e in Isr ael or o utof t he Merr il l Lync h o ffi ce i n Tel Avi v, Is rael . Merril l Lync h d idno t p ro vi de pe ti ti on er wi th anIsr ael i t el ep ho ne nu m be r oroff ic e sp ace. Se e Bjorns ta d v . Comm is si on er, 2 00 2 WL 23 85 07 , at * 5- *6 ; Si sl ikv. Co m m is si on er, 5 8 T.C.M . (CCH) at11 9.15

Pet it io ne r arg ue s tha t h is pl ace o f bu si ne ss was i n Is rael be cau se he pe rfo rm edall of h is res earc h a ndfun d m an ag em en t wh il e inIsr ael . Peti ti on er al so cl ai m s tha t h e h adto be inIsr ael to have acce ss to hi s wo rkfil es st or edinhi s ho m e o ffi ce, cl ai min g tha t h e n eed edth e res earc h a ndno te s i n t ho se workfil es to co nduc t h is sp eci al iz edin ve st m en t ap pr oa chth ro ug h m utua l fu nd s. Bu t the re was no th in g abo utth es e fi le s tha t n eces si tate d t he ir s to rag e in Isr ael ; i ns te adpe ti ti on er ke ptth em th ere b ecau se of h is pe rs on al ch oi ce t o l iv e inIsr ael an d wo rkfro m hi s ho m e in Isr ael . Peti ti on er al so co ul d h av e p erfo rm edth is res earc h wh il e in th e Uni te d S tate s, u si ng th e lapt op with M erri ll Ly nc h’s o pe rat in g s y st em . There was no th in g abo utth e n atur e o f hi s wo rkor M erri ll Ly nc h’s re qu ire m en ts th at ne ces si ta te d h is co nduc ti ng th e res earc h wh il e in Isr ael . The ch oi ce t o wo rkin Is rael was m ad e so le ly for p ers on al reas on s. See Sis li k v . Commis si on er, 5 8 T.C.M. (CC H) at11 5- 11 6. Pet it io ne r in di cat es th atwhen he ha d c li en ts inMan ha tt an , at M erri ll Ly nc h’s s ug ge st io n h e wou ldm eetth es e cl ie nt s atth e Ci ti co rp Cen te r of fic e, an of fic e d es ig na te d fo r us e b y ov ers eas -b as edem

pl oyees wh enth ey

ha d c li en ts in th e Uni te d S ta te s. Pet it io ne r as se rts th atth is reaf firm s tha t h e was co ns id eredan16

“ in te rn at io na l em

pl oyee.” The fa ctth atMerr il l Lync h p erm itte d p et it io ne r to us e

9 of fic e sp ace i n New Yo rkto en te rta in cli en ts di d n otm ak e h im anin te rn at io na l em pl oyee. There is no th in g i n M erri ll Ly nc h’s re co rd s t o i nd ic at e th atpe ti ti on er was co ns id eredanem

pl oyee of a lo cat io n o th er than t he Ly nn ve stGroup’s o ffi ces in New Jer se y . Pet it io ne r al so su gg es ts th athe was n otli cen se d a s a f in an ci al advi se r or reg is te redwith F INRA b ecau se of h is de si re t o c on ti nu e h is arrang em en t wi th Mr. Lip to n wh il e in Isr ael . This m ay ha ve be enth e cas e whe n p et it io ne r m ov edto Is rael in19 93 , bu t the pa rti es ag ree t ha t l aws res tri ct in g U.S. ci ti zen s wo rk in g i n fo rei gnco un tri es pre ve nt edpe ti ti on er fro m reg is te rin g andwork in g a s a f in an ci al advi se r an d s ol ic it in g c li en ts inIsr ael durin g t he y ears inis su e. Thi s re stric ti on was affi rm edby pol ic ie s s etforth inm em or an dais su edby bot h Ad ve stan d Merril l Lync h. Ad di ti on al ly, th is arrang em en t wi thMr. Lip to n t o wo rkun de r on e br ok er num

be r was a pe rs on al de ci si on an d was no t re qu ire d o r reque st edby Merril l Lync h. On the ba si s o f th is reco rdwe are s at is fie d t ha t p et it io ne r’s ta x h om e was in th e New York m etro po li tan a rea, an d n otIsr ael . W e co nc lu de th atpe ti ti on er fa il ed
W e p res um e th atpe ti ti on er b el ie ve s tha t h is be in g c on si de redan 9 “ in te rn at io na l em

pl oyee” wo ul d c ha ng e th e o ut co m e o f th is cas e.17

to m eetbo th requi rem en ts forth e fo rei gn earn edin co m e ex cl us io n u nd er s ect io n 91 1( d) (1 ). The p art ie s ag ree tha t p et it io ne r qu al ifi edas abo nafid e res id en t o f a fo rei gnco un try andth us m etth e se co ndrequi rem en t u nd er s ect io n 9 11 (d )(1 ). Pet it io ne r di d n otm eetth e fi rs t re qu ire m en t o f th e fo rei gn earn edin co m e ex cl us io n s in ce h is tax ho m e was inth e Uni te d S ta te s an d n otina fo rei gn co un try as requi redby sect io n 9 11 (d )(1 ). Acco rd in gl y , pet it io ne r is no t en ti tl edto cla im th e fo rei gnearn edin co m e ex cl us io n fo r 20 09 , 20 10 , or 2 01 1. III. Trav el an d Othe r Exp en se s Gen eral ly, a ta xp ay er wh o i s an em pl oyee m ay

de du ctun rei m

bu rs ed em pl oyee ex pe ns es as a n o rd in ary an d n eces sa ry bu si ne ss ex pe ns e und er s ect io n 16 2. Lu cas v. Co m

m is si on er, 7 9 T.C. 1 , 6 (1 98 2) . In ad di ti on , sec ti on 60 01 requi res a ta xp ay er t o m ai nt ai n s uf fic ie ntreco rd s t o a ll ow the de te rm in at io n o f th e ta xp ay er’s co rrec t t ax li ab il ity . Reg ard in g t rav el to an d fr om a ta xp ay er’s p la ce o f work, the “ no rm al ex pe ct at io n * * * is th atth e ta xp ay er wi ll ch oo se to li ve ne ar h is pl ace o f em pl oym en t.” Se e Fre de ric k v . Uni te d S ta te s, 6 03 F.2d12 92 , 12 95 (8th C ir. 19 79 ). A tax pa y er m

us t h av e so m e b us in es s ju st ifi cat io n b ey on d m erel y pe rs on al reas on s fo r m ai nt ai ni ng a res id en ce tha t i s re m ot e fro m hi s p la ce o f bu si ne ss if h e wis he s t o d educ t the trave l ex pe ns es or dup li cat e li vi ng ex pe ns es . See Tu ck er v .18

Co m m is si on er, 5 5 T.C. 7 83 , 78 7- 78 8 (1 97 1) . As di sc us se d p rev io us ly, we ha ve co nc lu de d t ha t p et it io ne r’s ta x h om e was inth e Uni te d S tate s (Ne w York m etro po li tan a rea) an d t ha t h e res id edinIsr ael forpe rs on al reas on s. The re i s an ex cep ti on to th e g en eral rul e whe re a t ax pa y er’s em pl oym en t i s ex pe ct edto be tem

po rary or la stfora sh ort p eri od . In s uc h c irc um st an ces a ta xp ay er m ay

be ab le to de du ctth e tr av el ex pe ns es to an d fr om th e te m po rary j ob si te . Id. at78 6. Workpro sp ect s tha t ar e ex pe ct edto co nt in ue foran“ in de fin it e” pe rio d o f ti m e d o n otfal l wi th in th is tem po rary em

pl oym en t ex cep ti on . W al ke r v. Co m m is si on er, 1 01 T.C. 53 7, 5 49 -5 50 (19 93 ); Nu ls env. Co m m is si on er, T.C. Mem o. 1 98 4- 30 7, 4 8 T.C.M . (CCH) 2 97 , 29 9 (1 98 4) . A tax pa y er i s n ot co ns id ered“ te m

po rari ly away

fro m ho m e” o n aworkass ig nm en t i f th e as si gn m en t is for m or e th an1 year. Sec. 1 62 (a) (f lu sh lan gu ag e). The pu rp os e fo r al lo win g de du ct io ns fortra ve l t o a ndfro m a te m po rary bus in es s l oc at io n i s t o a ss is t a ta xp ay er wh o m

us t t em po rari ly be away from

hi s re si de nc e fo r anem

pl oym en tba se d n eed , when itwou ldbe un reas on ab le to ex pe cthi m to m ov e in de fin it el y . Tuc ke r v. C omm is si on er, 5 5 T.C. at78 6. Fo r ta xp ay ers no t fa ll in g wi th in th is tem po rary workass ig nm en t ex cep ti on , co st s o f tr av el in g t o a ndfro m a pl ace o f bu si ne ss are co ns id eredpe rs on al an d n ot de du ct ib le . Comm is si on er v . Flo wers , 32 6 U.S. 4 65 , 47 3- 47 4 (1 94 6) . In Fl owe rs19

th e Co urt h el d t ha t the tax pa y er, wh os e job fora rai lro adwas b as edinMo bi le , Alab am a, bu t wh o c ho se forpe rs on al reas on s t o l iv e in Jac ks on , Mis si ss ip pi , cou ld no t d educ t the ex pe ns es for tra ve li ng ba ckan d fo rth be twee n M ob il e an d J ack so n as anord in ary an d n eces sa ry bu si ne ss ex pe ns e. Id . at 4 67 , 47 3- 47 4. Whenhi red by his em pl oyer forth e rel ev an t t ax y ears , th e ta xp ay er ac cep te d h is job with t he co nd it io n t ha t h e b e al lo wedto ke ep li vi ng inJac ks on . The rai lro ad acco m m od at edhi s re qu es t b utdi d n otha ve a bu si ne ss reas on for th e ta xp ay er t o li ve inJac ks on . Id. at47 4. Fu rth er, i n B jorn st adv. Co m

m is si on er, 2 00 2 WL 23 85 07 , at * 3, the Co urt h el d t ha t the tax pa y er co ul d n otde du cttra ve l ex pe ns es be twee n the tax pa y er’s t ax ho m e in Ch ic ag o a ndhi s h om e in Sto ug ht on , W is co ns in , bec au se th e ta xp ay er was li vi ng inSto ug ht on so le ly for p ers on al reas on s an d d idno t h av e a b us in es s ju st ifi cat io n. Pet it io ne r ha s n otcla im edhe was o n atem po rary workass ig nm en t. 1 0 Si m il ar t o t he tax pa y ers inFlo wers an d B jorn st ad , pet it io ne r ch os e to res id e in a Altho ug h p et it io ne r di d n otcla im he was o n atem

po rary workass ig nm en t, 1 0 we di d c on si de r whe th er h e co ul d b e co ns id eredon a te m po rary workass ig nm en t to de te rm in e whe th er h e fel l u nd er the ex cep ti on setforth inTuck er v . Comm is
si on er, 5 5 T.C. 7 83 (19 71 ). Pet it io ne r’s po si ti on with M erri ll Ly nc h was as a reg ul ar em

pl oyee, to las t fo r anin de fin it e p eri od , andhi s p os it io n l as te d l on ge r th an1 year, app ro xi m at el y 7 years fr om

20 05 un ti l the en d o f 20 12 . Thu s p et iti on er’s wo rkass ig nm en t wi thMerr il l Lync h was no t t em po rary. See s ec. 1 62 (a) (fl us h l an gu ag e); W al ke r v. C omm is si on er, 1 01 T.C. 53 7, 5 39 -5 40 (19 93 ); Nu ls en v. Co m m is si on er, T.C. Mem o. 1 98 4- 30 7, 4 8 T.C.M . (CCH) 2 97 , 29 9 (1 98 4) .20

lo cat io n re m ot e fro m

hi s emplo y er’s p la ce o f bu si ne ss forpe rs on al reas on s. His em pl oyer di d n otrequi re h im to li ve rem ot el y , no r di d h is em pl oyer be ne fitfro m th is ch oi ce o f res id en ce. Eve n i f pe ti ti on ers ’ m ov e to Isr ael in19 93 was m ad e pa rti al ly for b us in es s re as on s, p et it io ne r was work in g fo r a d iff eren t em pl oyer at th e ti m e. Duri ng th e y ears inis su e p et it io ne r’s de ci si on to li ve inIsr ael was p ur el y pe rs on al . Also si m il ar t o t he tax pa y er’s em pl oyer inFlo wers , pet it io ne r’s em pl oyer acco m

m od at edhi s ch oi ce o f res id en ce b utdi d n otga in an yth in g fr om th e arr an ge m en t, fo r rea so ns pre vi ou sl y di sc us se d. Se e Co m

mis si on er v . Flo wers , 32 6 U.S. at47 4; Bjorn st adv. Co m m is si on er, 2 00 2 WL 23 85 07 , at * 2. Thu s p et it io ne r’s un rei m

bu rs edex pe ns es for

tra ve l b etweenIsr ael an d t he Uni te d S tate s fo r ta x years 2 00 9, 2 01 0, an d 2 01 1 a re co ns id eredpe rs on al ex pe ns es an d a re n otde du ct ib le as o rd in ary an d n eces sa ry bu si ne ss ex pe ns es . Sin ce n on e o f pe ti ti on er’s unr ei m

burs edtra ve l ex pe ns es are d educ ti bl e o rd in ary an d n eces sa ry bu si ne ss ex pe ns es , we do no t ad dr es s wh ethe r hi s re co rd s wer e su ffi ci en t t o subs tant ia te th e expe ns es . IV. Accu racy-Rel at edPen al ty Sect io n 6 66 2( a) an d (b )(2 ) im po se s a p en al ty of 20 % of the po rti on of a n un de rp aym en t o f ta x a ttrib ut ab le to a subs ta nt ia l und ers ta te m en t o f in co m e ta x. An u nd ers ta te m en t o f in co m e ta x i s s ub st an ti al if the am ou ntof t he21

un de rs ta te m en t fo r th e ta xabl e y ear e xc eed s the gre at er o f 10 % of t he tax requi red to be sh ownon th e return o r $5 ,00 0. Se e se c. 66 62 (d )(1 ); s ec. 1 .66 62 -4 (b ), In co m e Tax Reg s. To co m pu te anun de rs ta te m en t, the am ou ntof t ax sh own on th e return i s s ub tra ct edfro m

th e am ou ntof t ax requi redto be sh own on th e return. Sec. 1 .66 62 -4 (b )(i i)( 2) , Inc om e Tax Reg s. Th e Co m m is si on er b ears th e b ur de n o f pr oduc ti on with re sp ectto a se ct io n 6 66 2 p en al ty. Sec. 7 49 1( c). Res po nd en t m et hi s b ur de n o f pr oduc ti on by sho win g t ha t p et it io ne r’s wag es di d n otqu al ify as fo rei gnearn edin co m e an d h e co ul d n otcla im un rei m bu rs edem

pl oyee ex pe ns e de du ct io ns . The b ur de n o f pr oo f th us sh ift s t o p et it io ne r to sh ow tha t the pe na lty do es no t ap pl y . See Hig be e v . Commis si on er, 1 16 T.C. 43 8, 4 47 (20 01 ). The un de rs ta te m en t fo r eac h year is gre at er than t he gre at er o f $5 ,00 0 o r 10 % of t he tax requi redto be sh own on th e return. Be cau se of c on ces si on s b y res po nd en t an d p et it io ne rs , th e co m pu ta ti on of t he un de rs ta te m en ts ap pe ars to requi re Ru le 15 5 c om

pu ta ti on s. 1 1 See b el ow the cal cu la ti on s fo r un de rs tate m en ts ba se d o n t he no ti ce o f 1 1 de fic ie nc y . Alth ou gh res po nd en t m ad e so m e co nc es si on s fo r pe ti ti on er’s de du ct io ns , th e am ou nt s co nc ed edwere re la ti ve ly sm al l co m pa redto th e am ou nt s of for ei gn earn edin co m e ex cl us io ns an d u nr ei m bu rs edem

pl oyee ex pe ns e de du ct io ns di sa ll owe d. Ev enaft er co nc es si on s i t i s cl ear t ha t the un de rs ta te m en t is gre at er than t he gre at er o f $5 ,00 0 o r 10 % of t he tax requi redto be sh own on th e return fo r eac h year. (co nt in ue d...)22

The sec ti on66 62 (a) a ccu racy-rela te d p en al ty doe s n otap pl y with re sp ectto an y po rti onof a n und erp aym en t i f th e ta xp ay er p ro ve s tha t the re was reas on ab le cau se forsu chpo rti on an d tha t h e act edingo odfai th . Sec. 6 66 4( c)(1 ). The de te rm in at io n o f whe th er a t ax pay er ac te d wi th reas on ab le cau se an d i n g oo d fa ith de pe nd s o n t he pe rti ne ntfact s an d c irc um st an ces , in cl ud in g: (1) th e ta xp ay er’s effo rts to ass es s the pro pe r ta x l iabi li ty; (2) th e kno wled ge an d the ex pe rie nc e o f th e ta xp ay er; an d (3 ) an y rel ianc e o n t he advi ce o f a p ro fes si on al , su chas a n acco un tant . Sec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Anho ne stm is un de rs ta nd in g of factor l aw th atis reas on ab le inth e li gh t o f th e kno wled ge , exp eri en ce, an d educ at io n o f th e ta xp ay er m ay co ns ti tu te reas on ab le cau se an d g oo d fa ith. Id . The ta xp ay er b ears th e b ur de n o f pr ov in g t ha t h e o r sh e fal ls withi n t hi s ex cep ti on . Hig be e v . Comm is si on er, 1 16 T.C. at 4 47 .

(...co nt in ue d) 1 1 Year Tax rep orte d Und ers ta te m en t Tax requi red 10 % of Tax requi red 20 09 -0 - $2 1,6 47 $2 1,6 47 $2 ,16 5 20 10 $1 9,7 80 32 ,58 4 52 ,36 4 5,2 36 20 11 -0 - 15 ,11 2 15 ,11 2 1,5 1123

A tax pa y er m ay

de m on strat e rea so nabl e cau se an d g oo d fa ith b y sh owi ng rel ianc e o n p ro fes si on al advi ce fr om a ta x re tu rnpre pa rer wh ere t he tax pa y er h as di sc lo se d a ll th e rel ev an t fa ct s t o t he pre parer. Ev an s v . Comm is si on er, at*1 6. In Evans th e ta xp ay ers , who were s eek in g afor ei gn earn edin co m e ex cl us io n fo r th e ta xp ay er h us ba nd ’s in co m e earne d i n R us si a, ha d t he ir r eturns pre pa redby a co m pe te nttax return p rep arer . Id. The tax pa y er h us ba nd ’s m ot he r, who ov ers aw hi s fi na nc ia l af

fai rs un de r a p owe r of

att orne y , pro vi de d the pre pa rer wi th th e in fo rm at io n t o p rep are t he returns an d g av e h im “ fu ll di sc lo su re * * * of a ll rel ev an t fa ct s” co nc ern in g t he em pl oym en t i n R

us si a. Id . at * 6, * 16 . The Co urt he ldth atsi nc e th e fo rei gn earn edin co m e ex cl us io n i s a “ te ch ni cal areaof t ax law”, th e ta xp ay ers “reas on ab ly reli edon th e advi ce the y were g iv en .” Id . at * 17 . Pet it io ne r is a pr of

es si on al in ve st m en t as so ci at e wit h aba ck gr ou ndin fin an ce wh o h as be enpra ct ic in g fo r m an y y ears . Peti ti on er i s a s op hi st ic at ed ta xp ay er wh o u nd ers tand s fi nanc ia l m ark et s wel l an d i s ex pe rie nc edinres earc hi ng co m pl ex is su es . See s ec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Pet it io ne rs ’ ta x re tu rn s fo r al l thr ee years i n i ss ue were p rep aredby a pr of es si on al , Mr. Kan tz os , a C.P.A. bas edinth e Uni te d S ta te s. Un li ke th e Co urt in Evan s, we d o n otkn ow the co m pe te nc e o f th e p rep arer

or wh ethe r pe ti ti on ers supp li edMr. Kan tz os with a ll rel ev an t i nf orm at io n. Th ere i s i ns uf

fic ie ntev id en ce24

to est ab li sh whet he r pe ti ti on ers pro vi de d M r. Kan tz os with c om pl et e an d a ccu rat e in fo rm at io n abo utth e n atur e o f pe ti ti on er’s wo rk or the res tri ct io ns im

po se d b y law andby his em

pl oyer inco nduc ti ng bu si ne ss inIsr ael . Add it io na ll y , itis no t cl ear wh ethe r pe ti ti on er’s p rep arerwas i nf orm edth atMerr il l Lync h d idno t requi re h im

to li ve inIsr ael . See Ev an s v . Comm is si on er, at*1 6. Pe ti ti on er al so 1 2 ha s n otpro vi de d e vi de nc e o f an y effo rts he m ig htha ve m ad e to asc ert ai n wh ethe r hi s t ax tre atm en t o f th e fo rei gn earn edin co m e an d t rav el ex pe ns es was c orrect . W e are no t s at is fie d t ha t p et it io ne rs cancla im rel ia nc e o n t he advi ce o f a t ax pr of es si on al as aba si s fo r rea so nabl e cau se . See Hig be e v . Comm is si on er, 1 16 T.C. at 4 47 ; s ec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Pet it io ne rs als o a ss ertas aba si s fo r rea so nabl e cau se an d g oo d fa ith t ha t res po nd en t ex am in edth ei r returns fortax y ears 20 06 th ro ug h 2 00 8, an d t he ex am in ers di d n otdi sa ll ow i te m s s im il ar t o t ho se at i ss ue he re dur in g t he ex am in at io n( s) . Pet it io ne rs cla im th atth ey rel ie d o n t he ex am in ers no t t ak in g 1 3
Pet it io ne rs ’ ta x re tu rnpre pa rer d idno t t es ti fy at t ria l. 1 2 Inhi s re sp on se to res po nd en t’s m ot io n fo r pa rti al su m m ary jud gm en t, 1 3 whi chwe de ni edon Aug us t 4 , 20 15 , pet it io ne r as se rte d tha t p et it io ne rs ’ ta x returns fory ears 20 06 th ro ug h 2 00 8 wer e ex am in edby resp on de nt , andth atth e ex cl us io ns an d d educ ti on s atis su e were a ll owe d. Pe ti ti on er as se rts th at“ [n ]one of th e supp os ed ly relev an t ca se law ci te d i n t he Reque stwas e ve r pu t fo rwardby any IRS p ers on ne l” an d t ha t h e ev enrece iv eda refu ndforon e o f th e y ears . On th e (co nt in ue d...)25

is su e wit h t he ir e xc lu si on s an d d educ ti on s as affi rm at io n t ha t the ir m etho do lo gy was co rrec t. Si nc e eac h year st an ds on it s o wn an d i s s ep arat el y co ns id ered , eve n if r es po nd en t h adpre vi ou sl y all owe d t he ex cl us io ns an d d educ ti on s atis su e fo r ta x y ears 20 06 th ro ug h 2 00 8, re sp on de ntis no t b ou ndto fol lo w th e sa m e tr eat m en t fo r ta x years 2 00 9 t hr ou gh 20 11 . See Sau nd ers v. Co m m is si on er, T.C. Mem o. 2 01 2- 20 0, s li p o p. at7. Pet it io ne rs ha ve pro vi de d i ns uf fic ie ntev id en ce t o s ho w th atth ere was reas on ab le cau se forth e und erp aym en t an d t ha t the y act edwith re as on ab le cau se an d i n g oo d fa ith. Acco rd in gl y we ho ldth atpe ti ti on ers are l iabl e fo r th e acc ur acyrel at edpe na lty

fortax y ears 20 09 , 20 10 , and20 11 . W e h av e co ns id eredall of t he pa rti es ’ arg um en ts , and , to th e ex te ntno t ad dr es se d h erei n, we co nc lu de th atth ey are m oo t, i rrel ev an t, o r witho utm eri t. To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red un de r Ru le 15 5. (...co nt in ue d) 1 3 ba si s o f pe ti ti on er’s s ta te m en ts itis un cl ear wh ethe r th ere wer e o ne or thr ee ex am in at io ns ; h e ref

ers to anex am in at io n fo r y ears 20 06 th ro ug h 2 00 8 b utals o refe rs to th ree e xa m in at io ns an d t hr ee s ep arat e au di t t eam s. Pet it io ne r al so m ad e th is ass ert io n a t tria l. Pet it io ne r ha s n otpro vi de d e vi de nc e o f th e ex am in at io n( s) orth e res ul ts th ereo f.