T.C. Memo. 2000-365

UNITED STATES TAX COURT

JOSÉ ANGEL LUJÁN, Petitioner v

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 24268-97. Filed December 4, 2000.

José Angel Luján, pro se.

James P. Dawson and Tamara S. Moravia-Israel, for

respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

JACOBS, Judge: Respondent determined the following

deficiencies in petitioner’s Federal income taxes and an addition

to tax:
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 Addition to Tax

Year Deficiency Sec. 6654 

1993 $15,511 $651

1994 62,745 3,232 

All section references are to the Internal Revenue Code in

effect for the years in issue.

The primary issue we must resolve is whether petitioner, an

Argentinean citizen, is subject to U.S. tax on compensation he

received during 1993 and 1994. Resolution of this issue requires us

to decide whether during 1993 and 1994 petitioner was a “resident

alien”, as that term is defined in section 7701(b)(1)(A), which in

turn requires us to determine whether petitioner meets the

“substantial presence test” of section 7701(b)(3) for those years.

If petitioner is subject to U.S. tax on the compensation he received

during 1993 and 1994, we then must resolve whether petitioner is

liable for the section 6654 addition to tax (failure to pay

estimated income tax) for 1993 and 1994.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The

stipulation of facts and the attached exhibits are incorporated

herein by this reference.

Background

Petitioner’s mailing address was in Buenos Aires, Argentina, at

the time he filed his petition contesting respondent’s

determination. 
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Petitioner was born and raised in Argentina. He received a law

degree from the Universidad de Buenos Aires in 1971. In 1983, he

entered the United States on a student visa. Petitioner’s wife and

children accompanied him. 

Petitioner took courses at the University of Texas and its law

school, receiving a master’s degree in comparative jurisprudence in

1984, and a master’s degree in Latin American studies in 1990.

After completing his studies, petitioner accepted employment as an

international attorney with an Austin, Texas, law firm. In

addition, he worked for law firms located in New York and

Washington, D.C. 

At all relevant times, petitioner’s family lived in Austin. In

so doing, petitioner’s children were able to complete high school in

the United States. 

Petitioner’s personal belongings, as well as several

automobiles that he and his wife owned, were located in Austin.

Petitioner and his wife each held a driver’s license issued by the

State of Texas. Petitioner also maintained an Argentinean driver’s

license.

At all relevant times, petitioner and his wife maintained

savings and checking accounts in Austin. Petitioner did not

maintain a bank account in Argentina. 
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On May 3, 1993, petitioner was issued a B-1/B-2 visa (which

type of visa is issued to a nonresident alien for entry into the

United States for business purposes), expiring on May 2, 2003.

Consulting Work

Lone Star Power Argentina-I, L.P. (Lone Star), a U.S.

partnership, retained petitioner, as a consultant, in connection

with its procuring permission from the Argentinean Government to

construct and operate an electrical power plant in Santa Fe

Province, Argentina (located approximately 400 kilometers from

Buenos Aires). For these services, Lone Star agreed to pay

petitioner $15,000 per month and reimburse him for expenses he

incurred in connection with his travel to (and stay in) Argentina.

Petitioner performed the majority of his services for Lone Star

in Argentina. During his business trips to Argentina petitioner

stayed at various hotels, took cabs, and dined at restaurants.

During 1993, Lone Star paid petitioner $50,000 in compensation and

reimbursed him for his expenses. 

Falcon Seaboard Power Corp. (Falcon Seaboard), headquartered in

Houston, Texas, replaced Lone Star with regard to the proposed

construction of the power plant project. On February 2, 1994,

petitioner and Falcon Seaboard entered into an agreement similar to

that which petitioner had entered into with Lone Star (i.e.,

petitioner received $15,000 per month as a consulting fee and

reimbursement for his out-of-pocket expenditures). 
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In November 1994, Falcon Seaboard established a presence in

Argentina by organizing a wholly owned subsidiary, Falcon Seaboard

Argentina, S.A. (Falcon Seaboard Argentina). Falcon Seaboard

Argentina did not maintain an office in Argentina; rather, it

utilized the office of its attorney, Ernesto Galante (Mr. Galante),

in Buenos Aires, on a space-available basis. 

Petitioner’s business cards showed petitioner’s business

address to be both that of Falcon Seaboard in Houston and that of

Mr. Galante in Buenos Aires.

During 1994, Falcon Seaboard paid petitioner $180,000 as a

consulting fee and an unspecified amount as reimbursement for his

hotel, taxi, and meal expenses in Argentina.

Over time, Falcon Seaboard realized that construction of the

power plant project was not feasible, and ultimately abandoned the

project. 

After petitioner’s consulting services were terminated, he

returned to Austin. Prior to his termination, petitioner traveled

to Austin as often as possible to be with his family. The following

summarizes petitioner’s entrances to and exits from the United

States during 1993 and 1994 from petitioner’s and governmental

records: 
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1993

Entry

into

U.S. per

INS

Entry

into

U.S. per

VISA

Exit Out

of U.S.

per P’s

Memo

Exit out

of U.S.

per INS

Exit

out

of

U.S.

per

VISA

Entry

into

Argentina

per

Passport

Exit out

of

Argentina

per

Passport

Days

withi

n the

U.S.

Total

Days

withi

n the

U.S.

01/15/93 01/16/93 15

days

02/02/93 02/02/93 02/01/93

02/07/93 02/08/93 6

days

02/16/93 02/16/93 02/15/93

03/22/93 03/23/93 35

days

03/28/93 03/28/93

04/20/93 04/21/93 24

days

05/28/93 05/27/93

07/13/93 07/14/93 47

days

08/13/93 08/12/93

08/25/93 08/26/93 13

days

10/01/93 10/01/93

10/26/93 10/27/93 26

days

11/19/93 11/19/93 11/19/93

12/01/93 12/02/93 13

days

12/18/93 12/18/93 12/18/93 14

days

193

days
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1994

Entry into

U.S. per

INS

Entry into

U.S. per

VISA

Exit out

of U.S.

per INS

Exi

t

out

of

U.S

.

per

VIS

A

Entry

into

Argentina

per

Passport

Exit out

of

Argentina

per

Passport

Days

within

the

U.S.

Total Days

within the

U.S.

01/30/94 02/01/94 30 days

02/19/94 02/19/94 02/18/94

03/04/94 03/05/94 14 days

03/24/94

04/03/94 10 days

04/12/94 04/12/94 04/11/94

04/24/94 04/24/94 13 days

04/26/94

05/01/94 5 days

05/08/94 05/08/94 05/07/94

05/16/94 8 days

06/18/94 06/17/94

07/02/94 15 days

07/16/94 07/16/94 07/15/94

07/27/94 07/28/94 12 days

08/05/94 08/05/94

08/25/94 08/26/94 21 days

09/16/94 09/15/94

10/10/94 25 days

10/22/94 10/22/94 10/21/94

11/01/94 11 days

11/23/94 11/23/94 11/22/94

12/02/94 10 days

12/21/94 11 days

185 days
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Argentinean Activities

At all relevant times, petitioner maintained an Argentinean

driver’s license. Beginning in July 1993, he served as an adviser

to the Argentinean military and was active in several Argentinean

political groups.

Absence of Filing 1993 and 1994 Tax Returns

Petitioner did not file U.S. or Argentinean income tax returns

for 1993 or 1994. Moreover, he did not pay any U.S. estimated

income taxes for these years.

Notice of Deficiency

In the notice of deficiency, respondent determined that

petitioner was a resident alien for 1993 and 1994, which required

him to file U.S. income tax returns for those years, reflecting the

compensation he received ($50,000 for 1993 and $180,000 for 1994).

Respondent further determined that for both years, petitioner was

liable for the section 6654(a) addition to tax for failure to pay

estimated income tax. 

OPINION

In general, all U.S. citizens, wherever resident, and all

resident alien individuals (citizens of a foreign country), are

liable for income taxes imposed by the Internal Revenue Code,

whether the income received is from sources within or without the

United States. See sec. 1.1-1(b), Income Tax Regs. An individual

is a nonresident alien, and generally not subject to U.S. income tax
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1 Pursuant to sec. 7701(b)(3)(A), (1) each day of

presence in the current year is counted as a full day, (2) each

day of presence in the first preceding year is counted as onethird of a day, and (3) each day of presence in the second

preceding year is counted as one-sixth of a day. See also sec.

301.7701(b)-1(c)(1), Proced. & Admin. Regs. In sum, the

applicable multipliers are:

(continued...)

on foreign source income, if the individual is neither a U.S.

citizen nor a U.S. resident. See sec. 7701(b)(1)(B). An alien

individual is treated as a U.S. resident for any calendar year if at

any time during the year that individual: (1) Is a lawful U.S.

permanent resident (the green card test); (2) meets the substantial

presence test; or (3) makes an election to be treated as a lawful

U.S. resident. See sec. 7701(b)(1)(A); sec. 301.7701(b)-1(b),

Proced. & Admin. Regs. 

There is no evidence in the record that petitioner was a lawful

U.S. permanent resident or that he made an election to be treated as

a resident pursuant to section 301.7701(b)-4(c)(3)(v), Proced. &

Admin. Regs. Accordingly, petitioner is considered a resident alien

only if he meets the section 7701(b)(3)(A) substantial presence

test.

The substantial presence test is an objective test: an alien

individual is treated as a U.S. resident alien with respect to any

year in which the alien is present in the United States on at least

31 days during the current calendar year and for at least 183 days

during the current year and the 2 preceding calendar years,

calculated pursuant to a weighted formula.1 See sec. 7701(b)(3)(A).
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1(...continued)

Current year = 1

1st preceding year = 1/3

2nd preceding year = 1/6

2 During opening statement at trial, respondent’s counsel

referred to petitioner being present in the United States for 158

days in 1994, whereas on brief, respondent refers to petitioner

being present in the United States for 185 days in 1994. The

record supports a finding that petitioner was present in the

United States for 185 days in 1994, see supra p. 7.

An individual is treated as present in the United States on any day

that the individual is physically present in the United States at

any time during the day. See sec. 7701(b)(7)(A). As such, the day

of entry into the United States and the day of departure from the

United States are both counted.

The parties disagree as to the number of days petitioner was

present in the United States during 1993 and 1994. Although

petitioner does not dispute the entry dates in the Immigration and

Naturalization Service records, he disagrees with several departure

dates that respondent utilizes. We believe the departure dates

utilized by respondent are accurate.

Petitioner contends that he was not physically present in the

United States for 183 days in either 1993 or 1994. Petitioner

maintains that at most, he was present in the United States for 171

days in 1993 and 164 days in 1994. Respondent, on the other hand,

maintains that petitioner was in the United States for 193 days in

1993 and 185 days in 1994.2 The record supports respondent’s
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calculations. In determining the number of days, petitioner

incorrectly failed to include the day of entry into the United

States and the day of departure from the United States. 

On the basis of the record before us, we conclude that

petitioner meets the substantial presence test for both years in

issue; accordingly, petitioner is deemed a U.S. resident alien for

1993 and 1994 and is subject to U.S. tax on the compensation he

received. 

We now turn our attention to whether petitioner is liable for

the section 6654 addition to tax for the years in issue. The

section 6654 addition is imposed on an individual taxpayer who fails

to make timely payments of estimated tax. An underpayment of

estimated tax exists if a tax payment for any of the four

installment period due dates (usually quarterly) is less than the

amount of taxes required to be paid each installment. See sec.

6654(b)(1). The amount of the addition is determined by applying

the applicable interest rate to the amount of the underpayment for

the period of time that the underpayment exists. See sec. 6654(a).

Petitioner failed to make any estimated tax payments in 1993

and 1994, and he does not qualify for any exception to the section

6654 addition to tax. Consequently, he is liable for the section

6654 addition to tax for both years as determined by respondent.

In reaching our holdings, we have considered all of the

arguments petitioner presented for contrary holdings (including
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petitioner’s claim that he qualifies for the “closer connection

exception” of section 7701(b)(3)(B) and section 301.7701(b)-2(a),

Proced. & Admin. Regs.) and, to the extent not discussed above, find

them to be not relevant or without merit.

To reflect the foregoing, 

Decision will be entered

for respondent.