Court Opinion

ID: 4333016
Source: CourtListenerOpinion
Date Created: 2018-11-14 00:58:58.759048+00
Date Added: 2024-06-11T14:46:58.080205
License: Public Domain

JOSI ANGEL LUJAN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, RespondentLujan v. CommissionerNo. 24268-97United States Tax CourtT.C. Memo 2000-365; 2000 Tax Ct. Memo LEXIS 435; 80 T.C.M. 780; T.C.M. (RIA) 54139; December 4, 2000, Filed 2000 Tax Ct. Memo LEXIS 435">*435  Decision will be entered for respondent.  Josi Angel Lujan, pro se.James P. Dawson and Tamara S. Moravia-Israel, for respondent.  Jacobs, Julian I.JACOBSMEMORANDUM FINDINGS OF FACT AND OPINIONJACOBS, JUDGE: Respondent determined the following deficiencies in petitioner's Federal income taxes and an addition to tax:                       Addition to Tax   Year         Deficiency        Sec. 6654   ____         __________       _______________   1993         $ 15,511          $ 651   1994          62,745          3,232All 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 meets2000 Tax Ct. Memo LEXIS 435">*436  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 FACTSome of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference.BACKGROUNDPetitioner's mailing address was in Buenos Aires, Argentina, at the time he filed his petition contesting respondent's determination.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 firms2000 Tax Ct. Memo LEXIS 435">*437  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.On May 3, 1993, petitioner was issued a B-CONSULTING WORKLone 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 majority2000 Tax Ct. Memo LEXIS 435">*438  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).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 Buenos2000 Tax Ct. Memo LEXIS 435">*439  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:                1993_____________________________________________________________________Entry     Entry     Exit Out    Exit out    Exit    Entryinto      into     of U.S.    of U.S.    out    intoU.S. per    U.S. per   per P's    per INS    of     ArgentinaINS      VISA     Memo            U.S.    per                          per    Passport2000 Tax Ct. Memo LEXIS 435">*440                            VISA_____________________________________________________________________                   01/15/93        01/16/9302/02/93    02/02/93                   02/07/93        02/08/9302/16/93    02/16/93                   03/22/93        03/23/9303/28/93    03/28/93                   04/20/93        04/21/93       05/28/93             07/13/93               07/14/9308/13/93                   08/25/93        08/26/9310/01/93                   10/26/93        10/27/9311/19/93    11/19/93                   12/01/93        12/02/9312/18/93    12/18/93_____________________________________________________________________2000 Tax Ct. Memo LEXIS 435">*441               [table continued]_____________________________________________________________________Entry      Exit out     Days     Totalinto      of        within    DaysU.S. per    Argentina     the      withinINS       per        U.S.     the       Passport           U.S._____________________________________________________________________               15               days02/02/93    02/01/93               6               days02/16/93    02/15/93               35               days03/28/93               24               days       05/27/93               47               days08/13/93    08/12/93               13     2000 Tax Ct. Memo LEXIS 435">*442            days10/01/93    10/01/93               26               days11/19/93    11/19/93               13               days12/18/93    12/18/93     14               days                     193                     days_____________________________________________________________________                1994_____________________________________________________________________Entry into    Entry into    Exit out    Exit    EntryU.S. per     U.S. per     of U.S.    out     intoINS        VISA       per INS    of     Argentina                      U.S.    per                      per     Passport                      VISA_____________________________________________________________________2000 Tax Ct. Memo LEXIS 435">*443                  01/30/94         02/01/9402/19/94     02/19/94                03/04/94         03/05/94        03/24/94                           04/03/9404/12/94     04/12/94                04/24/94         04/24/9404/26/94                           05/01/9405/08/94     05/08/94                           05/16/9406/18/94                           07/02/9407/16/94     07/16/94                07/27/94         07/28/9408/05/94     08/05/94                08/25/94         08/26/9409/16/94                           10/10/9410/22/94     10/22/94                        2000 Tax Ct. Memo LEXIS 435">*444     11/01/9411/23/94     11/23/94                12/02/9412/21/94_____________________________________________________________________             [table continued]_____________________________________________________________________Entry into     Exit out     Days      Total DaysU.S. per      of        within     within theINS        Argentina     the       U.S.         per        U.S.         Passport_____________________________________________________________________                 30 days02/19/94      02/18/94                 14 days                 10 days04/12/94      04/11/94                 13 days04/26/94                 5 days05/08/94      05/07/94                 8 days06/18/94      06/17/94       2000 Tax Ct. Memo LEXIS 435">*445            15 days07/16/94      07/15/94                 12 days08/05/94                 21 days09/16/94      09/15/94                 25 days10/22/94      10/21/94                 11 days11/23/94      11/22/94                 10 days12/21/94              11 days                        185 days_____________________________________________________________________ARGENTINEAN ACTIVITIESAt 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 RETURNSPetitioner 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 DEFICIENCYIn the notice of deficiency, respondent determined that petitioner was a resident2000 Tax Ct. Memo LEXIS 435">*446  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.OPINIONIn 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 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), 2000 Tax Ct. Memo LEXIS 435">*447  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). 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.2000 Tax Ct. Memo LEXIS 435">*448  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 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.2000 Tax Ct. Memo LEXIS 435">*449  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 considered2000 Tax Ct. Memo LEXIS 435">*450  all of the arguments petitioner presented for contrary holdings (including 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.  Footnotes1. 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 one-third 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:   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.↩