Stallforth v. Commissioner

FEDERICO STALLFORTH, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Stallforth v. Commissioner Docket Nos. 47200, 50287. United States Board of Tax Appeals 30 B.T.A. 546; 1934 BTA LEXIS 1306; April 27, 1934, Promulgated *1306 During the years 1925, 1926, and 1927 the petitioner was an alien domiciled in New York. His income during these years was earned from services performed in different countries of Europe. During each year he was absent from the United States for more than six months. Held, that his total income is liable to income tax. Charlton Ogburn, Esq., and G. Kibby Munson, Esq., for the petitioner. Mason B. Leming, Esq., for the respondent. SMITH *546 These proceedings, consolidated for hearing, involve deficiencies in income tax for 1925, 1926, and 1927 of $16,166.21, $29,704.54, and *547 $8,708.75, respectively. The question in issue is whether the petitioner, an alien, is liable to income tax upon compensation for services rendered in Europe while temporarily absent from the United States. FINDINGS OF FACT. The petitioner was born in Parral, Mexico. He removed permanently to the United States about 1912. He established his domicile in New York in 1913 and brought to this country his family, consisting of his wife, one infant daughter, and his sister-in-law, and reared and educated his daughters here (one daughter having been*1307 born in the United States). He lived continuously within the United States until 1923 when he made a trip to Europe. He made another trip to Europe in 1924, when he acted as adviser to the Dawes Commission in Berlin, and also in that year he traveled through England, France, Germany, and Austria. From that time on through the years 1925, 1926, and 1927 he crossed the ocean 12 times. He spent in the aggregate more than six months of each of the years 1925, 1926, and 1927 in Europe. He maintained continuously during these three years business headquarters in his name at the Hotel Bristol in Berlin, where he had in connection with his business a clerical and office force. His entire income during these three years was earned for work performed while in Europe for American business houses. Of this income $16,500 was paid him by three American companies jointly for his efforts to sell silver bullion for coinage to the governments of Germany, Austria, France, and England. The remainder of his income for these three years was for work performed while in Europe for Harris Forbes & Co., an underwriting and investment banking house of New York. This compensation was in the form of commissions*1308 for initiating the negotiation of European bond issues later underwritten or purchased by Harris Forbes & Co. The nature of the work in both cases was an extension of American business abroad. None of his income was earned in the United States or came from sources other than these earnings abroad. During these years the petitioner never relinquished his domicile in the United States, and when abroad always intended to return to the United States. During these three years petitioner's family, consisting of two daughters, lived most of the time in New York City. In 1926 they were with the petitioner in Europe for a period of about four months. In March 1923 the petitioner made a declaration of intention for citizenship in the United States, stating therein that it was his "intention in good faith to become a citizen of the United States of America and to permanently reside therein." He was admitted *548 to citizenship in October 1928. In connection with his application for naturalization in October 1928, the petitioner swore that: * * * arrived in the United States in the year 1912 and have been physically continuously within the United States ever since then except*1309 for the periods set forth hereunder: * * * Since the year 1920 I have maintained as a home a twenty-five acre estate with a sixteen-room house at Woodstock, New York. Up to last year I leased the said estate on a yearly basis and last year I purchased the said estate and am now the owner thereof. I also have continuously maintained an apartment in New York City ever since 1917. During all the periods of my absences hereinbefore referred to (with the exception of my last two trips in the year 1928) I maintained the aforementioned estate at Woodstock and also maintained an apartment at New York City, both of which places were maintained by me as places of residence and as homes for my two children. During the last year - that is to say since I purchased the estate at Woodstock, I have not maintained an apartment in New York City. I have continuously during the last year, however, maintained my home at Woodstock, N.Y. * * * At all times since the enactment of the Income Tax Law I have paid income taxes as a resident of the United States except that during a few years my losses were such that I had no income tax to pay but during those years I filed returns. I have also uniformly*1310 filed income tax returns and paid income tax when my income was sufficient to do so since the enactment of the State Income Tax Law. During all the periods of my absences abroad I never maintained any place of domicile outside the United States and while abroad I lived always at hotels at various places where my business took me. * * * In his income tax returns for 1925, 1926, and 1927 the petitioner stated that he was a resident of the United States. The petitioner's presence or absence from the United States during the taxable years was as follows: January 1 to April 1, 1925, in the United States April 13 to July 1, 1925, in Europe July 21 to August 22, 1925, in the United States September 1, 1925, to May 2, 1926, in Europe May 7 to August 10, 1926, in the United States August 18 to December 11, 1926, in Europe December 21, 1926, to January 15, 1927, in the United States January 21 to May 15, 1927, in Europe May 22 to June 17, 1927, in the United States June 24 to July 17, 1927, in Europe July 22 to August 25, 1927, in the United States August 13 to December 9, 1927, in Europe December 18 to December 31, 1927, in Europe The days not covered by*1311 the above periods represent days en route from the United States to Europe or vice versa. OPINION. SMITH: The deficiencies involved herein arose principally from the disallowance of deductions from gross income of claimed losses *549 sustained by the petitioner upon his investments. At the hearing of this proceeding counsel for the petitioner stated that it was impossible or impracticable to attempt to prove the claimed deductions for losses. The sole defense of the petitioner to the deficiencies determined by the respondent is that during the taxable years in question the petitioner was a nonresident alien (while absent from the United States) and derived his income from sources without the United States. In support of this contention the petitioner relies upon section 213 of the Revenue Act of 1926, which, so far as material, provides: SEC. 213. For the purposes of this title, except as otherwise provided in section 233 - * * * (c) In the case of a nonresident alien individual, gross income means only the gross income from sources within the United States, determined under the provisions of section 217. Section 217 of the Revenue Act of 1926, so far as material, *1312 provides: (c) The following items of gross income shall be treated as income from sources without the United States: * * * (3) Compensation for labor or personal services performed without the United States. The position of the respondent in this proceeding is that during the taxable years the petitioner was a resident alien and as such is liable to income tax upon his gross income for services performed in Europe. The respondent relies upon article 3 of Regulations 69, promulgated under the provisions of the Revenue Act of 1926, which, so far as material, provides: ART. 3. * * * Every resident alien individual is liable to the tax, even though his income is wholly from sources outside the United States. * * * The incidence of the income tax is upon "the entire net income received * * * from all sources by every individual, a citizen or resident of the United States * * *." (See sec. 1, Revenue Act of 1916.) Article 311 of Regulations 69 provides: ART. 311. * * * A "nonresident alien individual" means an individual - (a) Whose residence is not within the United States; and (b) Who is not a citizen of the United States. An alien actually present in the United*1313 States who is not a mere transient or sojourner is a resident of the United States for purposes of the income tax. Whether he is a transient or not is determined by his intentions with regard to the length and nature of his stay. A mere floating intention, indefinite as to time, to return to another country is not sufficient to constitute him a transient. If he lives in the United States and has no definite intention as to his stay, he is a resident. One who comes to the United States for a definite *550 purpose which in its nature may be promptly accomplished is a transient; but if his purpose is of such a nature that an extended stay may be necessary for its accomplishment, and to that end the alien makes his home temporarily in the United States, he becomes a resident, though it may be his intention at all times to return to his domicile abroad when the purpose for which he came has been consummated or abandoned. * * * The domicile of the petitioner in the United States during the taxable years involved is admitted by the petitioner. His residence in the United States while absent from the United States during the taxable years in question is not admitted. That*1314 the terms "domicile" and "residence" have different connotations is well established. A man may have a domicile in one place and a residence in another. It is equally well established that a man may be absent from his place of residence for a long period of time. Clearly, if a resident of the city of New York takes a trip around the world he does not lose his residence in New York thereby. A traveling man who is long absent from his place of residence does not lose his place of residence. He is not regarded as a resident of the place where he temporarily stops. The question here is whether the petitioner, who had a residence in the State of New York, became a resident of some other place or country while he was temporarily absent from his regular place of abode. The petitioner claims that while he was away from New York he was a nonresident alien within the meaning of the statute. We are of the opinion that the petitioner's claim upon this point is not well founded. The evidence all goes to show that it was never the petitioner's intention to establish a residence outside of the United States while he was absent from his home in New York. He stopped at hotels in various*1315 countries of Europe in which he traveled and he made the Hotel Bristol in Berlin his headquarters while abroad. But we do not think that within the fair intent of the statute the petitioner was a resident of Berlin or of any other place in Europe while absent from the United States. The evidence is conclusive that while abroad the petitioner always had the intention of returning to his home in New York. He never established any residence in any other place. The petitioner calls attention to the provisions of section 213 of the Revenue Act of 1926, which provides in part: SEC. 213. For the purposes of this title, except as otherwise provided in section 233 - * * * (b) The term "gross income" does not include the following items, which shall be exempt from taxation under this title: * * * (14) In the case of an individual citizen of the United States a bona fide nonresident of the United States for more than six months during the taxable year, amounts received from sources without the United States if such amounts *551 constitute earned income as defined in section 209; but such individual shall not be allowed as a deduction from his gross income any deductions*1316 properly allocable to or chargeable against amounts excluded from gross income under this paragraph. Attention is then called to some of the rulings made by the respondent with respect to the question of what constitutes the bona fide nonresidence of an individual citizen under this provision. Thus in General Counsel Memorandum 9848, Cumulative Bulletin X-2, pp. 178, 179, it is said: In construing the phrase "a bona fide nonresident of the United States for more than six months during the taxable year," the Bureau has held that it applies to any American citizen who is actually outside the United States for more than six months during the taxable year. The absence need not be continuous, but may be made up of several trips where the periods of absence from the United States amount in the aggregate to more than six months during the taxable year. It has also been held that the citizen is not required to be a resident of any foreign country, but is only required to be a nonresident of the United States for more than six months. * * * Hence it is argued that if such an interpretation of the statute applies to a nonresident individual citizen of the United States, *1317 a like ruling must be applied in the case of a taxpayer who, although not a citizen of the United States in the taxable years, was nevertheless absent from the United States. Without passing upon the correctness of the respondent's rulings under the above quoted provision of the statute, we are of the opinion that they have no application to this case. The petitioner was not "an individual citizen of the United States" during the years 1925, 1926, and 1927. His only proven residence during those years was in the State of New York. He was only temporarily absent from the United States during the period. We sustain the respondent's determination that he was a resident alien of the United States during the tax years involved, and he is liable to income tax upon his entire net income. At the hearing of these proceedings the respondent moved to increase the deficiencies for the years 1925 and 1926 by reason of the fact that the petitioner had a larger income from Harris Forbes & Co., during those years than the respondent took into account in computing the deficiencies. After a conference between counsel it was stipulated that the net income of the petitioner for 1925 should*1318 be increased to the extent of $7,200 over the amount used by the respondent in the determination of the deficiency for 1925 and that the deficiency should be increased accordingly, but that no increase should be made in the deficiency determined for 1926. Reviewed by the Board. Judgment will be entered under Rule 50.