Douglas H. Cutting, 15370-17

Petitioner, a U.S. citizen, worked 2005–2014 as an Omni Air International pilot under a CBA that required designation of a U.S. home base and gateway airport; he designated San Jose (SJC) and listed his father's Campbell, CA address.
He spent most off-duty time in Thailand with his Thai wife and stepdaughter but held only temporary transit/nonimmigrant Thai visas (30‑day stays), was not a tenant on his wife's lease, and paid no Thai taxes.
OAI withheld federal and California taxes; petitioner reported wages and claimed the foreign earned income exclusion on Forms 2555 for 2012–2014, excluding most of his salary.
Commissioner disallowed the section 911 exclusion in full for 2012–2014 and determined unreported California state tax refunds were taxable; petitioner conceded penalties.
Trial evidence showed petitioner performed U.S. training, had flight assignments tied to a U.S. base, traveled frequently to/from SJC, and received California tax refunds which he did not report.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether petitioner qualifies for the §911 foreign earned income exclusion (tax home/bona fide residence)	Cutting: has foreign tax home and was a bona fide resident of Thailand during each year	Commissioner: tax home is San Jose (duty station); petitioner not bona fide resident of Thailand	Tax home was San Jose; petitioner not a bona fide resident; §911 exclusion denied for 2012–2014
Whether California state tax refunds are includable in gross income under §111 (tax‑benefit rule)	Cutting: refunds not taxable unless prior state deduction produced a federal tax benefit (contends no benefit)	Commissioner: prior state deductions produced a federal tax benefit; refunds are includable	Refunds for 2012–2014 are includable in gross income; petitioner failed to prove no tax benefit for 2011 (so 2012 refund includable)

Cook v. Tait, 265 U.S. 47 (U.S. citizens taxed on worldwide income)
Welch v. Helvering, 290 U.S. 111 (burden of proof on taxpayer in deficiency proceedings)
Sochurek v. Commissioner, 300 F.2d 34 (7th Cir.) (factors for bona fide residence analysis)
Jones v. Commissioner, 927 F.2d 849 (5th Cir.) (taxpayer intent central to residence determination)
Folkman v. United States, 615 F.2d 493 (9th Cir.) (pilots’ tax home as duty station/base)
Schoneberger v. Commissioner, 74 T.C. 1016 (requirement that taxpayer show "strong proof" of bona fide residency)