1941 BTA LEXIS 1356 | B.T.A. | 1941
Lead Opinion
Section 116 (a) of the Revenue Act of 1936 exempts from taxation, in the case of an individual citizen of the United States who is “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 which would constitute earned income, as defined in section 25 (a), if received from sources within the United States. Earned income is defined in section 25 (a) to include “compensation for personal services actually rendered.” The petitioner contends that the decedent was a bona fide nonresident during all of the year 1936 and received the $37,400 as compensation for personal services actually rendered abroad.
The Commissioner contends that the facts in the present case fail to bring it within the provision of section 116 (a) in two respects— first, the decedent was not a bona fide nonresident of the United States for more than six months during the taxable year, and, second, the $37,400 which he received was not “compensation for personal services actually rendered.” He argues that the only person who can qualify as “a bona fide nonresident of the United States for more
The words “residence” and “domicile” have never been satisfactorily defined for legal purposes. See generally on this subject Kennan on Residence and Domicile. Where the word “nonresident” is defined in dictionaries, the definitions given are not sufficiently discriminative for present purposes. Although residence and domicile are sometimes regarded as synonymous, there would seem to be a difference. Domicile is the broader term, since a man may have his domicile at one place and actually reside for the time being in another. Bowring v. Bowers, 24 Fed. (2d) 918; Carstairs v. United States (Dist. Ct., E. Dist. Pa., 1936, not officially reported); J. P. Schumacher, 32 B. T. A. 1242. The basic concept involved in the term “residence” is that of being seated or abiding in a place, while the predominant element in domicile is the intention of remaining. Thus, the distinction between residence and domicile seems to lie in the difference in degree of permanency contemplated. Residence is a variable and elastic term. Its meaning generally depends upon the context and the purpose of the statute in which it is used. The addition of the words “bona fide” to the term resident or nonresident would seem to imply that the intent of the person is of considerable importance. It might also prevent a person who has more than one residence from shifting importance to one or the other, as may suit his own interests.
Looking to the context and the purpose of the statute to discover the meaning of the phrase “bona fide nonresident of the United States for more than six months during the taxable year”, we do not discover much that is helpful. This phrase appeared for the first time in section 213 (b) (14) of the Revenue Act of 1926. Paragraph 14 was one of a number of exclusions from income, but it bore no further relation to contiguous provisions. The purpose of the provision is not entirely clear. A statement was made during the hearings of the Ways and Means Committee urging the adoption of a provision which would “relieve American citizens resident in foreign countries and engaged there in the promotion of American foreign trade from
Does this legislative history indicate anything in regard to the purpose of the provision other than would appear from the words used in the provision itself? It indicates that Congress did not intend to limit the exemption to persons domiciled in foreign countries. See also S. M. 5446, C. B. V-l, p. 49. If the purpose of the provision was correctly stated in the hearings before the Ways and Means Committee, that is, to relieve American citizens residing and engaged in business in foreign countries from tax upon the income which they earned in the country of residence, then the salary in question would come within the purpose of the legislation, since the decedent was a citizen residing and engaged in business in a foreign country and the income was earned in the country of residence. The use of the words “bona fide nonresident” instead of a straightforward statement that mere physical presence in or absence from the United States would be determinative, is indication enough that Congress did not mean the exemption to depend upon mere physical presence in or absence from the United States during six months of the year.
The Bureau rulings are neither clear nor controlling on the question of what was meant by “bona fide nonresident.” The exemption has been held applicable in the rulings, provided that the citizen was merely absent from the United States for more than six months during a taxable year, but it is quite another thing to say that it does not apply unless the person has been absent from the United States for more than six months during a taxable year. Physical absence
Regulations 94, article 211-2 defines a nonresident alien as a person who is not a citizen and whose residence is not within the United States. It holds that one who is a mere transient or sojourner is not a resident, and whether he is a transient is determined by his intentions with regard to the length and nature of his stay. One who comes to the United States for a purpose which will require an extended stay and to that end makes his home temporarily in the United States is a resident, although he may have the intention at all times to return to his domicile abroad when the purpose for which he came has been consummated or abandoned. This regulation was originally promulgated in substantially the same language under the Revenue Act of 1921, and the court in Bowring v. Bowers, supra, said that congressional approval of it made it binding on the courts. Aliens have been held to be residents of the United States for income tax purposes even though they have been absent from this country for all or a part of the taxable year. Federico Stallforth, 30 B. T. A. 546; affd., 77 Fed. (2d) 548; certiorari denied, 296 U. S. 606; J. P. Schumacher, supra; L. E. L. Thomas, 33 B. T. A. 725; John Ernest Goldring, 36 B. T. A. 779. An alien may be a nonresident of the United States even though he resides in this country a substantial part of the year. Ingram v. Bowers, 47 Fed. (2d) 925; affd., 57 Fed. (2d) 65. Congress probably intended the word “nonresident” to have the same meaning in section 116 (a) as it has in Supplement H, to which the above article applies. S. M. 5446, supra.
Thus, it seems proper to conclude that the question of whether the decedent was a nonresident depends not merely upon the period of time he spent in the United States, but depends also upon the
The respondent argues further that the decedent was not a resident of France since the best evidence of his intention is contained in the statements which he made in applications for passports and in income tax returns to the effect that his residence, permanent residence, or legal residence, was in Chicago or in New York. The decedent never concealed the fact that he had been living for years in
The respondent contends that the amount received by the decedent was not compensation for personal services actually rendered or performed because the decedent rendered no services during 1936. He says the amount was not a gift and he suggests that it might have been a distribution of profits. The amount was not a distribution of profits since the decedent held no stock in the company. Although the decedent was away from his place of business and was too ill to perform his duties during 1936, nevertheless, he had rendered services in the past, he was expected to continue to render services in the future, and his employer continued his salary during his illness. Cf. Lucas v. Ox Fibre Brush Co., 281 U. S. 115. His place of employment was in France. He served the company only by rendering personal services. Apparently, the decedent had developed an office organization and a clientele for his employer so that the business could go on even in his absence. His employer wanted to hold him as an employee. It is difficult to draw any other conclusion from the fact that the employer paid him the $37,400 in 1936. The Commissioner has held that retired pay and pensions are earned income. Mim. 3283, C. B. IV-1, p. 14. We conclude that the amount in question was paid to the decedent as compensation for personal services actually rendered outside of the United States.
Reviewed by the Board.
Decision will be entered under Bide 50.