Lee v. Commissioner

1927 BTA LEXIS 3351 | B.T.A. | 1927

Lead Opinion

OPINION.

Phillips:

It is the contention of the petitioners that the salary and commissions earned by the petitioner, John C. Lee, for services performed wholly without the United States while he was a nonresident alien are not subject to tax. The Commissioner, on the other hand, contends that since the petitioners were resident aliens on the last day of the taxable year they must include such amount in their income. The Commissioner has filed no brief advising us why he believes his contention to be well founded and the examination we have made of the law discloses nothing to- justify the position taken by him.

The Revenue Act of 1921 in section 212(a) provides that in the case of an individual the term “ net income ” means the gross income as defined in section 213, less the deductions allowed by section 214. Section 213(c) provides as follows:

In tlie 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.

There is no question that at the time the amounts in question became income, the petitioners were nonresident alien individuals and as such were exempt from any tax upon this amount. There is nothing in the law providing that if they became resident aliens, such income shall become subject to tax. It is a familiar rule of statutory construction that taxing statutes should not be extended beyond their clear import.

It might be pointed out that if the position of the Commissioner is correct and the tax liability is to be determined by reason of the status at the close of the year, one who has been a resident alien, and as such subject to tax on income from all sources, could escape liability on income from sources outside.the United States by becoming a nonresident prior to the close of the taxable year. This construction, however, would be in contravention of section 250(g) of the Revenue Act of 1921, providing for the termination of the taxable year by the Commissioner in the event that a taxpayer intends to depart from the United States.

Counsel for the petitioners points out in his brief that section 216(f) of the Revenue Act of 1921 provides as follows:

The credits allowed by subdivisions (e), (d), and (e) of this section shall be determined by the status of the taxpayer on the last day of the period for which the return of income is made * * *.

This appears to be the only provision of the statute providing that the status of the taxpayer on the last day of the taxable period is to govern in computing tax. The subdivisions enumerated do not cover the case of a nonresident, alien who becomes a resident alien. Exprés-alo'imius est exclusio alterius.

Reading the statute as a whole we are of the opinion that income received by a nonresident alien from sources without the United States is not taxable even though such person may become a resident alien subsequent to its receipt and prior to the close of the taxable year.

The deficiencies are redetermined to be $3.63 as to each of the petitioners.

Decision will be entered accordingly.