Nico v. Comm'r of Internal Revenue
| Decision Date | 10 January 1977 |
| Docket Number | Docket No. 301-74. |
| Citation | 67 T.C. 647 |
| Parties | SEVERINO R. NICO, JR., AND TERESITA V. NICO, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
In April 1971 petitioners, Philippine nationals, moved from Manila to San Francisco, and 4 months later moved on to New York Coty where they remained through the rest of 1971. Held, as dual-status (nonresident and resident) aliens petitioners were not entitled to file a joint return or use the standard deduction. Held, further, petitioners are not entitled to deduct their moving expenses from Manila to San Francisco because, on the facts, San Francisco was petitioners' new principal place of work but they failed to remain there the required 39 weeks (sec. 217(c)(2)). Held, further, on the facts, petitioners are not entitled to a moving expense deduction on their move from San Francisco to New York City in excess of that allowed by respondent. Severino R. Nico, Jr., pro se.
R. E. Marum, for the respondent.
Respondent determined the following deficiencies in petitioners' income tax for 1971:
+---------------------------------+
¦Severino R. Nico¦Teresita V. Nico¦
+----------------+----------------¦
¦$150.92 ¦$303.81 ¦
+---------------------------------+
The issues for decision are:
(1) Whether petitioners are entitled to file a joint return for their year of entry into the United States.
(2) Whether petitioners are entitled to use the standard deduction for their year of entry into the United States.
(3) Whether petitioners are entitled to a deduction for their moving expenses incurred in their move from Manila, Philippines, to San Francisco, Calif.
(4) Whether respondent correctly computed petitioners' deductions for moving expenses arising from their move from San Francisco to New York City.
Some of the facts have been stipulated by the parties and are found accordingly.
Petitioners, husband and wife, resided in New York City at the time of filing their petition herein. They filed a joint Federal income tax return for the calendar year 1971.
Prior to May 1971 petitioners were Philippine nationals. On April 23, 1971, they left Manila by plane for the United States. After stopovers in Taipei, Taiwan, and Tokyo, Japan, they arrived in Honolulu on May 2, 1971. Two days later petitioners flew from Honolulu to San Francisco. They remained in San Francisco until August 29, 1971, at which time they left for New York City.
Sometime after their arrival in San Francisco, petitioners received their alien registration cards which were mailed to them by the Immigration Office in Honolulu. On May 17, 1971, their personal belongings and clothing arrived by ship from the Philippines. While in San Francisco they also received several checks, two of which represented retirement contributions. The first of the retirement contribution checks, dated June 2, 1971, was for approximately $500, and the second, dated June 30, 1971, was for approximately $3,000. They also received two checks from their bank in Manila sometime before August 1971. These checks of approximately $400 each represented their savings and the proceeds from the sale of their furniture in the Philippines.
Prior to leaving the Philippines, Severino R. Nico, Jr. (Severino), had been employed as an attorney with the United States Veterans' Administration in Manila. Although a member of the Philippine bar, he was not admitted to practice in any jurisdiction in the United States. He left the Philippines with the intention of resuming employment with the Veterans' Administration once he had met the agency's employment qualifications.1 Teresita V. Nico (Teresita) had also been employed with the Veterans Administration while in the Philippines.
After arriving in San Francisco, petitioners stayed temporarily in a hotel. On May 6, 1971, they signed a 4-month lease on a furnished apartment. Eight days later Teresita began work in San Francisco with California Blue Cross. Severino, unable to find work as a law clerk in San Francisco, took a temporary job with Anthony Enterprises. He left this position after 2 days, and on June 23, 1971, commenced employment with the State of California. Teresita resigned her position on August 14, 1971, and Severino resigned on August 23, 1971.
On August 29, 1971, petitioners left San Francisco by bus for New York City. They traveled for 9 days and 8 nights. After arriving in New York City on September 6, 1971, they both soon found employment. Teresita began work on September 14, 1971, and Severino began as a law clerk on October 14, 1971. They were unable, however, to obtain an apartment immediately, and, as a consequence, lived in hotels and ate in restaurants until October 1, 1971.
Petitioners filed a purported joint income tax return for 1971, and adopted the calendar year as their accounting period. They deducted the travel expenses and temporary lodging and meal expenses incurred in their move from San Francisco to New York City, as well as their moving expenses incurred in the move from Manila to San Francisco. They also used the standard deduction in computing their taxable income. Respondent in his notices of deficiency disallowed in its entirety the moving expense deduction attributable to the move from Manila to San Francisco, and reduced the claimed amounts for meals and incidentals attributable to the move from San Francisco to New York City. Respondent also determined that petitioners were not entitled to file a joint return or elect the standard deduction because they were nonresident aliens for a part of the calendar year 1971.2
OPINIONThe first issue is whether petitioners may file a joint return in computing taxable income for their year of entry into the United States. Petitioners do not dispute that they were nonresident aliens prior to May 2, 1971. They instead contend that their 1971 return covered only the short taxable year May 2, 1971, to December 31, 1971, the period of time during which they were resident aliens. Respondent disagrees and asserts that petitioners' taxable year was the calendar year 1971, and since petitioners were nonresident aliens during a part of 1971, they are not entitled to file a joint return. We agree with respondent.
Section 60133 provides generally that a husband and wife may file a joint income tax return except where either is a nonresident alien ‘at any time during the taxable year.’ The crucial question thus becomes whether petitioners' taxable year is the entire 1971 calendar year or only that portion of it subsequent to their move to the United States.
The term ‘taxable year’ is defined in section 7701(a)(23) as the calendar year or fiscal year for which taxable income is computed, or, in the case of a return made for a fractional part of a year, the period for which such return is made. Returns for a period less than 12 months, i.e., short periods, are required by section 443(a)(2) where a taxpayer is not in existence for the entire taxable year. Petitioners argue that they were taxpayers ‘not in existence’ prior to May 2, 1971, and, as a consequence, their ‘taxable year’ is the fractional part of the calendar year 1971 commencing after May 2, 1971. We have recently considered a similar question in Jose E. More, 66 T.C. 27, 32 (1976),4 on appeal (2d Cir., Oct. 22, 1976). There we were faced with the question of whether the taxpayer was eligible to use the income averaging provisions of sections 1301 through 1305 where he was a dual-status (resident and nonresident alien) taxpayer during the initial base period taxable year. We stated that a dual-status taxpayer is not a taxpayer ‘not in existence’ in the portion of the year preceding the time he becomes a resident alien. We went on to say:
Respondent's long-standing policy has been to treat taxpayers such as Jose as dual-status taxpayers for the year in which residency is changed, to require of such taxpayers a tax return prepared on Form 1040 for the taxpayer's entire annual accounting period, and to report separately therein income derived during the taxpayer's period of residency and the taxpayer's period of nonresidency.9 The requirement of making a full-year return is not altered or suspended by the fact that a taxpayer may have had no income taxable in the United States during his period of nonresidency. * * * The respondent's position in respect of this point has been cited with apparent approval in Georges Simenon (44 T.C. 820, 832-833 (1965)).
9 This policy dates back to G.C.M. 10759, XI-2 C.B. 99 (1932), and is more recently embodied in secs. 1.871-13(a) and 1.6012-1(b)(2)(ii)(a), Income Tax Regs. See also Rev. Rul. 56-365, 1956-2 C.B. 934, and I.R.S. Pub. No. 519, United States Tax Guide for Aliens (1975).Petitioners also argue that this dual type of reporting for a year in which an alien changes residency bolsters their assertion that Jose had a short taxable year consisting of only that portion of the 1960 calendar year in which he had reportable income. But, the very provision cited by petitioners, sec. 1.6012-1(b)(2)(ii)(a), Income Tax Regs., contains language undermining their position: ‘If an alien individual becomes a citizen or resident of the United States during the taxable year.’ (Emphasis added.) We note, however, that this regulation is only applicable for taxable years beginning after Dec. 31, 1966.
We conclude that petitioners were not taxpayers ‘not in existence’ during that portion of the calendar year 1971 preceding the time they became resident aliens and are not permitted to file short-period returns for 1971. Since petitioners' 1971 taxable year was not a short period and since they did not adopt a fiscal year, their 1971 taxable year was the calendar year. Sec. 441; sec. 1.441-1, Income Tax Regs. Petitioners' contention, moreover, is inconsistent with section 1.871-13(a)(1), Income Tax Regs. In view of this conclusion, we hold that petitioners are not...
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