Elghanian v. Commissioner
| Decision Date | 28 February 2005 |
| Docket Number | Docket No. 256-03.,Docket No. 254-03. |
| Citation | 89 T.C.M. 815 |
| Parties | Faramarz and Mitra Elghanian v. Commissioner. Faramarz Elghanian v. Commissioner. |
| Court | U.S. Tax Court |
Howard S. Fisher, for petitioners.
Jack H. Klinghoffer and Gerard Mackey, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
Respondent determined deficiencies in petitioners' Federal income tax and an addition to tax and a penalty as follows:
The issues for decision are:
1. Whether petitioner's2 loss on the expropriation of his family's Iranian property occurred in 1979, as respondent contends, or in 1986, as petitioners contend. We hold that it occurred in 1979.
2. Whether petitioner was a resident of the United States in 1979. We hold that he was not.
3. Whether petitioner is entitled to a settlement of his claimed deduction for expropriation losses on the same terms as respondent's settlement with petitioner's father and brother. We hold that he is not.
4. Whether petitioner is liable for the addition to tax under section 6661(a)3 for 1988 and the accuracy-related penalty under section 6662(a) for 1989 for substantial understatement of tax. We hold that he is not.
Some of the facts have been stipulated and are so found.
Petitioners were married and resided in France when they filed their petition.4
Petitioner was born in Iran in 1950 or 1951. Petitioner's father and several of his father's brothers owned businesses in Iran which had 5,000-8,000 employees in the 1970s.
Petitioner's father was born in Iran. His mother was born in London. Petitioner attended school in Iran from 1957 to May 1965. Petitioner never worked for his family's businesses in Iran.
Petitioner applied for an alien registration receipt card (green card)5 in 1965 when he was about 14 years old. In his green card application, petitioner said that he intended to study in the United States and stay as an immigrant. The United States issued a green card6 to petitioner, his parents, and a brother and sister in the mid-1960s. Petitioner's father came to the United States in the mid-1960s for an amount of time not specified in the record and then returned to Iran.
Petitioner visited the United States in July 1965. He had his green card at that time. Also that month, he began attending high school in Great Britain. Petitioner attended high school in England until May 1969.
Petitioner applied only to colleges in the United States. Petitioner came to the United States on an Iranian passport and a student visa7 issued by the United States in 1969.
Petitioner attended Florida Southern College from July 1969 to May 1973, and he received a 4-year college degree in business. While in Florida, petitioner obtained a license to buy and sell real estate.
Petitioner went to Iran about once every 2 years during the years he was an undergraduate student. He stayed 2-3 weeks per visit. In the late 1960s and early 1970s, petitioner told his parents that he intended to reside in the United States. Petitioner married his cousin, Shirley Elghanian, in Iran in July 1972.
Petitioner began attending graduate school at George Washington University, Washington, D.C., in September 1973. He received a master's degree in business administration in 1976. Petitioner and Shirley Elghanian rented an apartment in Washington, D.C., while petitioner attended George Washington University.
After petitioner finished graduate school, he and Shirley Elghanian shared an apartment in Boston with Moeez Elghanian, Shirley Elghanian's brother and petitioner's cousin. Petitioner and Moeez Elghanian viewed various properties for possible syndication, and they traveled frequently.
Petitioner told his brother Phillip Elghanian after 1970 and after petitioner got married that he intended to reside in the United States. Nassar Victory (Victory), petitioner's second cousin, saw petitioner about 10 times per year from 1970 to 1977. Petitioner told Victory that he intended to reside in the United States. After graduate school, petitioner told Steven Kumin (Kumin), a friend of his who lived in the Boston area, that petitioner intended to reside in the United States.
On a date not specified in the record, petitioner's father paid about $2 million to buy land in Tehran, Iran, on which he intended to build his personal residence. At a time not specified in the record, petitioner's father arranged to have the Customs Administration Building constructed on that site. Petitioner's parents owned the land on which it was to be built.
The Customs Administration Building had 3 underground parking levels, about 25 retail stores, and 3 office towers which were 11 or 12 stories high. The building occupied about an acre of land. It cost about $15 million to build the Customs Administration Building and another $1.5 to $2 million for tenant improvements. The Iranian Department of Taxation and Customs occupied the Customs Administration Building.
Petitioner conveyed an interest in the building (about 6 meters by 14 meters, not otherwise described in the record) to the regional electrical company for a price not stated in the record on a date not clear from the record.
Based on the experiences of some of his relatives, petitioner believed that he would be required to serve for 2 years in the Iranian military in order to return to Iran later to deal with his family's property. On a date in 1977 not specified in the record, petitioner returned to Iran to begin that service. Petitioner's parents lived in Iran at that time. Petitioner left a car, some dishes, photographs, and clothing in Boston, which he intended to reclaim later.
Shirley Elghanian returned to Iran with petitioner in 1977. Petitioner's daughter, Roya, was born in Iran in December 1977. Because of political unrest in Iran, Shirley Elghanian and Roya went to London in 1978 to live with Shirley Elghanian's parents.
Petitioner's mother and his brother, Phillip Elghanian, moved to the United States in 1978.
In January 1979, the Shah of Iran was deposed in a revolution. The Ayatollah Khomeini became the new leader of Iran.8
Petitioner's father moved to the United States in 1979. Petitioner's father's green card was renewed at that time. Petitioner's parents have lived in the United States since 1979. In April or May 1979, petitioner's father asked his son-in-law, Alex Ebrahimzadeh (Ebrahimzadeh), to retrieve the family's green cards from petitioner's father's office in Tehran and bring them to him in New York. A U.S. Customs inspector confiscated those green cards when Ebrahimzadeh brought them into the United States.
Petitioner completed 2 years of service in the Iranian military around May 1, 1979. He intended to leave Iran at that time, but the Iranian government prevented petitioner from leaving. Habib Elghanian, petitioner's uncle, was executed on May 29, 1979. The Iranian government expropriated petitioner's family businesses and property.
On June 1, 1979, petitioner was arrested, blindfolded, interrogated, and imprisoned. He was released on July 1, 1979, He reasonably feared for his life in Iran, and on July 13, 1979, he fled from Iran under an assumed name. He has not returned to Iran since then.
After leaving Iran, petitioner went to London to see Shirley Elghanian and Roya. He stayed there for a few weeks. On August 1, 1979, he traveled to Spain to visit his brother, Farhad Elghanian, and to obtain a visa to come to the United States. He received a B-1 or B-2 entry visa.9
Petitioner then went to New York where he spent about 3 weeks with his parents, family, and friends. He then went to France for about 1 month. Petitioner went to London for 2-3 weeks in November 1979, and then to Israel for 1-2 weeks, and back to London for about 2 weeks.
Petitioner then went to New York, stayed briefly with his parents, and, in December 1979, began occupying an apartment at 279 E. 44th Street owned by petitioner, his wife, and her two sisters. Petitioner had a birthday party for his brother Phillip at that apartment in December 1979.
Petitioner was not engaged in the sale of stock as a trade or business in 1979. Petitioner owned a rental apartment near London that he had received as a gift. He never lived in that apartment.
Petitioner and his family learned of the expropriation in 1980. On May 15, 1980, petitioner's father, on behalf of his immediate family, filed with the Office of Foreign Assets Control of the United States Department of the Treasury a claim for the expropriated property (Census of Claims by United States Persons Against Iran). In it, petitioner's father claimed expropriation losses of $113,530,000, including stock which he valued at $11,580,000; the Customs Administration Building which he valued at $20 million; other real property which he valued at $10.45 million; loans which he valued at $1.5 million; and tangible personal property which he valued at $70 million. Petitioner signed the claim. In the claim, petitioner's father stated that the date of loss...
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