Lemay v. C.I.R., 87-4594

• Decision Date: 04 February 1988
• Docket Number: No. 87-4594,87-4594
• Citation: 837 F.2d 681
• Parties: -667, 88-1 USTC P 9182 John T. LEMAY and Yvonne P. Lemay, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 681

837 F.2d 681

61 A.F.T.R.2d 88-667, 88-1 USTC P 9182

John T. LEMAY and Yvonne P. Lemay, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

No. 87-4594.

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Feb. 4, 1988.

C. Jerre Lloyd, McLeod, Little, Hopkins & Lloyd, Lake Charles, La., for petitioners-appellants.

Fred T. Goldberg, Jr., Chief Counsel, I.R.S., Michael L. Paup, Michael C. Durney, Acting Asst. Atty. Gen., William S. Rose, Jr., Ann Belanger Durney, Chief Appellate Sec., Tax Div., Dept. of Justice, Washington, D.C., for respondent-appellee.

Appeal from the Decision of the United States Tax Court.

Before POLITZ, JOHNSON, and HIGGINBOTHAM, Circuit Judges.

JOHNSON, Circuit Judge:

Petitioners John T. and Yvonne P. Lemay filed a petition in the United States Tax Court seeking redetermination of the deficiencies determined by the Commissioner of Internal Revenue in their joint federal income taxes for 1981 and 1982. The dispositive issue addressed by the tax court was whether, during the period John T. Lemay was in Tunisia in 1982, he established a "tax home" in Tunisia within the meaning of 26 U.S.C. Sec. 911(d)(3) so as to entitle the Lemays to a foreign earned income exclusion. Because we agree with the tax court that Lemay's "abode" remained in Louisiana during the relevant period, we affirm.

I. FACTS AND PROCEDURAL HISTORY

At all times during 1982, John T. Lemay was employed by the Penrod Drilling Company (Penrod) as an assistant drilling superintendent on an offshore oil rig located in the territorial waters of Tunisia. Lemay's work schedule consisted of alternating twenty-eight day periods on and off duty. After working on the oil rig for a continuous period of twenty-eight days, Lemay would travel from Sfax, Tunisia, to his residence in Lake Charles, Louisiana, where he would remain for a continuous rest period of twenty-eight days until he had to return to Tunisia. Penrod paid all of Lemay's expenses associated with his travel between Louisiana and Tunisia. Additionally, Penrod provided Lemay's food and lodging while in Tunisia and paid the Tunisian government all taxes relating to Lemay's earnings from his employment with Penrod.

In a typical twenty-eight day work period, Lemay spent all of his time on board the rig, and was on call twenty-four hours a day. Due to Lemay's supervisory position with Penrod, however, he was occasionally permitted to travel to the mainland of Tunisia where Penrod had established a main office in Sfax. While he was in Sfax, Lemay stayed either in a hotel room or an apartment paid for by Penrod. On the Tunisian mainland, Lemay had minimal contact with local Tunisian residents, although he did meet some municipal officials, participate in some informal gatherings with Tunisian employees of Penrod, and attend a local soccer match.

During his employment with Penrod in Tunisia, Lemay's wife and daughter resided in the house Lemay maintained in Lake Charles, Louisiana. After his twenty-eight day work period in Tunisia, Lemay always returned home to his family for the entire twenty-eight day rest period. Lemay was registered to vote in Lake Charles, maintained his bank account in Lake Charles, and possessed a Louisiana state driver's license.

The Lemays timely filed a joint federal income tax return in 1982, reporting that during 1982 Mr. Lemay was a bona fide resident of Tunisia for 209 days and claiming a foreign earned income exclusion in the amount of $42,750.00, equal to fifty-seven percent of his total salary of $73,365.63. In 1985, the Commissioner determined a deficiency in the Lemays' joint federal income taxes for 1982. ¹ Thereafter, the Lemays filed a petition in the tax court seeking a redetermination of the deficiency. On May 19, 1987, the tax court rendered a decision in favor of the Commissioner, upholding the 1982 deficiency and concluding that John T. Lemay was not a "qualified individual" so as to entitle the Lemays to the foreign earned income exclusion provided by 26 U.S.C. Sec. 911. The court based its decision on the fact that John T. Lemay's "abode" in 1982 was in Lake Charles, Louisiana, and, therefore, his "tax home" was not in Sfax, Tunisia. The Lemays appeal the tax court's decision.

II. DISCUSSION

Section 911(a)(1), as in effect in 1982, permitted a "qualified individual" to exclude from gross income for tax purposes up to $75,000.00 of foreign earned income. ² The Code defines a "qualified individual" as one who has a "tax home" in a foreign country and who is (1) a citizen of the United States, and establishes to the satisfaction of the Secretary that he has been a "bona fide resident" of a foreign country for an uninterrupted period which includes an entire taxable year (bona fide residence test), or (2) a citizen or resident of the United States, and who is physically present in a foreign country for at least 330 full days during the taxable year (physical presence test). Section 911(d)(1)(A)-(B). Thus, to be entitled to the foreign earned income exclusion within the context of section 911, an individual must have his "tax home" in a foreign country and satisfy either the "bona fide residence" requirement or "physical presence" requirement of section 911(d)(1).

At trial, the Lemays conceded that John T. Lemay did not meet the "physical presence" test of section 911(d)(1)(B). Instead, the Lemays argued that Lemay was a bona fide resident of Tunisia for the requisite period in 1982. However, the tax court did not reach the issue of Lemay's status, or lack thereof, as a bona fide resident of Tunisia due to the court's conclusion that Lemay's "tax home" was not in Tunisia during 1982. The term "tax home" is defined by section 911(d)(3) as follows:

The term "tax home" means, with respect to any individual, such individual's home for purposes of section 162(a)(2) (relating to traveling expenses while away from home). An individual shall not be treated as having a tax home in a foreign country for any period for which his abode is within the United States.

In addition to the pertinent code section, the regulations under section 911 further define "tax home" as follows:

(b) Tax home.... Thus, under section 911, an individual's tax home is considered to be located at his regular or principal (if more than one regular) place of business or, if the individual has no regular or principal place of business because of the nature of the business, then at his regular place of abode in a real and substantial sense. An individual shall not, however, be considered to have a tax home in a foreign country for any period for which the individual's abode is in the United States. Temporary presence of the individual in the United States does not necessarily mean that the individual's abode is in the United States during that time. Maintenance of a dwelling in the United States by an individual, whether or not that dwelling is used by the individual's spouse and dependents, does not necessarily mean that the individual's abode is in the United States.

Section 1.911-2(b) (emphasis added). Thus, an individual's "tax home" for purposes of the foreign earned income exclusion depends on the application of a general rule subject to an overriding exception that the individual's "abode" not be in the United States. Bujol v. Commissioner, 53 T.C.M. 762, 763 (CCH 1987). ³ In the instant case, the tax court found that Lemay's "abode" remained in the United States at all times during 1982. By so finding, the court necessarily concluded that Lemay's "tax home" was not located in Sfax, Tunisia.

The determination of an individual's "tax home" pursuant to section 911(d)(3) is a legal issue, not a factual one. While the tax court determines the underlying facts, the ultimate conclusion to be drawn from those facts is a question of law. Carpenter v. United States, 495 F.2d 175, 178 (5th Cir.1974). See also United States v. Winthrop, 417 F.2d 905, 910 (5th Cir.1969).

An examination of circuit precedent reveals no cases interpreting the definition of "tax home" within the context of section 911 as it relates to the limiting "abode" language. However, in Bujol v. Commissioner, the tax court, addressing virtually identical facts to those in the instant case, held that the taxpayer's "abode" remained at...