JESSE A. LINDE AND DAWN LINDE, Petitioners
COMMISSIONER OF INTERNAL REVENUE, Respondent
United States Tax Court
September 18, 2017
David Johnston and Paul F. Turner, Jr., for petitioners.
B. Cleverdon and Horace Crump, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
determined deficiencies and section 6662(a) accuracy-related penalties
against petitioners in the following amounts:
| Year || Deficiency || Penalty sec. 6662(a) |
issues for decision are: (1) whether petitioner Jesse Linde
is a "qualified individual" who is entitled to
exclude portions of the wages that he earned overseas during
the taxable years 2010, 2011, and 2012 (years in issue) under
the foreign earned income exclusion provisions of section
911(a); (2) whether petitioners are entitled to deductions
for unreimbursed employee business expenses claimed on
Schedules A, Itemized Deductions, for the years in issue; and
(3) whether petitioners are liable for accuracy-related
penalties under section 6662(a).
the facts have been stipulated and are so found. The
stipulation of facts and the attached exhibits are
incorporated by this reference. Petitioners reported
Daleville, Alabama, as their mailing address on their
Mr. Linde's Background
and Dawn Linde are U.S. citizens. Mr. Linde grew up in
Louisville, Kentucky, and joined the U.S. Army (Army) in
1972. In 1982 Mr. Linde was stationed in Fort Rucker,
Alabama, where he trained to become a helicopter pilot. After
retiring from the Army in 1992, Mr. Linde briefly worked for
a car dealership and the Daleville, Alabama, police
Mr. Linde resumed his piloting career in the private sector.
From 1995 to 1997 he lived and worked in Saudi Arabia, where
he trained helicopter pilots. He then obtained a similar job
in Bosnia and worked there until 2000. Mr. Linde rejoined the
Army after the September 11, 2001, terrorist attacks; he
served initially as an instructor pilot at Fort Rucker in
Alabama but was later deployed to the Sinai Peninsula. In
2005 Mr. Linde retired from the Army for a second time.
Mr. Linde was offered a helicopter pilot job with Government
contractor Blackwater Security Consulting (Blackwater) in
Iraq. In his midfifties at the time, Mr. Linde was concerned
about his employment prospects in the United States, which
had an abundance of younger helicopter pilots. With each
passing year Mr. Linde was becoming less marketable as a
helicopter pilot in the United States. In Iraq Mr.
Linde's age was not as great an obstacle so long as he
could pass a physical. Petitioners discussed Mr. Linde's
concerns and agreed that he would accept the job offer and
work in Iraq until he was willing and able to permanently
retire. Mrs. Linde would remain in Alabama.
Employment at DynCorp
Linde began working for Blackwater in April 2009. In November
2009 Blackwater lost its Government contract, and Mr. Linde
became an employee of Blackwater's successor under the
contract, DynCorp International, LLC (DynCorp). In connection
therewith, Mr. Linde signed a one-year employment agreement
with DynCorp. Thereafter the Iraqi Government issued Mr.
Linde a residency visa. Throughout the years in issue and
continuing through the date of trial Mr. Linde worked in Iraq
as an employee of DynCorp pursuant to yearly employment
Linde resided in Iraq for 248 days in 2010, 240 days in 2011,
and 249 days in 2012. During these years Mr. Linde's
primary responsibility was to fly "[a]ll over
Iraq", transporting Government officials to various
locations in direct support of the U.S. Ambassador to Iraq.
In furtherance of this duty Mr. Linde communicated regularly
with Iraqi intelligence personnel and several Iraqi
civilians. Because Mr. Linde was often subject to hostile
fire, the U.S. Department of State issued him a firearm. Mr.
Linde carried the firearm pursuant to a letter of
authorization from the Iraqi Government. In 2012 Mr. Linde
received a promotion and became responsible for overseeing
the schedules of 36 other pilots in Iraq.
Linde's work schedule generally consisted of 60 straight
days of 12hour shifts followed by break periods of 30 days.
Because DynCorp could not keep all of its employees in Iraq
at one time, it required its helicopter pilots to leave Iraq
every 60 days. Accordingly, DynCorp provided Mr. Linde a
round-trip ticket to Kuwait at the conclusion of each 60-day
there Mr. Linde flew to the United States at his own
Because Mr. Linde's trips to and from the United States
involved multiple flights, each round trip usually required
three days of travel time. On some occasions Mr. Linde spent
time in Europe before flying to the United States.
Linde spent the remainder of his break periods at his and
Mrs. Linde's marital home in Daleville,
While there, Mr. Linde spent time with Mrs. Linde and their
two adult children, who also reside in Daleville. The special
healthcare needs of petitioners' son-in-law, an Army
veteran who was seriously injured while on active duty in
Iraq, make overseas travel extremely difficult for Mrs. Linde
and petitioners' children. Were it not for his
son-in-law's disability, Mr. Linde would have arranged
for Mrs. Linde and their children to join him in Europe for
some of his break periods.
Mr. Linde lived in a DynCorp-provided container housing unit
(CHU), a large metal container comprising two bedrooms and a
shared bathroom. No one else resided in Mr. Linde's
bedroom when it was unoccupied, and he kept his personal
belongings there while he was out of the country. For the
first few months of 2010 Mr. Linde's CHU was in the Green
Zone, an area of Baghdad with secured points of entry.
Thereafter he moved to a CHU near the Baghdad airport, which
was not in the Green Zone or an area otherwise declared
was not working, Mr. Linde went on group excursions to local
markets to purchase food and building materials, which he
used for small construction projects to improve the
conditions of his CHU. Mr. Linde also spent time dining in
restaurants and socializing with several Iraqi interpreters
whom he had befriended at work.
joining the Army in 1972, Mr. Linde has maintained an account
at the Armed Forces Bank that he can use anywhere (including
February 2010 through May 2011 he also maintained an Iraqi
bank account at the U.S. Embassy; he closed the account when
the Iraqi bank stopped operating its branch there. Meanwhile,
Mr. Linde kept his vehicles in Alabama, where he was
registered to vote and licensed to drive.
Linde did not pay taxes to the Iraqi Government during the
years in issue. However, in May 2013 DynCorp began
withholding Iraqi income taxes from Mr. Linde's
compensation. That year DynCorp changed Mr. Linde's work
shifts from a 60-30 alternating schedule to a 90-30 one
(i.e., 90 straight days of 12-hour shifts, with break periods
of 30 days).
Tax Return Preparation
returns for the years in issue were prepared by their
longtime accountant, Bob Wills. Mr. Wills is an experienced
accountant and tax return preparer in Dale County, Alabama,
with a large number of clients who are helicopter pilots. For
each year in issue petitioners provided Mr. Wills extensive
information about Mr. Linde's work in Iraq and the
expenses they sought to deduct. Mr. Wills advised petitioners
that Mr. Linde was eligible for the foreign earned income
exclusion for the years in issue. Mr. Wills also advised
petitioners that certain expenses, including Mr. Linde's
travel expenses, were deductible. Petitioners, who have no
training in accounting or tax return preparation, believed
that Mr. Wills' advice was...