Swenson v. Thomas, 11923.

• Decision Date: 04 December 1947
• Docket Number: No. 11923.,11923.
• Citation: 164 F.2d 783
• Parties: SWENSON v. THOMAS.
• Court: U.S. Court of Appeals — Fifth Circuit

164 F.2d 783 (1947)

SWENSON v. THOMAS.

No. 11923.

Circuit Court of Appeals, Fifth Circuit.

December 4, 1947.

John S. Carlson and Joseph L. Hull, Jr., both of Tulsa, Okl., and J. P. Jackson and S. G. Sinstead, both of Dallas, Tex., for appellant.

Lester L. Gibson and Sewall Key, Sp. Assts. to Atty. Gen., and William P. Fonville, Asst. U. S. Atty., of Dallas, Tex., for appellee.

Before SIBLEY, HOLMES, and McCORD, Circuit Judges.

SIBLEY, Circuit Judge.

Appellant Swenson paid assessed deficiencies in income taxes for the years 1943 and 1944, and his claims for refund, based on his contention that salaries earned by working in Colombia, South America, during the whole of those years, was not taxable under Section 116(a) of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 116 (a), were neglected for six months and he brought suit against the representative of the Collector. The district judge found against him and he appeals.

Prior to 1942, this exclusion from taxation of income earned abroad applied, "In the case of an individual citizen of the United States, a bona fide non-resident of the United States for more than six months during the taxable year * * *." It is demonstrable from the history of that legislation that the exemption was made in the interest of foreign trade, to induce Americans to accept employment abroad and put American business on an equality with foreign competitors. In the Revenue Act of 1942, 56 Stat. 841, § 148(a), now appearing as Internal Revenue Code Section 116(a), 26 U.S.C.A. Int.Rev.Code, § 116(a), the language was changed to read, "In the case of an individual citizen of the United States, who establishes to the satisfaction of the Commissioner that he is a bona fide resident of a foreign country or countries during the entire taxable year * * *." The history of this legislation shows that under the former law only simple absence from the United States anywhere or for any purpose need be shown, and for only six months and a day, to exempt the year's earned income, and by liberal construction there had been an undesirable escape from just taxation; and the change was made not because of a reversal of the original purpose to encourage foreign employment of Americans, but to so tighten the law as to require bona fide residence in a particular foreign country, or countries, and for the whole of the taxable year. The act goes on to provide that if such foreign residence has lasted for two years and return to the United States occurs during a subsequent year, the exemption may be claimed proportionally for the subsequent year although the foreign residence had not continued for all of that year. After this change Treasury Regulation 111, Sec. 29.116-1 was promulgated which directed that in general bona fide foreign residence should be determined by the principles laid down in Sections 29.211-1 to 29.211-5 as to residence by aliens in the United States. We will advert to these sections later.

The material facts as to Swenson are these. He was born in El Campo, Texas, where his mother still lives, and where he has always claimed his domicile to be. He graduated at the University of Illinois, and since 1935 has been in geophysical work. In August, 1937, he was first sent abroad to work by Geophysical Service, Inc., and was so employed for most of the time, till on August 28, 1941, he entered into a written contract with his employer to enter its foreign service for three years, for a salary, a bonus and living expenses while outside the...