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No Foreign Earned Income Exclusion for Taxpayer with Multiple U.S. Residences.

(Parker Tax Publishing February 2, 2015)

Despite spending a considerable amount of time living in Russia as part of his job in the oil industry, the Tax Court held that the taxpayer's strongest ties were to his residences in Louisiana, and thus he could not take the foreign earned income exclusion. Evans v. Comm'r, T.C. Memo. 2015-12.


Joel Evans began working in the oil industry in 1988 and was regularly assigned to drilling locations overseas. While abroad, he used his parents' house in West Monroe, Louisiana as his address for purposes of receiving mail. During this time, his mother generally managed his business affairs. In 1997, Evans began working for Parker Drilling Co. (Parker). During breaks from his overseas assignments, he would return home and stay with his parents.

After Evans married his first wife in 2003, they built a house in West Monroe. Once it was completed, Evans would return there when he came back to the United States on home leave. In 2006, Evans was promoted to a management position at Parker's facilities on Sakhalin Island in Russia, where he worked through 2010. Evans' work schedule during 2007-2010 consisted of alternating 30-day periods on and off duty. During his on-duty periods, he lived in employer provided housing, sometimes on offshore drilling platforms. During his 30-day off-duty periods, Evans usually returned to West Monroe in order to spend time with his family, alternating between his own home and his parents' home.

Following his divorce in 2007, Evans moved his daughter in with his parents. His house sat empty until September 2009, when he remarried. After that, Evans spent virtually all his off-duty periods with his family at his own house.

No family member ever accompanied Evans to Russia. He held a Russian visa with a "resident work" permit. Although this visa allowed him to remain in Russia long term, it did not permit him to bring family members with him. Evans was registered to vote in Louisiana, held a Louisiana driver's license, had bank and credit card accounts in Louisiana, and registered and maintained vehicles there. His tax returns listed his parents' address, as his mailing address.

On his tax returns for 2007 through 2010, Evans took the position that his tax home was in Russia and accordingly excluded his wages earned in Russia from his gross income under Code Sec. 911(a). The IRS determined that Evans was not entitled to claim the foreign earned income exclusion and assessed deficiencies for each tax year. Evans petitioned the Tax Court, challenging the IRS's determination.


U.S. citizens are taxed on their worldwide income unless a specific exclusion applies. A qualified individual may elect to exclude from gross income (up to the statutory maximum amount) his or her foreign earned income. To be entitled to this exclusion, a taxpayer must satisfy two requirements: (1) he must be an individual whose tax home is in a foreign country (Code Sec. 911(d)(1)(A); and (2) he must either be a bona fide resident of one or more foreign countries or be physically present in such country or countries during at least 330 days in a 12-month period (Code Sec. 911(d)(1)(B)).

OBSERVATION: The Tax Court could have easily resolved this case by reference to the 330-day "physical presence" test (the court even pointed out in a footnote that Evans clearly failed the test). Instead, the court decided to proceed with the more difficult "tax home" analysis, yielding a longer and more interesting opinion than the case might have required.

The Tax Court determined that, despite frequently living abroad in Russia for work, Evans was not eligible to exclude his foreign earned income.

The court first considered whether Evans' tax home during 2007 through 2010 was in Russia. The court noted that Code Sec. 911(d)(3) defines the term "tax home" to mean an individual's home for purposes of Code Sec. 162(a)(2). Citing Mitchell v. Comm'r, 74 T.C. 578 (1980), the court found that a person's home is generally considered to be the location of his regular or principal place of business. However, Code Sec. 911(d)(3) also provides that an individual does not have a tax home in a foreign country for any period for which his abode is within the United States. Thus, the court reasoned, a person whose "abode" is within the United States cannot establish that his "tax home" is in a foreign country. Relying on precedent established by Bujol v. Comm'r, 842 F.2d 328 (5th Cir. 1988), the court determined a taxpayer's "abode" is generally in the country in which he has the strongest economic, family, and personal ties.

The court found that during 2007 through 2010, Evans clearly had very strong ties to his residences in Louisiana. Throughout that period, he owned a house that he had built. While he was overseas, his first wife, his second wife, and his daughter lived in that house or with his parents. During his off-duty periods he regularly returned to West Monroe. His business affairs were generally handled by his mother, whose address he used. His driver's license, voter registration, bank accounts, and motor vehicles were all centered in Louisiana. His ties to Russia, by contrast, were entirely transitory and did not extend much beyond the bare minimum required to perform his duties there.

Evans attempted to argue that as because his ties to Louisiana were divided between two residences - his parents' home and his own home - he did not reside at either location within the meaning of the statute. The court noted, however, that Code Sec. 911(a) does not require determining which particular building in West Monroe constituted Evans' "abode." Rather, the statute asks whether his "abode" was in the United States or in Russia. Finding that Evans had the strongest ties to his residences in the United States, the Court held that his tax home was within the United States and thus Evans could not exclude income he earned in Russia under the foreign earned income exclusion.

For a discussion of the foreign earned income exclusion, see Parker Tax ¶ 78,620. (Staff Editor Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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