The opinion
T.C. Summary Opinion 2007-156
UNITED STATES TAX COURT
MEHRDAD HAMZEYE LANGROUDI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9489-06S. Filed September 5, 2007.
Mehrdad Hamzeye Langroudi, pro se.
James H. Harris, Jr., for respondent.
RUWE, Judge: This case was heard pursuant to the provisions
of section 74631 of the Internal Revenue Code in effect when the
petition was filed. Pursuant to section 7463(b), the decision to
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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be entered is not reviewable by any other court, and this opinion
shall not be treated as precedent for any other case.
Respondent determined deficiencies in petitioner’s Federal
income taxes and accuracy-related penalties under section 6662(a)
as follows:2
Accuracy-related Penalty
Year Deficiency Sec. 6662(a)
2002 $7,165 $1,433.00
2003 11,846 2,369.20
After concessions,3 the issues we must decide are: Whether
petitioner’s wage income from residencies in anesthesiology in
2002 and 2003 was exempt from Federal income tax pursuant to the
tax convention between the United States and Belgium (the treaty)
and whether petitioner is liable for accuracy-related penalties
under section 6662(a).
2
Respondent subsequently issued a Form 4549, Supplement to
the Notice of Deficiency (supplement), which reflects a reduction
in the determined 2002 and 2003 to $6,625 and $9,071,
respectively. As a result of the reduced deficiency
determinations, the supplement reduces the determined 2002 and
2003 penalties to $1,325 and $1,814.20, respectively.
3
The parties stipulated that petitioner received unreported
dividend and interest income in 2002 and 2003. Anesthesiology
Associates of Boro Park, L.L.P., paid petitioner $5,700 in
miscellaneous income during 2003. As a result, respondent
determined that petitioner was liable for self-employment tax.
Petitioner did not dispute respondent’s determination that he was
liable for self-employment tax on nonemployee compensation in
2003.
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Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated by this reference. When the petition was filed,
petitioner resided in Newport News, Virginia.4 Petitioner is a
citizen of the Kingdom of Belgium (Belgium); however, he has
resided in the United States from June of 2001 through the
present.
On July 1, 2001, petitioner began a 1-year residency in
internal medicine at Fairview Hospital, a Cleveland Clinic
hospital, and he completed it on June 30, 2002. Fairview
Hospital paid petitioner wages of $19,995.90 in 2002.
Petitioner began a residency in anesthesiology at Maimonides
Medical Center on July 1, 2002, and he completed it on June 30,
2005. Maimonides Medical Center paid petitioner wages of
$23,726.77 in 2002 and $49,033.12 in 2003. In addition,
University Group Medical Associates paid petitioner wages of
$10,290 in 2003.
Petitioner filed a 2002 Form 1040NR, U.S. Nonresident Alien
Income Tax Return, in which he reported wages of $43,721 as
“income exempt by a treaty”. On his return, petitioner listed
his occupation in the United States as “Anesthesia Trainee”.
Respondent subsequently requested that petitioner provide
4
Petitioner resided in New Jersey at the time of trial.
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information concerning his claim that his income was exempt from
Federal income tax. In response, petitioner submitted a second
2002 Form 1040NR and attached a photocopied article regarding the
treaty that exempts particular Belgian residents, who are
temporarily in the United States, from U.S. income tax in certain
circumstances. On this second Form 1040NR, petitioner listed his
occupation in the United States as “Anesthesia trainee in
training”.
Petitioner filed a 2003 Form 1040NR in which he reported
wages of $59,323 and miscellaneous income of $5,700 as “income
exempt by a treaty”. He listed his occupation in the United
States as “Anesthesia Trinee [sic]”.
On February 22, 2006, respondent issued to petitioner a
notice of deficiency for the 2002 and 2003 tax years in which he
explained that “Maimonides Medical Center and Fairview Hospital
are not universities or other ‘recognized educational
institution(s).’ The income you received is not exempt from U.S.
income tax under Article 20 of the income tax treaty between
Belgium and the United States.” Respondent issued to petitioner
a Form 4549, Supplement to the Notice of Deficiency (supplement),
asserting adjustments that decreased petitioner’s deficiencies
and section 6662(a) penalties from what was determined in the
notice of deficiency. In the supplement, and pursuant to article
21 of the treaty, respondent asserted that the first $2,000 of
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petitioner’s earned income for 2002 and 2003 is exempt from U.S.
income tax. The supplement also explains the reason for
respondent’s determination regarding petitioner’s claim that all
of his wages were exempt from income tax. In the supplement,
respondent states:
Article 20 of the treaty between the United States and
Belgium allows residents of Belgium to exempt from
United States taxation income received for the primary
purpose of teaching or engaging in research, or both,
from a university or other recognized educational
institution for a period of 2 years from the date of
arrival if invited by the United States Government or
of a university or other recognized educational
institution.
You did not show that you were invited to work for the
primary purpose of teaching or research. You stated on
your 2002 income tax return that your occupation was
‘Anesthesia Trainee’, and that your purpose for coming
to the United States was for ‘Training (Medical
Specialty) [sic]. On May 30, 2003 we received your
signed response to our request for additional
information regarding your 2002 claim for treaty
benefits. Your response included a work phone number
at Maimonides Medical Center for Resident Training,
which shows that you were still in residency training
as of that date. That shows that you were not in the
United States for the primary purpose of teaching or
research in 2003. The certificates you provided from
Fairview Hospital and Maimonides Medical Center show
that you were in the United States as a resident in
Internal Medicine and Anesthesiology, which means your
primary purpose was residency, not teaching or
research.
Based on the above facts, the income you received is
not exempt from U.S. income tax under Article 20 of the
income tax treaty between Belgium and the United
States.
Article 21 of the treaty allows you to exempt up to
$2000 of earned income per year for the first five tax
years you are present in the US for training if you
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were a resident of Belgium prior to coming to the US.
Since you meet those requirements, the first $2000 of
your earned income for 2002 and 2003 is exempt from US
income tax, as shown above.
Petitioner timely filed a petition with this Court.
Discussion
Petitioner argues that all of his 2002 and 2003 wage income
from his residencies at Fairview Hospital and Maimonides Medical
Center is exempt from taxation pursuant to article 20 of the
treaty. Articles 20 and 21 of the treaty provide:
Article 20
TEACHERS
(1) An individual who is a resident of one of the
Contracting States at the time he becomes temporarily
present in the other Contracting State and who, at the
invitation of the Government of that other Contracting
State or of a university or other recognized
educational institution in that other Contracting State
is temporarily present in that other Contracting State
for the primary purpose of teaching or engaging in
research, or both, at a university or other recognized
educational institution shall be exempt from tax by
that other Contracting State on his income from
personal services for teaching or research at such
university or educational institution, for a period not
exceeding 2 years from the date of his arrival in that
other Contracting State.
(2) This article shall not apply to income from
research if such research is undertaken not in the
public interest but primarily for the private benefit
of a specific person or persons.
Article 21
STUDENTS AND TEACHERS
(1)(a) An individual who is a resident of one of
the Contracting States at the time he becomes
temporarily present in the other Contracting State and
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who is temporarily present in that other Contracting
State for the primary purpose of:
(i) Studying at a university or other
recognized educational institution in that other
Contracting State, or
(ii) Securing training required to qualify
him to practice a profession or professional
specialty, or
(iii) Studying or doing research as a recipient of
a grant, allowance, or award from a governmental,
religious, charitable, scientific, literary, or
educational organization,
shall be exempt from tax by that other Contracting
State with respect to amounts described in subparagraph
(b) for a period not exceeding 5 taxable years from the
date of his arrival in that other Contracting State.
(b) The amounts referred to in subparagraph (a)
are:
(i) Gifts from abroad for the purpose of his
maintenance, education, study, research, or
training;
(ii) The grant, allowance, or award; and
(iii) Income from personal services performed
in that other Contracting State in an amount not
in excess of 2,000 United States dollars or its
equivalent in Belgian francs for any taxable year.
Convention for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Income,
U.S.-Belg., arts. 20-21, July 9, 1970, 23 U.S.T. 2687.
In order to meet the requirements of article 20 of the
treaty, petitioner would have to be “temporarily present in * * *
[the U.S.] for the primary purpose of teaching or engaging in
research”. Petitioner argues that he accepted his residencies
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because he was offered the opportunity to research, teach, and
receive additional training in a subspecialty that he considered
important and useful.
At trial, respondent called Dr. Ketan Shevde, who was
chairman of anesthesia at Maimonides Medical Center in 2002 and
2003, to testify as to the primary purpose of petitioner’s
residency. Dr. Shevde testified as follows:
[Respondent’s Counsel]: What was the petitioner hired
to do while at Maimonides?
[Dr. Shevde]: He was hired to do training in
anesthesiology for three years.
Q: Did you hire the petitioner, or did Maimonides hire
the petitioner as a teacher?
A: No
Q: Did they hire the petitioner as a researcher?
A: No.
Dr. Shevde went on to say that, although teaching and research
are part of a resident’s function, the “emphasis really is on
teaching residents how to give anesthesia and to become
anesthesiologists at the end of the training.” Finally, Dr.
Shevde summarized his testimony by stating as follows:
The primary purpose [of a residency in
anesthesiology] is to train residents to give
anesthesia, and to become consultants in
anesthesiology, and to pass the boards that are given
by the American Board of Anesthesiology at the end of
their training.
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That includes some amount of research, and it also
includes some amount of teaching, but those are minor
roles compared to the major role, which is that of
becoming an anesthesiologist.
Dr. Shevde’s testimony clearly demonstrates that the primary
purpose of petitioner’s residency was to train in anesthesiology,
rather than to teach or to perform research. Petitioner,
himself, listed his occupation as an Anesthesia Trainee on all
three of the tax returns filed for 2002 and 2003. Given
petitioner’s testimony that both Fairview Hospital and Maimonides
Medical Center were “basically and fundamentally * * * no
different” from each other with respect to achieving objectives
for themselves, residents, teachers, and researchers, it is clear
that article 20 of the treaty is inapplicable to petitioner’s
residencies.5
With respect to the accuracy-related penalty under section
6662(a), the Commissioner has the burden of production. Sec.
7491(c). To prevail, the Commissioner must produce sufficient
evidence that it is appropriate to apply the penalty to the
taxpayer. Higbee v. Commissioner, 116 T.C. 438, 446 (2001).
Once the Commissioner meets his burden of production, the
5
As previously explained, the deficiencies for which
respondent argues, and the basis for respondent’s determinations
were not fully set forth until respondent supplemented his notice
of deficiency. Since the evidence presented by the parties
clearly establishes that the primary purpose of petitioner’s
residencies was to train in anesthesiology, we have no reason to
decide which party would bear the burden of proof.
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taxpayer bears the burden of supplying sufficient evidence to
persuade the Court that the Commissioner’s determination is
incorrect. Id. at 447.
Section 6662(a) provides an accuracy-related penalty equal
to 20 percent of the underpayment required to be shown on a
return due to negligence or disregard of rules or regulations.
Sec. 6662(b)(1). For purposes of section 6662, the term
“negligence” includes “any failure to make a reasonable attempt
to comply with the provisions of * * * [the Code], and the term
‘disregard’ includes any careless, reckless, or intentional
disregard.” Sec. 6662(c). “Negligence” also includes any
failure by a taxpayer to keep adequate books and records or to
substantiate items properly. Sec. 1.6662-3(b), Income Tax Regs.
An accuracy-related penalty is not imposed with respect to
any portion of the underpayment as to which the taxpayer acted
with reasonable cause and in good faith. Sec. 6664(c)(1); see
Higbee v. Commissioner, supra at 448. This determination is made
based on all the relevant facts and circumstances. Higbee v.
Commissioner, supra at 448; sec. 1.6664-4(b)(1), Income Tax Regs.
“Relevant factors include the taxpayer’s efforts to assess his
proper tax liability, including the taxpayer’s reasonable and
good faith reliance on the advice of a professional such as an
accountant.” Higbee v. Commissioner, supra at 448-449.
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Petitioner filed his 2002 and 2003 income tax returns and
reported all of his income from wages. At the time of filing,
petitioner was new to this country and unfamiliar with the U.S.
tax system, let alone the intricacies of the tax convention
between the United States and Belgium. Even respondent had
difficulty applying the treaty to petitioner’s situation, as
evidenced by the necessity of issuing a supplement to his
original notice of deficiency. We hold that petitioner is not
liable for the accuracy-related penalties under section 6662.
To reflect the foregoing,
Decision will be entered
under Rule 155.