Bhutta v. Comm'r

USMAN BHUTTA, PETITIONER v. COMMISSIONER

OF INTERNAL REVENUE, RESPONDENT

Docket No. 26940–13. Filed December 22, 2015.

P, a citizen of Pakistan and a foreign medical school grad-

uate, entered the United States in 2009 to participate in an

internal medicine residency training program. During the

three-year residency training program, for which P received

an annual salary, P treated patients, with supervision; con-

ducted and presented research; and supervised and trained

third- and fourth-year medical students. P’s supervising and

training of medical students consisted of having the medical

students observe him during ‘‘rounds’’, preparing the students

for monthly examinations, and evaluating the students

monthly. For taxable year 2010 P reported his wages from the

residency training program as exempt from U.S. income tax

under the Convention for the Avoidance of Double Taxation

and the Prevention of Fiscal Evasion With Respect to Taxes

on Income, U.S.-Pak., art. XII, July 1, 1957, 10 U.S.T. 984

351

352 145 UNITED STATES TAX COURT (351)

(entered into force May 21, 1959) (hereinafter treaty). Treaty

art. XII exempts from U.S. income tax remuneration that a

professor or teacher receives for teaching if the professor or

teacher is a Pakistani resident who temporarily visits the

United States ‘‘for the purpose of teaching for a period not

exceeding two years at a university, college, school or other

educational institution’’ in the United States. R subsequently

issued P a notice of deficiency disallowing the claimed treaty

exemption. P asserts that he is entitled to an exemption

under treaty art. XII or, alternatively, that he is entitled to

an exemption under treaty art. XIII(3). Treaty art. XIII(3)

exempts from income tax compensation up to $10,000 if a

Pakistani resident, temporarily present in the United States

under arrangements with the United States or any agency or

instrumentality thereof solely for the purpose of training,

study, or orientation, receives such compensation for the ren-

dition of services directly related to such training, study, or

orientation. Held: P was not in the United States for ‘‘the pur-

pose of teaching’’ in 2010 and therefore is not entitled to the

exemption under treaty art. XII. Held, further, P is not enti-

tled to the exemption under treaty art. XIII(3) because P has

not proven that he was in the United States under arrange-

ments with the United States or an agency or instrumentality

thereof. Held, further, R’s determination is sustained.

H. Craig Pitts, for petitioner.

William Franklin Castor and H. Elizabeth H. Downs, for

respondent.

MARVEL, Judge: In a notice of deficiency, respondent deter-

mined a $4,415 deficiency in petitioner’s Federal income tax

for taxable year 2010. Petitioner timely petitioned this Court

for redetermination of the deficiency. After concessions, 1 the

sole issue for decision is whether petitioner’s wages earned

as a medical resident in 2010 are exempt from tax under

1 Respondent conceded his determination in the notice of deficiency that

petitioner had a taxable State tax refund of $762. This concession resulted

in a computational adjustment to petitioner’s itemized deductions, and in

a first supplemental stipulation of facts the parties stipulated respondent’s

computation of a reduced deficiency of $4,295. In addition to the explicit

concessions, we consider petitioner to have conceded his assertion in the

petition that he is entitled to a standard deduction for 2010. Petitioner

failed to advance any arguments as to this issue in his opening or answer-

ing brief. Accordingly, we deem the issue abandoned. See Wilcox v. Com-

missioner, 848 F.2d 1007, 1008 n.2 (9th Cir. 1988), aff ’g T.C. Memo. 1987–

225; Lunsford v. Commissioner, 117 T.C. 183, 187 (2001); Nicklaus v. Com-

missioner, 117 T.C. 117, 120 n.4 (2001).

(351) BHUTTA v. COMMISSIONER 353

article XII or article XIII(3) of the Convention for the Avoid-

ance of Double Taxation and the Prevention of Fiscal Evasion

With Respect to Taxes on Income, U.S.-Pak., July 1, 1957, 10

U.S.T. 984 (entered into force May 21, 1959) (United States-

Pakistan Income Tax Convention or treaty).

FINDINGS OF FACT

Some of the facts have been stipulated and are so found.

The stipulated facts are incorporated herein by this ref-

erence. Petitioner resided in Oklahoma when he petitioned

this Court. 2

Petitioner was a citizen of Pakistan at all relevant times.

At the time of trial he lived with his wife, a Pakistani citizen

whom he married in 2010, and his daughter, who is a U.S.

citizen. He has been a practicing physician on the nephrology

faculty of OU Physicians, a physicians group within the

Oklahoma University Health Sciences Center (university),

since August 2014 after completing a three-year residency

training program and a fellowship there.

I. Petitioner’s Medical Background and Residency Training

Program

In 2005 petitioner graduated from Allama Iqbal Medical

College, University of Punjab, Lahore, Pakistan, with a med-

ical degree. To obtain the medical degree petitioner com-

pleted five to six years of coursework and spent one year

working in a hospital. 3

Petitioner believed that the medical training in the United

States was ‘‘far superior’’ to the training he received in Paki-

2 Unless otherwise indicated, all section references are to the Internal

Revenue Code (Code) in effect for the year in issue, and all Rule references

are to the Tax Court Rules of Practice and Procedure.

3 It is not clear whether petitioner practiced medicine in Pakistan before

entering the United States in 2009. During cross-examination petitioner

answered ‘‘Yes. After I did the one year training’’ to respondent’s counsel’s

question ‘‘At the point you graduated from medical school, did you become

a medical doctor for purposes of Pakistan?’’ However, petitioner stated on

an unsigned Form 9250, Questionnaire—Tax Treaty Benefits, see infra p.

358, that his occupation before coming to the United States was ‘‘medical

student’’. The record does not show where petitioner was employed after

obtaining the medical degree in 2005 and before entering the United

States in 2009. However, we infer from the record that petitioner did not

teach at a medical school in Pakistan.

354 145 UNITED STATES TAX COURT (351)

stan and decided to pursue a medical residency in the United

States. Before he could begin a residency training program in

the United States, however, petitioner had to pass the

United States Medical Licensing Examination (USMLE), a

three-step examination for medical licensure in the United

States. He completed the first step and the clinical knowl-

edge portion of the second step in Pakistan on December 20,

2006, and October 18, 2007, respectively. On December 4,

2007, petitioner was issued a B–1/B–2 visa, which allowed

him to enter the United States to take the clinical skills por-

tion of the second step of the USMLE. Petitioner completed

the clinical skills portion in the United States on January 30,

2008.

After passing steps 1 and 2 of the USMLE, petitioner was

eligible for certification from the Educational Commission for

Foreign Medical Graduates (ECFMG). ECFMG is an

organization that certifies the qualifications of international

medical school graduates before they begin U.S. graduate

medical education. ECFMG certification is required before an

international medical school graduate may take step 3 of the

USMLE, begin a U.S. residency training program, and obtain

an unrestricted license to practice medicine in the United

States. Petitioner obtained ECFMG certification on March

27, 2008, and he completed the third step of the USMLE in

the United States in January 2009.

While in the United States petitioner interviewed at var-

ious universities seeking acceptance into an internal medi-

cine residency training program. He interviewed with the

university and received by letter dated March 23, 2009, an

offer of appointment as a first-year internal medicine resi-

dent from the university’s department of internal medicine.

The offer letter indicated that petitioner’s start date would be

July 1, 2009, and that he would complete his ‘‘residency

training’’ on June 30, 2012. The letter also stated that peti-

tioner would have the opportunity to initiate training in a

subspeciality during his second year of residency. The resi-

dency position paid an annual salary of $45,666 for the first

year, which increased by approximately $1,000 ‘‘with each

year of training.’’ Petitioner accepted the offer by signing the

letter on March 28, 2009, and returning it to the university.

Petitioner’s acceptance of the university’s offer was

memorialized in a contract entitled the University of Okla-

(351) BHUTTA v. COMMISSIONER 355

homa College of Medicine Residency Agreement, which peti-

tioner and a university representative signed on August 11,

2009 (2009 agreement). The 2009 agreement covers only peti-

tioner’s first year of residency and comprises four parts:

Appointment; University Responsibilities; Resident Respon-

sibilities; and Reappointment, Promotion, and Termination.

Among the university’s stated responsibilities is its obligation

to provide a ‘‘graduate medical education program’’ with ‘‘fac-

ulty oversight and supervision of all educational and clinical

activities’’. Resident responsibilities include ‘‘fulfill[ing] the

educational requirements of the training program’’ and using

‘‘his/her best efforts to provide safe, effective and compas-

sionate patient care’’. Teaching medical students is not a

stated resident responsibility.

Under the 2009 agreement a resident could be suspended

without pay or dismissed for failing to obtain an Oklahoma

medical license within a prescribed time. The 2009 agree-

ment also states that continuation of the training program

requires annual renewals of appointment, which are not

automatically offered but rather are ‘‘offered yearly based

upon meeting the performance standards of the Program.’’

Failure to satisfactorily complete training program require-

ments or breaching institutional rules could result in ‘‘non-

promotion’’. A resident would not know for certain whether

he could continue in the program until the university gave

him a renewal contract. 4

Before he could begin his residency training program, peti-

tioner needed to obtain a U.S. exchange visitor, or J–1, visa.

ECFMG, as petitioner’s sponsor, issued him a Form DS–

2019, Certificate of Eligibility for Exchange Visitor (J–1)

Status, which allowed him to go to a U.S. embassy to apply

for and receive the visa. See 22 C.F.R. sec. 62.2 (2010)

(defining Form DS–2019). The Form DS–2019 described peti-

tioner as a ‘‘university post grad medical trainee’’, an ‘‘alien

physician’’, and a ‘‘research scholar’’ and was valid from

August 10, 2009, to August 9, 2010, to reflect the dates of the

2009 agreement. 5

4 Petitioner was aware of other residents at the university whose con-

tracts were not renewed.

5 Originally the Form DS–2019 was valid beginning July 2009, but be-

cause there was a delay in the issuing of petitioner’s visa, which caused

Continued

356 145 UNITED STATES TAX COURT (351)

ECFMG had to renew the Form DS–2019 every year for

petitioner to continue in the residency training program.

ECFMG’s criteria for renewing a Form DS–2019 were listed

on its Web site and included a requirement that an applicant

provide proof of a renewed agreement with a university, a

letter of good standing from the director of the applicant’s

residency training program, and copies of the applicant’s visa

and insurance. ECFMG would not renew a Form DS–2019 if

the applicant’s residency training program or university

closed or if the applicant’s home country wanted him to

return.

Petitioner obtained a J–1 visa on June 5, 2009. The J–1

visa allowed petitioner to remain in the United States for the

duration of the residency training program and any

postresidency fellowship but required him to return to Paki-

stan for two years after his training unless he obtained a

hardship waiver. See id. sec. 62.27(g)(1). Petitioner entered

the United States at the end of July 2009 and began his resi-

dency training program at the university on August 10, 2009.

The university renewed petitioner’s residency agreement

yearly, allowing him to obtain a new Form DS–2019 every

year and to complete his three-year residency training pro-

gram on August 10, 2012. He then began a two-year fellow-

ship in nephrology at the university, which he completed in

August 2014. He subsequently obtained a hardship waiver of

the J–1 visa two-year foreign residence requirement, which

allowed him to remain in the United States and work at the

university hospital as a licensed physician.

Petitioner’s duties throughout his residency and fellowship

included treating patients on inpatient wards and in the out-

patient clinic under faculty supervision, conducting and pre-

senting clinical research, and supervising and training third-

and fourth-year medical students. All of these duties,

including the supervising and training of medical students,

were part of petitioner’s training in the residency training

program. Petitioner was able to treat patients and train the

medical students simultaneously because, at that point in the

medical students’ education, they spent most of their time in

the hospital on the ward teams with the residents.

a delay of his start date in the residency training program, ECFMG had

to issue him a new Form DS–2019.

(351) BHUTTA v. COMMISSIONER 357

Three to five medical students accompanied petitioner on

‘‘rounds’’ during which he treated patients, and he discussed

the patients’ physical examination findings and other rel-

evant information with the students. After rounds the med-

ical students accompanied petitioner while he treated

incoming patients or existing patients who needed additional

care. After petitioner had finished treating his patients, he

helped the students prepare for their monthly examinations.

At the end of the month petitioner evaluated each student on

certain criteria including medical knowledge, interpersonal

communication skills, and ability to gather information and

conduct physical examinations.

As discussed further infra, petitioner came to the United

States in 2009 and remained in the United States in 2010 for

the purpose of participating in a training program for med-

ical residents. Although supervising and training medical

students was a component of the residency training program,

petitioner was not in the United States for the purpose of

teaching.

The university also expected petitioner to conduct research

as part of his residency training program. Petitioner spent

one to two months per year on research, during which time

he took on lighter clinical responsibilities so that he could

conduct clinical research on selected patients. He conducted

research during 2009 through 2011, published abstracts and

articles, and presented his research at local and national

medical conferences, such as the American Society of Clinical

Oncology annual meeting and the national meeting of the

American College of Physicians. 6

II. Petitioner’s 2010 Federal Income Tax Return and Liability

Petitioner hired a tax return preparer in New York to pre-

pare a Form 1040NR, U.S. Nonresident Alien Income Tax

Return, on his behalf for taxable year 2010. 7 The return

6 Petitioner estimated at trial that during 2010 his ‘‘education-related’’

activities, including research and teaching students, constituted 70% of a

typical day. However, this percentage, even if accurate, is unconvincing as

most of the time he spent supervising and training medical students was

time spent treating patients as part of his residency training program.

7 Although petitioner married in 2010, the return reflects a filing status

of ‘‘other single nonresident alien’’. Respondent does not challenge peti-

Continued

358 145 UNITED STATES TAX COURT (351)

states that petitioner’s occupation in the United States is

‘‘research physician’’. The Form 1040NR does not report peti-

tioner’s wages from the residency totaling $46,170 as taxable

income but rather claims the wages as ‘‘income exempt by a

treaty’’. A Schedule OI, Other Information, attached to the

return shows that petitioner claimed an exemption from

income tax on his wages under treaty art. XII. Petitioner did

not report or pay tax on his 2010 wages to Pakistan.

On November 19, 2012, petitioner filed a Form 9210, Alien

Status Questionnaire, with respect to taxable years 2010–12.

In response to the question regarding his reason for coming

to the United States, petitioner checked the boxes for ‘‘Edu-

cation’’ and ‘‘Teaching’’. An unsigned Form 9250 was

attached to the Form 9210. On the Form 9250 petitioner

indicated that his primary purpose in visiting the United

States was ‘‘teaching/research/training in internal medicine’’.

On the Form 9250 petitioner also stated that he came to the

United States at the invitation of an educational institution

and spent 50% of his time teaching and 50% of his time

researching. Petitioner also stated that his occupation before

coming to the United States was ‘‘medical student’’ and his

occupation when he returned to Pakistan would be ‘‘consult-

ant physician in nephrology’’.

Respondent mailed petitioner a notice of deficiency, dated

November 5, 2013, disallowing petitioner’s claimed exemp-

tion from U.S. income tax under treaty art. XII but allowing

a $5,000 student exemption under treaty art. XIII(1)(a). 8

tioner’s claimed filing status.

8 The Convention for the Avoidance of Double Taxation and the Preven-

tion of Fiscal Evasion With Respect to Taxes on Income, U.S.-Pak., art.

XIII(1), July 1, 1957, 10 U.S.T. 984 (entered into force May 21, 1959), pro-

vides:

A resident of one of the contracting States, who is temporarily present

in the other contracting State solely

(a) as a student at a recognized university, college or school in such

other State, or

(b) as the recipient of a grant, allowance or award for the primary pur-

pose of study or research from a religious, charitable, scientific or edu-

cational organization of the former State

shall be exempted from tax by such other State (i) on all remittances

from abroad for the purposes of his maintenance, education or training,

and (ii) with respect to an amount not in excess of 5,000 United States

dollars for any taxable year, representing compensation for personal

(351) BHUTTA v. COMMISSIONER 359

Petitioner filed a timely petition in this Court contesting

respondent’s determination. 9

OPINION

I. Burden of Proof

As a general rule, a notice of deficiency is entitled to a

presumption of correctness, and the taxpayer bears the bur-

den of proving the Commissioner’s deficiency determination

incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933); Bronstein v. Commissioner, 138 T.C. 382, 384 (2012).

However, under section 7491(a), if the taxpayer produces

credible evidence 10 with respect to any factual issue relevant

to ascertaining the taxpayer’s liability for tax and meets

other requirements, the burden of proof rests on the Commis-

sioner as to that factual issue. See Higbee v. Commissioner,

116 T.C. 438, 440–441 (2001). With the exception of part

III.B, infra, our findings of fact are based on a preponderance

of the evidence, and thus the allocation of the burden of proof

is immaterial. See Estate of Bongard v. Commissioner, 124

T.C. 95, 111 (2005). With respect to part III.B, infra, peti-

tioner does not argue, and the record does not permit us to

conclude, that the burden of proof should shift under section

7491(a), and the burden of proof remains with petitioner.

II. Governing Statutory Framework

Under the general rule of section 871(b), a nonresident

alien individual such as petitioner 11 who is engaged in a

services.

9 Petitioner initially elected to have this case conducted under small tax

case procedures. See sec. 7463(a). Before trial petitioner’s counsel orally

moved that the ‘‘S’’ designation be removed, and we granted the oral mo-

tion.

10 ‘‘Credible evidence is the quality of evidence which, after critical anal-

ysis, the court would find sufficient upon which to base a decision on the

issue if no contrary evidence were submitted (without regard to the judicial

presumption of IRS correctness).’’ Higbee v. Commissioner, 116 T.C. 438,

442 (2001) (quoting H.R. Conf. Rept. No. 105–599, at 240–241 (1998),

1998–3 C.B. 747, 994–995).

11 A nonresident alien is a person who is neither a citizen nor a resident

of the United States as defined in sec. 7701(b)(1)(A). Id. subpara. (B). Re-

spondent conceded that petitioner was not a citizen or a resident of the

Continued

360 145 UNITED STATES TAX COURT (351)

trade or business in the United States is subject to U.S.

income tax on the individual’s taxable income effectively con-

nected with the conduct of that trade or business. Ordinarily,

an individual who performs personal services within the

United States at any time during the taxable year conducts

a ‘‘trade or business within the United States’’. Sec. 864(b).

Consequently, a nonresident alien who receives compensation

for the performance of personal services in the United States

has income effectively connected with the conduct of a trade

or business in the United States and therefore has gross

income under the Code. See sec. 1.864–4(c)(6)(ii), Income Tax

Regs.; see also sec. 61(a)(1). However, under section 894(a),

the Code is applied to any taxpayer with due regard to any

treaty obligations of the United States that pertain to that

taxpayer. An applicable treaty obligation can therefore alter

an individual’s income tax liability under the Code.

III. The United States-Pakistan Income Tax Convention

The United States-Pakistan Income Tax Convention was

signed on July 1, 1957, and was ratified by the President of

the United States on November 6, 1958. It entered into force

on May 21, 1959, and is effective for taxable years beginning

on or after January 1, 1959. This case raises interpretation

issues regarding treaty art. XII, which deals with the tax

ramifications of remuneration paid to professors and

teachers, and treaty art. XIII(3), which deals with the tax

ramifications of compensation paid for certain services

related to training, study, or orientation under arrangements

with a State or any agency or instrumentality thereof.

When interpreting a treaty, we begin with the text of the

treaty and the context in which the written words are used.

E. Airlines, Inc. v. Floyd, 499 U.S. 530, 534 (1991); Sumitomo

Shoji Am., Inc. v. Avagliano, 457 U.S. 176, 179–180 (1982).

The plain meaning of the language of a treaty controls unless

its effect is contrary to the intent or expectations of the sig-

natories. Sanchez-Llamas v. Oregon, 548 U.S. 331, 346 (2006)

(citing 1 Restatement (Third) of Foreign Relations Law of the

United States sec. 325(1) (1986)); Sumitomo Shoji Am., Inc.,

457 U.S. at 180; Amaral v. Commissioner, 90 T.C. 802, 812

(1988). Because treaties are contracts between sovereigns, we

United States in 2010.

(351) BHUTTA v. COMMISSIONER 361

construe them more liberally than private agreements to give

effect to the signatories’ intent. See United States v. Stuart,

489 U.S. 353, 365–366 (1989); Air France v. Saks, 470 U.S.

392, 396 (1985); Factor v. Laubenheimer, 290 U.S. 276, 293

(1933); Estate of Silver v. Commissioner, 120 T.C. 430, 434

(2003) (citing Nw. Life Assurance Co. of Can. v. Commis-

sioner, 107 T.C. 363, 378–379 (1996)). Where appropriate, we

may ascertain the meaning of a treaty with an eye toward

the treaty’s legislative history and the parties’ negotiations,

diplomatic correspondence, and practical construction they

have adopted. See Air France, 470 U.S. at 396; Factor, 290

U.S. at 294–295; Estate of Silver v. Commissioner, 120 T.C.

at 434; Rust v. Commissioner, 85 T.C. 284, 288–289 (1985).

We also give weight to how the departments of the respective

governments charged with negotiating and enforcing a treaty

interpret that treaty. See Kolovrat v. Oregon, 366 U.S. 187,

194 (1961); Rust v. Commissioner, 85 T.C. at 288.

A. Article XII of the United States-Pakistan Income Tax

Convention

Treaty art. XII provides: ‘‘A professor or teacher, resident

in one of the contracting States, who temporarily visits the

other contracting State for the purpose of teaching for a

period not exceeding two years at a university, college, school

or other educational institution in the other contracting

State, shall be exempted from tax by such other contracting

State in respect of remuneration for such teaching.’’ Peti-

tioner contends that the compensation he received in 2010

for his residency training program is exempt from U.S.

income tax under treaty art. XII because a purportedly large

component of the residency training program was teaching

third- and fourth-year medical students. Respondent

counters that petitioner (1) was not in the United States for

‘‘the purpose of teaching’’ and (2) was not temporarily vis-

iting the United States for ‘‘a period not exceeding two

years’’.

The phrase ‘‘the purpose of teaching’’ is not defined in the

treaty. Our analysis focuses on the meaning of the word

‘‘purpose’’ and on whether petitioner had the requisite pur-

pose. Neither party has invited our attention to, and we have

not found, any legislative history or documentary evidence of

the negotiators’ or signatories’ intended meaning of the word

362 145 UNITED STATES TAX COURT (351)

‘‘purpose’’. 12 See, e.g., S. Exec. Rept. No. 85–1 (1958), 1960–

2 C.B. 906 (Committee on Foreign Relations report on the

treaty); 104 Cong. Rec. 13238–13241 (1958) (Senate floor

debate and action on the treaty); Treasury Department Tech-

nical Explanation of the 1957 U.S.-Pakistan income tax

treaty (Technical Explanation), signed July 1, 1957, RIA Int’l

Tax Treaty 7033. In the instance of an undefined treaty

term, treaty art. II(2) provides: ‘‘[A]ny term not otherwise

defined shall, unless the context otherwise requires, have the

meaning which it has under the laws of that contracting

State relating to the taxes which are the subject of the

present Convention.’’ ‘‘[P]urpose’’ is not defined in the Code

in any way meaningful to this situation. We therefore ‘‘adopt

the ordinary, contemporary understanding of * * * [this]

word[] for purposes of our analysis.’’ See Eshel v. Commis-

sioner, 142 T.C. 197, 209 (2014).

Black’s Law Dictionary defines ‘‘purpose’’ as ‘‘[a]n objective,

goal, or end’’. Black’s Law Dictionary 1356 (9th ed. 2009).

Merriam-Webster’s Collegiate Dictionary defines ‘‘purpose’’ as

‘‘something set up as an object or end to be attained’’,

Merriam-Webster’s Collegiate Dictionary 949 (10th ed. 1997),

and Merriam-Webster’s Online Dictionary defines it as ‘‘the

reason why something is done or used: the aim or intention

of something’’; ‘‘the feeling of being determined to do or

achieve something’’; and ‘‘the aim or goal of a person: what

a person is trying to do, become, etc.’’, Merriam-Webster’s

Online Dictionary, http://www.merriam-webster.com/dic-

tionary/purpose (last visited Nov. 16, 2015).

12 To support his position, petitioner relies upon several revenue rulings

promulgated by the Commissioner which we address infra. But the Com-

missioner generally does not participate in the negotiation of tax treaties,

and we do not interpret the revenue rulings as evidence of the negotiators’

or signatories’ intent. See Crow v. Commissioner, 85 T.C. 376, 389 (1985)

(‘‘A revenue ruling represents the view of the Commissioner, not the Treas-

ury Department, and thus is generally only ‘the contention of one of the

parties to the litigation.’ ’’ (citation omitted) (quoting Estate of Smead v.

Commissioner, 78 T.C. 43, 47 n.5 (1982))); see also Xilinx, Inc. v. Commis-

sioner, 598 F.3d 1191, 1196 (9th Cir. 2010) (‘‘A tax treaty is negotiated by

the United States with the active participation of the Treasury.’’), aff ’g 125

T.C. 37 (2005). But cf. Rauenhorst v. Commissioner, 119 T.C. 157, 171

(2002) (describing cases where we have treated revenue rulings as conces-

sions by the Commissioner where the rulings were relevant to the disposi-

tion of the case).

(351) BHUTTA v. COMMISSIONER 363

We use these definitions, which focus on the object or goal

to be attained, to guide our analysis. 13 In so doing, we recog-

nize that the better indicator of an individual’s purpose is his

conduct and not the individual’s self-serving representations

regarding his purpose. We examine the entire record and

consider all of the relevant facts and circumstances to dis-

cern petitioner’s purpose in coming to the United States.

Before coming to the United States, petitioner obtained a

medical degree in Pakistan. He believed the medical training

in the United States was ‘‘far superior’’ to the training he

received in Pakistan and, for that reason, decided to pursue

a medical residency here. In furtherance of his stated goal of

obtaining U.S. medical training, petitioner obtained a Form

DS–2019 from ECFMG, which allowed him to apply for and

receive a J–1 visa. The Form DS–2019, which we consider to

be objective, credible evidence of petitioner’s and ECFMG’s

understanding regarding the nature of petitioner’s trip to the

United States, describes petitioner as a ‘‘university post grad

medical trainee’’, an ‘‘alien physician’’, and a ‘‘research

scholar’’. 14 Although both ‘‘teacher’’ and ‘‘professor’’ are pos-

13 Petitioner cites Rev. Rul. 55–211, 1955–1 C.B. 676, to support his posi-

tion. We address petitioner’s contentions infra but for now note that Rev.

Rul. 55–211, supra, the subject of which is the income tax treaty between

the United States and the United Kingdom of Great Britain and Northern

Ireland, interprets the phrase ‘‘the purpose’’ in a nearly identical context

to mean ‘‘the primary purpose’’. Id., 1955–1 C.B. at 677. We neither en-

dorse nor reject that interpretation because we find that petitioner’s only

purpose in coming to and remaining in the United States in 2010 was to

receive medical training.

Further, in reaching our holding today, we need not address whether the

definite article ‘‘the’’ restricts or otherwise modifies the ‘‘purpose’’ that is

the subject of treaty art. XII. Cf. NLRB v. Noel Canning, 573 U.S. ll,

ll, 134 S. Ct. 2550, 2561 (2014) (discussing the meaning of ‘‘the’’ in the

Constitution); Baldwin Graphic Sys., Inc. v. Siebert, Inc., 512 F.3d 1338,

1342–1343 (Fed. Cir. 2008) (discussing the meaning and use of definite ar-

ticles in patent law); Colorado v. Sunoco, Inc., 337 F.3d 1233, 1241–1242

(10th Cir. 2003) (discussing the meaning and use of definite articles under

the Comprehensive Environmental Response, Compensation, and Liability

Act of 1980, Pub. L. No. 96–510, 94 Stat. 2767 (codified as amended at 42

U.S.C. secs. 9601–9675 (2000))); Ltd., Inc. v. Commissioner, 286 F.3d 324,

333–334 (6th Cir. 2002) (addressing the word ‘‘the’’ as used in sec.

956(b)(2)(A)), rev’g 113 T.C. 169 (1999).

14 Regulations implementing the Mutual Educational and Cultural Ex-

change Act of 1961, Pub. L. No. 87–256, 75 Stat. 527 (codified as amended

Continued

364 145 UNITED STATES TAX COURT (351)

sible categories of participant eligibility on Form DS–2019,

see 22 C.F.R. sec. 62.4(d) and (e) (2010); supra note 14, peti-

tioner was not described as a teacher or a professor on the

original Form DS–2019 or any subsequent renewal of the

form.

The 2009 agreement outlines the university’s and peti-

tioner’s responsibilities during the residency training pro-

gram and frames petitioner’s expectations of the residency

training program. The university agreed to provide a ‘‘grad-

uate medical education program’’ with ‘‘faculty oversight and

at 22 U.S.C. secs. 2451–2464 (1988)) govern the issuance of Form DS–2019

and define the categories of participant eligibility in an exchange visitor

program underlying the issuance of a J–1 visa. See 22 C.F.R. secs. 62.1,

62.2, 62.4 (2010). Under the regulations, ‘‘alien physician’’ is a category of

participant eligibility in which foreign medical school graduates may enter

the United States to participate in either a clinical exchange program or

a nonclinical exchange program. Id. sec. 62.27(b) and (c); see id. para. (d).

A clinical exchange program is a program for alien physicians pursuing

graduate medical education or training, and, inter alia, requires that an

alien physician provide a statement from the Government of his home

country that (1) there is a need in that country for qualified medical practi-

tioners in the alien physician’s chosen speciality and (2) the alien physi-

cian has in writing agreed to return to the home country upon completion

of the training and intends to practice medicine in the chosen speciality.

Id. para. (b)(6). A nonclinical exchange program is a program in which an

alien physician enters the United States for the predominant purposes of

observation, consultation, teaching, or research, wherein patient care, if

any, is incidental and under direct supervision. Id. sec. 62.27(c). Although

petitioner’s Form DS–2019 does not specifically state whether he entered

the United States for the purpose of a clinical or a nonclinical exchange

program, the record indicates that petitioner intended to pursue a clinical

exchange program. For example, only alien physicians entering a clinical

exchange program need to pass steps 1 and 2 of the USMLE (or a similar

examination). Petitioner testified that he needed to pass the USMLE to

begin his residency training program. See id. para. (b)(5).

‘‘Graduate medical education or training’’ is defined as ‘‘participation in

a program in which the alien physician will receive graduate medical edu-

cation or training, which generally consists of a residency or fellowship

program involving health care services to patients, but does not include

programs involving observation, consultation, teaching or research in which

there is no or only incidental patient care.’’ Id. sec. 62.2 (emphasis added).

The applicable definition of research scholar is: ‘‘An individual primarily

conducting research, observing, or consulting in connection with a research

project at research institutions, corporate research facilities, museums, li-

braries, post-secondary accredited educational institutions, or similar types

of institutions. The research scholar may also teach or lecture, unless dis-

allowed by the sponsor.’’ Id. sec. 62.4(f).

(351) BHUTTA v. COMMISSIONER 365

supervision of all educational and clinical activities’’. Peti-

tioner agreed to ‘‘fulfill the educational requirements of the

training program’’ and use his ‘‘best efforts to provide safe,

effective and compassionate patient care’’. In the context of

the 2009 agreement, the ‘‘educational * * * activities’’ and

‘‘educational requirements’’ are most reasonably interpreted

to refer to the education petitioner would receive by partici-

pating in the residency training program. The offer letter,

which does not speak to petitioner’s duties, and the 2009

agreement encompassed the entire understanding between

the university and petitioner. 15 Neither document refers to

any obligation to teach medical students nor suggests that

petitioner’s remuneration was for teaching. Rather, the 2009

agreement focuses on the education petitioner would be

receiving and the patient care he would be providing as a

resident. Moreover, the 2009 agreement was renewed for

each year of petitioner’s residency without a material change

in the description of the residency training program or peti-

tioner’s responsibilities as a resident.

During the residency training program petitioner’s training

consisted of treating patients under faculty supervision, con-

ducting and presenting research, and supervising and

training medical students. Petitioner was responsible for

taking three to five medical students with him on rounds,

preparing them for their monthly examinations, and evalu-

ating them at the end of each month. Although petitioner

estimated that he spent 70% of his time in ‘‘education-

related’’ activities, we do not find his estimate convincing

because, as he acknowledged, much of his time spent with

medical students occurred while he was also treating

patients. Nor do we assign much weight to the Form 9210

and unsigned Form 9250 that petitioner completed in 2012,

in which petitioner stated that his primary purpose in vis-

iting the United States was ‘‘teaching/research/training in

internal medicine’’ and estimated that he spent 50% of his

time teaching and 50% of his time researching during tax-

able years 2010–12. Petitioner completed these forms two

15 In the record is a letter dated November 20, 2012, from the univer-

sity’s director of the internal medicine residency training program describ-

ing petitioner’s position and duties during his residency. Although helpful

in ascertaining what petitioner did during his residency, the letter is not

part of the offer or contract between petitioner and the university.

366 145 UNITED STATES TAX COURT (351)

years after the year in issue, and we regard them only as

petitioner’s post hoc position regarding his 2010 claimed

treaty exemption. Moreover, on the Form 9250 petitioner

indicated that his occupation before coming to the United

States was medical student and his occupation upon

returning to Pakistan would be consultant physician in

nephrology. This description of petitioner’s occupation before

and after the residency training program clearly implies that

he participated in the residency training program to obtain

a change in professional status.

Petitioner contends that his time spent ‘‘teaching’’ medical

students is sufficient to prove that he was in the United

States for the ‘‘purpose of teaching’’. However, petitioner’s

involvement in the supervising and training of medical stu-

dents was a component of his stated goal to receive U.S.

medical training and become a fully licensed doctor and was

not his objective or aim during the year in issue. The over-

whelming weight of the evidence shows that petitioner did

not enter the residency training program to become a

teacher. The university did not hire petitioner to teach, and

he did not hold a faculty appointment. The Form DS–2019

and the 2009 agreement show that neither ECFMG nor the

university contemplated that petitioner was coming to the

United States with the ‘‘objective’’ or ‘‘goal’’ of teaching. See

Black’s Law Dictionary 1356. Instead, teaching was an inci-

dental part of petitioner’s overall training to become a doctor,

which primarily involved treating patients and also included

conducting research. 16 On the basis of all the facts and cir-

cumstances, we find that petitioner’s purpose in coming to

and remaining in the United States in 2010 was to receive

postgraduate medical training and that he was not in the

United States for the purpose of teaching.

Petitioner cites several revenue rulings to support his posi-

tion that he was in the United States for the purpose of

teaching. However, they do not help him.

16 Some income tax treaties to which the United States is a party exempt

from income tax any remuneration received for conducting research. See,

e.g., Convention for the Avoidance of Double Taxation and the Prevention

of Fiscal Evasion With Respect to Taxes on Income, U.S.-Belg., art. 19(2),

Nov. 27, 2006, Tax Treaties (CCH) para. 31,011 (entered into force Dec. 28,

2007). The United States-Pakistan Income Tax Convention is not one of

them.

(351) BHUTTA v. COMMISSIONER 367

Rev. Rul. 55–211, 1955–1 C.B. 676, concerns the applica-

tion of a treaty provision similar to treaty art. XII to

nationals of the United Kingdom who held faculty appoint-

ments at various universities in the United States. The rev-

enue ruling concludes that the treaty benefit obtains if an

individual’s ‘‘primary purpose * * * is to teach, lecture or

instruct’’ and ‘‘a substantial portion of his time is devoted to

such duties’’. Id., 1955–1 C.B. at 677. ‘‘Where, however, the

primary purpose of his presence in the United States is the

pursuit of research and like duties and any teaching is inci-

dental to such research it cannot be considered that he is

present in the United States ‘for the purpose of teaching’ ’’.

Id. The revenue ruling also states: ‘‘Activities in which a

teacher engages for the purpose of conferring on students the

benefit of his knowledge and methods as distinguished from

the pursuit of his own projects would be considered a part of

his teaching.’’ Id.

Rev. Rul. 74–174, 1974–1 C.B. 371, interprets Rev. Rul.

55–211, supra, and applies its reasoning to different facts. 17

It involves a citizen and resident of Canada who was an

assistant professor in Canada, entered the United States to

study for a doctoral degree, and spent 60% of his time in the

United States performing duties as a teaching assistant. Rev.

Rul. 74–174, supra. Applying an objective facts and cir-

cumstances analysis, the revenue ruling concludes that the

individual’s compensation for his duties as a teaching assist-

ant was exempt from income tax because he ‘‘was engaged in

the business of teaching before coming to the United States’’

and because he spent substantial time performing teaching

duties even though he was also a doctoral student. Id., 1974–

1 C.B. at 372.

Petitioner contends that ‘‘because the vast majority of his

time was spent engaged in educational duties’’, he falls

within the purview of Rev. Rul. 55–211, supra, and qualifies

for an exemption under treaty art. XII. However, the evi-

dence in the record supports findings that petitioner was a

medical student, not a teacher, before coming to the United

States for his residency training program, see supra note 3,

and that he did not hold a faculty or teaching position at the

17 Petitioner does not explicitly rely on Rev. Rul. 74–174, 1974–1 C.B.

371, but we address it for the sake of completeness.

368 145 UNITED STATES TAX COURT (351)

university during 2010. Petitioner’s supervising and training

of medical students, which he performed mainly while

treating patients, was incidental to his graduate medical

education, and he has not ‘‘distinguished [supervising and

training of medical students] from the pursuit of his own

projects’’. See Rev. Rul. 55–211, 1955–1 C.B. at 677. Peti-

tioner’s situation is distinguishable from those in Rev. Rul.

55–211, supra, and Rev. Rul. 74–174, supra.

Petitioner also cites Rev. Rul. 69–46, 1969–1 C.B. 365, and

Rev. Rul. 70–382, 1970–2 C.B. 331, for the proposition that

an individual does not need to have taught in his home

country before entering the United States for the purpose of

teaching. The revenue rulings state that, as applied to treaty

provisions similar to the one at issue here, an individual’s

remuneration for teaching is exempt from income tax even if

the individual had not taught in his home country before

entering the United States. Rev. Rul. 70–382, 1970–2 C.B. at

331; Rev. Rul. 69–46, 1969–1 C.B. at 365. However, in both

revenue rulings the individuals qualified as teachers in their

home countries and entered the United States for the express

purpose of teaching in schools. Rev. Rul. 70–382, supra; Rev.

Rul. 69–46, supra. The record overwhelmingly establishes

that petitioner did not enter the United States for the

express purpose of teaching. Rev. Rul. 69–46, supra, and Rev.

Rul. 70–382, supra, do not support petitioner’s contention.

Finally, petitioner cites United States v. Mem’l Sloan-Ket-

tering Cancer Ctr., 563 F.3d 19 (2d Cir. 2009), for the propo-

sition that modern medical residents are principally teachers.

The issue in Sloan-Kettering was whether medical residents

were liable for payroll taxes because they were employees or

whether their income was excepted from payroll taxes

because they were students. Id. at 24–25. In remanding the

two consolidated cases, the U.S. Court of Appeals for the

Second Circuit held that ‘‘[w]hether a medical resident is a

‘student’ and whether he is employed by a ‘school, college, or

university’ are separate factual inquiries that depend on the

nature of the residency program in which the medical resi-

dents participate and the status of the employer.’’ Id. at 28

(quoting United States v. Mount Sinai Med. Ctr. of Fla., Inc.,

486 F.3d 1248, 1252 (11th Cir. 2007)). Petitioner argues that,

consistent with the Court of Appeals’ reasoning, the record

(351) BHUTTA v. COMMISSIONER 369

proves that he was a teacher rather than a student because

he was compensated and received benefits for his services.

Sloan-Kettering is not binding precedent in this case 18 and

is inapplicable to services performed on or after April 1,

2005, the effective date of regulations that created a bright-

line rule for distinguishing between students and full-time

employees for purposes of the student exception to payroll

taxes under section 3121(b)(10). See Sloan-Kettering, 563

F.3d at 25 n.2; sec. 31.3121(b)(10)–2(d)(3)(iii), (e) Example

(4), (f), Employment Tax Regs.; see also Mayo Found. for

Med. Educ. & Research v. United States, 562 U.S. 44 (2011)

(holding the regulations that apply to services performed on

or after April 1, 2005, valid). Moreover, petitioner takes the

analysis of Sloan-Kettering several inferential steps too far.

Sloan-Kettering involved payroll taxes rather than a treaty

provision and focused on whether medical residents are stu-

dents or employees without specifying whether a medical

resident who was an employee was compensated for treating

patients, researching, teaching, or performing other personal

services.

The guidance that petitioner cites is inapposite or distin-

guishable. The record clearly proves that petitioner’s purpose

in the United States during 2010 was to receive medical

training. The supervising and teaching of medical students

that petitioner did was an incidental part of his medical

training and was not his objective or goal in coming to or

remaining in the United States. We conclude that petitioner

was not in the United States in 2010 for the purpose of

teaching. 19

18 Under the rule of Golsen v. Commissioner, 54 T.C. 742, 757 (1970),

aff ’d, 445 F.2d 985 (10th Cir. 1971), this Court will ‘‘follow a Court of Ap-

peals decision which is squarely in point where appeal from our decision

lies to that Court of Appeals and to that court alone.’’ This case appears

to be appealable to the U.S. Court of Appeals for the Tenth Circuit, absent

a stipulation to the contrary. See sec. 7482(b)(1)(A), (2). Therefore caselaw

from the U.S. Court of Appeals for the Second Circuit would not be binding

in this case even if United States v. Mem’l Sloan-Kettering Cancer Ctr., 563

F.3d 19 (2d Cir. 2009), were ‘‘squarely in point’’, which it is not.

19 Because we find that petitioner was not in the United States for the

purpose of teaching, we do not address respondent’s remaining contentions

regarding the applicability of treaty art. XII.

370 145 UNITED STATES TAX COURT (351)

B. Article XIII(3) of the United States-Pakistan Income Tax

Convention

Petitioner’s alternative contention is that, if his income is

not exempt under treaty art. XII, then $10,000 of his income

is exempt under treaty art. XIII(3). Article XIII(3) of the

United States-Pakistan Income Tax Convention provides:

A resident of one of the contracting States temporarily present in the

other contracting State under arrangements with such other State or

any agency or instrumentality thereof solely for the purpose of training,

study or orientation shall be exempted from tax by such other State with

respect to compensation not exceeding 10,000 United States dollars for

the rendition of services directly related to such training, study or ori-

entation (including emoluments and remuneration, if any, from the

employer abroad of such resident).

As applicable here, ‘‘other State’’ means the United States.

See id. art. II(1)(c). The Department of the Treasury tech-

nical explanation of the treaty clarifies that this exemption

applies to ‘‘Pakistan personnel invited to the United States

for training or study by our Government,’’ including ‘‘military

and armed forces trainees, central bank employees studying

budgetary and financial policies, and trainees under tech-

nical assistance programs.’’ Technical Explanation, supra.

In the petition, petitioner vaguely contends that he quali-

fies for this exemption because the university is a Govern-

ment contractor and therefore is an agency or instrumen-

tality of the United States. We have recognized that

‘‘ ‘[a]gency’ and ‘instrumentality’ are terms of considerable

breadth, and they are susceptible of different meanings in

different contexts.’’ Guardian Indus. Corp. v. Commissioner,

143 T.C. 1, 12–14 (2014) (listing cases where ‘‘agency’’ and

‘‘instrumentality’’ have different definitions in various cir-

cumstances). However, even if petitioner had provided

authority to support his contention that a Government con-

tractor qualifies as an agency or instrumentality in this con-

text, which he has not, he has failed to introduce any cred-

ible evidence showing that the university was a Government

contractor for the U.S. Government in 2010. Moreover, there

is no credible evidence to prove that the signatories of the

treaty intended article XIII(3) to apply to anything other

than a Government-sponsored or -supported program. See

Technical Explanation, supra; cf. Rev. Rul. 72–301, 1972–1

(351) BHUTTA v. COMMISSIONER 371

C.B. 439–440 (analyzing similar provisions in other income

tax treaties to conclude that treaty art. XIII(3) applies only

to ‘‘individuals who, under arrangements with the United

States or an agency or instrumentality thereof, are invited to

the United States for training or study under a specific pro-

gram, sponsored or supported by the United States Govern-

ment’’). Because petitioner bears the burden of proof with

respect to this issue, see supra p. 359, and has not proven

that he was in the United States under arrangements with

the U.S. Government or an agency or instrumentality

thereof, he is not entitled to an exemption under treaty art.

XIII(3).

IV. Conclusion

Petitioner does not qualify for an exemption under article

XII or article XIII(3) the United States-Pakistan Income Tax

Convention. We therefore sustain respondent’s determination

as amended in the first supplemental stipulation of facts. See

supra note 1. We have considered the parties’ remaining

arguments, and to the extent not discussed above, conclude

those arguments are irrelevant, moot, or without merit.

To reflect the foregoing,

Decision will be entered under Rule 155.

f