                                              NORMA A. SANTOS, PETITIONER v. COMMISSIONER                                     OF
                                                     INTERNAL REVENUE RESPONDENT
                                               Docket Nos. 1173–09, 5323–09.                          Filed October 18, 2010.

                                                  P, a teacher from the Philippines, came to the United
                                               States under an exchange teacher program sponsored by the
                                               U.S. Department of State. P claims that her wages from
                                               teaching in the United States are exempt from taxation under
                                               art. 21 of the U.S.-Philippines income tax convention (art. 21),
                                               which provides that certain teacher’s earnings may be exempt
                                               from income tax if the requirements of art. 21 are satisfied.
                                               The parties dispute whether P was invited to come to the
                                               United States ‘‘for a period not expected to exceed 2 years’’,
                                               as is required in order to receive the exemption. Held:
                                               Whether P was invited to the United States for a period ‘‘not
                                               expected to exceed 2 years’’, as contemplated by the conven-
                                               tion, is to be determined on the basis of an objective consider-
                                               ation of all of the relevant facts and circumstances. The rel-
                                               evant facts and circumstances do not establish that P was
                                               invited to the United States ‘‘for a period not expected to
                                               exceed 2 years’’. Therefore, P’s income is not exempt from tax-
                                               ation under art. 21.

                                           Michael J. Low and Jonathon M. Morrison, for petitioner.
                                           Jon D. Feldhammer and Melissa C. Quale, for respondent.
                                        RUWE, Judge: Respondent determined deficiencies of
                                      $4,346 and $6,126 in petitioner’s 2005 and 2006 Federal
                                      income taxes. 1 The only issue for decision is whether peti-
                                        1 Respondent also determined that petitioner was liable for the accuracy-related penalty under

                                      sec. 6662(a) for taxable year 2006 but has now conceded that issue.


                                                                                                                                     447




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                                      448                135 UNITED STATES TAX COURT REPORTS                                         (447)


                                      tioner’s 2005 and 2006 wages are exempt from taxation
                                      because she came to the United States for a period ‘‘not
                                      expected to exceed 2 years’’ as contemplated by the Conven-
                                      tion With Respect to Taxes on Income, U.S.-Phil., art. 21,
                                      Oct. 1, 1976, 34 U.S.T. 1277 (article 21). 2 Unless otherwise
                                      indicated, all section references are to the Internal Revenue
                                      Code (Code) as amended, and all Rule references are to the
                                      Tax Court Rules of Practice and Procedure.

                                                                          FINDINGS OF FACT

                                        Some of the facts have been stipulated and are so found.
                                      The stipulation of facts, the supplemental stipulation of facts,
                                      and the attached exhibits are incorporated herein by this ref-
                                      erence. At the time the petitions were filed, petitioner
                                      resided in California.
                                      Amity
                                         Petitioner entered the United States on August 9, 2004,
                                      under an international exchange teacher program sponsored
                                      by the U.S. Department of State. Amity Institute (Amity), a
                                      nonprofit organization, operates an exchange teacher pro-
                                      gram regulated by the Department of State. Amity’s
                                      exchange teacher program permits internationally qualified
                                      faculty to come to the United States to teach in their respec-
                                      tive subjects for up to 3 years. Amity expects that teachers
                                      who participate in the exchange teacher program will come
                                      to the United States for 3 years. In preparation for the
                                      return to their home countries, Amity requires that partici-
                                      pants complete a cultural project in the third year of their
                                      teaching assignment. Even though Amity intends that
                                      participants return home after 3 years, it has been Amity’s
                                      experience that only a very small percentage of Filipino
                                      teachers actually return to their home country at that time,
                                      with the vast majority of the participants deciding to remain
                                      in the United States.
                                         As part of the exchange teacher program, Amity serves as
                                      a J–1 visa sponsor for teachers entering the United States
                                      from other countries. Amity is authorized to issue Forms DS–
                                        2 In the petition at docket No. 1173–09, petitioner concedes that she is entitled, at most, to

                                      an exemption for only $28,161 of her wages for 2006 because the remainder was earned after
                                      she had been in the United States for more than 2 years.




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                                      (447)                          SANTOS v. COMMISSIONER                                          449


                                      2019, Certificate of Eligibility for Exchange Visitor (J–1)
                                      Status, which allow teachers to apply for J–1 visas to enter
                                      the United States.
                                      Avenida International Consultants and Badilla Corp.
                                         Amity does not directly recruit teachers from the Phil-
                                      ippines. During 2004 and 2005 Amity used Avenida Inter-
                                      national Consultants (AIC) and Badilla Corp. (Badilla) to
                                      recruit teachers from the Philippines. Badilla is AIC’s local
                                      affiliate in the Philippines. Ligaya Avenida is the owner and
                                      operator of both AIC and Badilla. Badilla obtains re´sume´s
                                      and transcripts from teachers seeking employment in the
                                      United States and maintains a database of this information.
                                      Badilla finds prospective teachers primarily by word of
                                      mouth and through seminars conducted by Ms. Avenida. For
                                      a fee of at least $3,000 in 2004, AIC and/or Badilla would
                                      assist a teacher in: (1) Finding employment in the United
                                      States; (2) getting their American teaching credentials; (3)
                                      getting a visa; (4) arranging for health, Department of Jus-
                                      tice, and other Federal clearances; (5) obtaining transpor-
                                      tation and initial housing; and (6) getting training and accul-
                                      turation information. When AIC contracts with a prospective
                                      teacher, it is AIC’s expectation that the exchange teacher will
                                      stay in the United States for 3 years, before returning to his
                                      or her home country. Even though AIC intends for the teacher
                                      participants to return to their home countries after 3 years,
                                      in reality 80 to 90 percent of participants remain in the
                                      United States after the program has concluded.
                                         AIC assists school districts in the United States with the
                                      recruitment of international teachers. AIC finds school dis-
                                      tricts that might be interested in its services by attending job
                                      fairs and by reviewing vacancy postings. AIC provides
                                      interested school districts with access to its database, which
                                      comprises re´sume´s and transcripts for candidate teachers in
                                      various subject areas whom AIC believes eligible to receive
                                      teaching credentials in the United States. AIC then preselects
                                      the teaching candidates for the schools to interview and
                                      facilitates the interviews.
                                         After the completion of the interview process, the school
                                      districts can extend employment offers to candidates. Once a




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                                      candidate is offered employment, AIC will assist the teacher
                                      in obtaining a visa.
                                         Generally, there are two types of visas that may be avail-
                                      able to foreign teachers. The first, an H–1B visa, is for
                                      working professionals. The second, a J–1 visa, is for individ-
                                      uals entering the United States under a cultural exchange
                                      program approved by the Department of State. The H–1B
                                      visa does not work well for school districts hiring new
                                      teachers through the exchange teacher program because its
                                      April 1 application deadline prevents teachers from securing
                                      visas before the school year begins. As a result, the J–1 visa
                                      is used more frequently in hiring teachers through exchange
                                      programs. The J–1 visa allows teachers from foreign coun-
                                      tries to teach in the United States for the period specified on
                                      Form DS–2019. Form DS–2019, the basic document used in
                                      the administration of the exchange visitor program, allows a
                                      prospective exchange visitor to seek an interview at a U.S.
                                      embassy or consulate in order to obtain a J–1 visa to enter
                                      the United States. Form DS–2019 identifies the exchange
                                      visitor and the visitor’s designated sponsor and provides a
                                      brief description of the exchange visitor’s program, including
                                      the starting and ending dates, the category of exchange, and
                                      an estimate of the financial support to be provided to the
                                      exchange visitor. After the period specified on Form DS–
                                      2019, the teacher must return to his or her home country,
                                      unless a waiver of the return requirement is obtained from
                                      the Department of State.
                                         When a school district has found a teacher that it wishes
                                      to hire, AIC sends the teacher’s documentation to Amity.
                                      Amity then issues a Form DS–2019 showing that Amity is
                                      sponsoring the applicant and thereby allowing the teacher to
                                      obtain a J–1 visa.
                                         Petitioner learned of Ms. Avenida’s business through an
                                      occupational therapist who had previously attended one of
                                      Ms. Avenida’s seminars. Petitioner met Ms. Avenida when
                                      she attended one of her seminars regarding available
                                      teaching opportunities in the United States. Petitioner paid
                                      a fee to AIC and/or Badilla to assist her in finding a teaching
                                      position in the United States.




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                                      (447)                          SANTOS v. COMMISSIONER                                          451


                                      Ravenswood City School District
                                        During the latter part of the 2003–2004 school year, the
                                      Ravenswood City School District (RCSD), located in Cali-
                                      fornia, used AIC to recruit teachers from the Philippines
                                      because it was unable to hire a sufficient number of qualified
                                      special education providers to meet the needs of the school
                                      district. When recruiting teachers from the Philippines, the
                                      RCSD was looking for someone who had completed the rel-
                                      evant coursework and would qualify for a preliminary
                                      teaching credential in California with contingencies. The
                                      RCSD offered extensive training to its special education
                                      teachers. Providing this type of training was very expensive
                                      for the school district. When making an offer of employment,
                                      the RSCD’s goal was to hire a teacher interested in staying at
                                      the RCSD long term, in order to maintain its academic pro-
                                      grams. When the RCSD hired a teacher through the exchange
                                      teacher program, it hoped and expected that the teacher
                                      would be an employee for at least 3 years and, in many
                                      cases, for longer periods. 3 This expectation was based on the
                                      RCSD’s history with Filipino teachers hired through the
                                      exchange program. It was the RCSD’s experience that such
                                      teachers would often stay in the United States beyond the
                                      duration of the exchange program and become residents.
                                        The RCSD offered petitioner employment as an education
                                      specialist for the 2004–2005 school year. Petitioner’s employ-
                                      ment with the RCSD was at will, and she signed a 1-year con-
                                      tract on June 9, 2004. When the RCSD offers employment to
                                      a new teacher, the term of the employment contract is 1 aca-
                                      demic year, regardless of whether the teacher is recruited
                                      from within the United States or from abroad. The RCSD uses
                                      a 1-year contract with its teachers until the point at which
                                      they are granted tenure. Teachers are granted tenure with
                                      the RCSD when they have obtained all required credentials
                                      and have begun the first day of work in their third year of
                                      teaching. On June 30, 2005, shortly after the expiration of
                                      petitioner’s initial contract with the RCSD, she signed a
                                      second contract of employment for the 2005–2006 school
                                         3 When asked to testify about her expectations regarding how long petitioner would remain

                                      in the United States, Maria Ibarra, former director of human resources for the RCSD testified:
                                      ‘‘So my hopes when I recruited—not just Ms. Santos, but any candidate—is that it’s a long term,
                                      three year—I know that they had—candidates from the Philippines had a J–1, so it was three
                                      years. But my hope was that they’d be able to stay longer.’’




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                                      452                135 UNITED STATES TAX COURT REPORTS                                         (447)


                                      year. Before the second contract’s expiration, petitioner
                                      signed a contract on June 6, 2006, for the 2006–2007 school
                                      year. In June 2004 petitioner, Amity, and the RCSD entered
                                      into the Amity exchange teacher contract covering the period
                                      of the Form DS–2019 that was to be issued. Pursuant to the
                                      contract, Amity agreed to provide J–1 visa sponsorship for up
                                      to 3 years.
                                      Petitioner’s Visa
                                         After petitioner received an offer of employment from the
                                      RCSD,  she paid Amity to sponsor her J–1 visa pursuant to
                                      Amity’s 3-year administrative fee payment contract, which
                                      was signed on July 25, 2004. According to the contract, peti-
                                      tioner agreed to pay, and did pay, $1,500 to Amity during the
                                      first year of the exchange teacher program and $750 for each
                                      of the second and third years.
                                         To receive and remain eligible for the J–1 visa, petitioner
                                      was required to obtain a valid Form DS–2019. Amity issued
                                      her Form DS–2019 certificates which met the J–1 visa
                                      requirements for the first 3 years that she was eligible to
                                      remain in the United States under her visa. Petitioner was
                                      issued two separate Forms DS–2019 in order to remain
                                      eligible for a J–1 visa for the entire 3-year period. Before
                                      2004, and in all subsequent years, Amity would have issued
                                      a teacher a Form DS–2019 that covered a 3-year period from
                                      the outset. However, in 2004 Amity instead issued a 2-year
                                      Form DS–2019, which was subsequently reissued for a third
                                      year as a matter of course. The change in practice was
                                      caused by Amity’s mistaken interpretation of a new Depart-
                                      ment of State policy. Amity incorrectly believed that because
                                      it had to be redesignated as a visa sponsor by the Depart-
                                      ment of State every 2 years, it was permitted to issue Form
                                      DS–2019 certificates only for 2-year periods. Consequently,
                                      every teacher sponsored by Amity in 2004 received a Form
                                      DS–2019 that covered a 2-year period. As a result, Amity
                                      issued petitioner a Form DS–2019 that covered the 2-year
                                      period from August 1, 2004, to July 31, 2006, followed by a
                                      second Form DS–2019 covering the period from August 1,
                                      2004, to July 31, 2007.
                                         From 2004 to 2007 petitioner’s J–1 visa was sponsored by
                                      Amity. On July 28, 2004, petitioner was issued a J–1 visa




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                                      (447)                          SANTOS v. COMMISSIONER                                          453


                                      that allowed for her entry into the United States on August
                                      9, 2004. Petitioner’s visa was valid for 5 years at the time it
                                      was issued, and its expiration date was July 27, 2009. Peti-
                                      tioner’s visa was also subject to a 2-year-residency require-
                                      ment under which she had to return to the Philippines for
                                      at least 2 years after the expiration of the exchange teacher
                                      program. Petitioner requested and was granted a waiver of
                                      the 2-year-residency requirement. On July 25, 2004, peti-
                                      tioner signed a contract with Amity agreeing to return to the
                                      Philippines after her J–1 visa expired or otherwise pay a
                                      $1,500 fine.
                                      Teaching Credentials
                                        Before petitioner could begin teaching in the United
                                      States, she was required to obtain a preliminary teaching
                                      credential. The preliminary teaching credential petitioner
                                      received was valid for 5 years but conditioned upon her
                                      taking and passing the California Basic Educational Skills
                                      Test (CBEST). However, a teacher is permitted to apply to the
                                      California Commission on Teacher Credentialing (the
                                      commission) for a waiver of the CBEST requirement. If
                                      granted, the waiver is valid for 1 year. From 2004 to 2007,
                                      a teacher could request a maximum of three waivers of the
                                      CBEST requirement.
                                        Petitioner’s teaching credential was valid from August 16,
                                      2004, to September 1, 2009. On August 30, 2004, petitioner
                                      requested from the commission a waiver of the CBEST
                                      requirement. Under the waiver, petitioner could have taught
                                      in the RCSD without passing the CBEST until August 16, 2005.
                                      Petitioner requested a second waiver of the CBEST require-
                                      ment on September 27, 2005, which the commission granted.
                                      The second waiver would have allowed petitioner to teach in
                                      the RCSD until August 29, 2006, without passing the CBEST.
                                        Petitioner passed the mathematics, writing, and reading
                                      sections of the CBEST in April and August 2005 and April
                                      2006, respectively. As of April 22, 2006, petitioner had
                                      passed all components of the CBEST. Petitioner also partici-
                                      pated in the RCSD’s special education training program that
                                      was provided to its special education teachers.
                                        While working in the United States, petitioner earned a
                                      salary that was considerably greater than that which she




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                                      454                135 UNITED STATES TAX COURT REPORTS                                         (447)


                                      would have earned in the Philippines. In the Philippines,
                                      petitioner earned the equivalent of $400 to $500 per month,
                                      while during her first 3 years at the RCSD she was paid
                                      $3,700 to $4,200 a month. Petitioner incurred at least $5,000
                                      in expenses and fees in order to come to the United States.
                                      Petitioner’s Tax Returns
                                         Petitioner timely filed her 2005 and 2006 Federal income
                                      tax returns and stated her occupation as teacher. On her
                                      2005 and 2006 returns petitioner reported wages of $38,941
                                      and $46,722 and taxable income of zero and requested
                                      refunds of $5,364 and $7,384, respectively. On her 2005 and
                                      2006 Schedules A, Itemized Deductions, petitioner claimed
                                      deductions of $38,941 and $46,721, respectively, stating
                                      ‘‘J–1 Tax Exempt Status of Exchange Teacher’’.
                                         In September 2008 petitioner filed amended Forms 1040X,
                                      Amended U.S. Individual Income Tax Return, and Forms
                                      1040NR, U.S. Nonresident Alien Income Tax Return, for the
                                      taxable years 2005 and 2006. For tax year 2005 petitioner
                                      reported on Form 1040NR wages of zero and claimed an
                                      overpayment of $5,364. For tax year 2006 petitioner reported
                                      on Form 1040NR wages of $18,561 and tax owed of $1,141.
                                      Petitioner contends that she was exempt from taxation
                                      during 2005 and 2006 on account of article 21.
                                         Respondent issued to petitioner separate notices of defi-
                                      ciency for 2005 and 2006, respectively, on the grounds that
                                      petitioner did not qualify for the exemption provided for by
                                      article 21. Petitioner timely filed separate petitions with this
                                      Court.

                                                                                  OPINION

                                         Generally, the Commissioner’s determinations in the notice
                                      of deficiency are presumed correct and the taxpayer bears
                                      the burden of proving error in the determinations. Rule
                                      142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
                                         For the years at issue, petitioner was classified as a non-
                                      resident alien under section 7701(b) because she had a J–1
                                      visa and participated in the exchange teacher program. Sec-
                                      tion 7701(b)(1)(B) provides that a nonresident alien is a per-
                                      son who is not a citizen or resident of the United States
                                      within the meaning of section 7701(b)(1)(A). Generally, a




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                                      (447)                              SANTOS v. COMMISSIONER                                          455


                                      nonresident alien individual engaged in trade or business
                                      within the United States is taxed on the taxable income
                                      effectively connected with that trade or business. Sec. 871(b).
                                      The phrase ‘‘trade or business within the United States’’ gen-
                                      erally includes the performance of personal services within
                                      the United States at any time within the taxable year. Sec.
                                      864(b). Compensation paid to a nonresident alien in
                                      exchange for the performance of services in the United States
                                      constitutes income that is effectively connected with the con-
                                      duct of a trade or business in the United States. Sec. 1.864–
                                      4(c)(6)(ii), Income Tax Regs. As a result, petitioner’s wages
                                      would ordinarily be subject to taxation under the Code. How-
                                      ever, section 894(a) provides that the provisions of the Code
                                      will be applied to any taxpayer with due regard to any treaty
                                      obligations of the United States that apply. Therefore, the
                                      treatment of petitioner’s wages might be altered by treaty
                                      provisions. See id.
                                         Article 21 provides an exemption to certain individuals
                                      from U.S. income taxation for income earned through the
                                      performance of personal services as teachers in the United
                                      States if the requirements of article 21 are satisfied. Article
                                      21 provides:

                                                                                      Article 21

                                                                                     TEACHERS

                                        (1) Where a resident of one of the Contracting States is invited by the
                                      Government of the other Contracting State, a political subdivision or local
                                      authority thereof, or by a university or other recognized educational
                                      institution in that other Contracting State to come to that other Con-
                                      tracting State for a period not expected to exceed 2 years for the purpose
                                      of teaching or engaging in research, or both, at a university or other recog-
                                      nized educational institution and such resident comes to that other Con-
                                      tracting State primarily for such purpose, his income from personal serv-
                                      ices for teaching or research at such university or educational institution
                                      shall be exempt from tax by that other Contracting State for a period not
                                      exceeding 2 years from the date of his arrival in that other Contracting
                                      State.

                                        When interpreting a treaty, 4 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
                                           4 The   term ‘‘treaty’’ is used synonymously with ‘‘convention’’.




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                                      456                135 UNITED STATES TAX COURT REPORTS                                         (447)


                                      Shoji Am., Inc. v. Avagliano, 457 U.S. 176, 179–180 (1982).
                                      The plain words of the treaty control unless their effect is
                                      contrary to the intent of the signatories. Sumitomo Shoji
                                      Am., Inc. v. Avagliano, supra at 180; Amaral v. Commis-
                                      sioner, 90 T.C. 802, 812 (1988). The words of a treaty are to
                                      be interpreted according to their ordinary meaning as under-
                                      stood in the public law of nations. Amaral v. Commissioner,
                                      supra at 812.
                                         Under article 21, a taxpayer’s wages can be exempt from
                                      Federal income tax only if the taxpayer meets the following
                                      requirements: (1) She was a resident of the Philippines
                                      before coming to the United States; (2) she was invited by
                                      the Government or a recognized educational institution
                                      within the United States; (3) she was invited for a period not
                                      expected to exceed 2 years; (4) she was invited for the purpose
                                      of teaching or engaging in research at the recognized edu-
                                      cational institution; and (5) she did in fact come to the
                                      United States primarily to carry out the purpose of the
                                      invitation.
                                         In order for petitioner to qualify for the article 21 exemp-
                                      tion of her wages, she must satisfy all of its requirements.
                                      Petitioner has clearly met four of the five requirements, and
                                      the only dispute between the parties is whether she meets
                                      the third. As a result, the only issue for us to decide is
                                      whether petitioner has established that the invitation that
                                      she accepted was ‘‘for a period not expected to exceed 2
                                      years’’ within the meaning of article 21.
                                         Respondent contends that petitioner fails to qualify for
                                      benefits on any portion of her visit under article 21 because
                                      petitioner has not established that she was invited to come
                                      to the United States ‘‘for a period not expected to exceed 2
                                      years’’. Respondent contends that it is the invitor’s expecta-
                                      tion that is relevant in determining whether petitioner came
                                      to the United States for a period not expected to exceed 2
                                      years. Respondent bases his position on what he maintains
                                      is the plain reading of the text of article 21. Petitioner argues
                                      that the expectation referred to in article 21 is that of the
                                      invitee alone; in this case, petitioner. Petitioner contends
                                      that her expectation is the only relevant expectation and that
                                      it can be evidenced through her testimony and an observance
                                      of the surrounding circumstances.




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                                      (447)                          SANTOS v. COMMISSIONER                                          457


                                         Article 21 provides an exemption from income tax for up
                                      to 2 years for specified persons who are invited to the United
                                      States by specified governmental entities and educational
                                      institutions for the purpose of teaching, but only if the invita-
                                      tion is ‘‘for a period not expected to exceed 2 years’’. The text
                                      of article 21 does not support one party’s suggested
                                      interpretation to a greater extent than it does the other
                                      party’s. Article 21 is ambiguous with respect to whose
                                      expectation is relevant in determining the expected duration
                                      of an exchange teacher’s visit. Therefore, we believe that the
                                      most logical reading of article 21 requires us to consider all
                                      of the relevant facts and circumstances and then make an
                                      objective determination of whether petitioner was invited to
                                      come to the United States ‘‘for a period not expected to
                                      exceed 2 years’’. This standard does not focus exclusively or
                                      primarily on the expectation of any single party or on a par-
                                      ticular factor; rather, this inquiry necessitates that we look
                                      at all of the facts, including the expectations of the involved
                                      parties as well as any relevant facts and circumstances
                                      regarding the operation of the exchange teacher program.
                                         To begin our analysis, we will consider the evidence that
                                      relates to petitioner’s expectation. Petitioner argues that she
                                      did not expect to remain in the United States for more than
                                      2 years. Petitioner advances several facts intended to support
                                      her position, including: Her family ties to, and familiarity
                                      with, the Philippines; the limited terms of her employment
                                      agreement(s); and her limited right to remain in the United
                                      States both legally and contractually. The strongest of peti-
                                      tioner’s arguments can be stated as two basic positions: (1)
                                      Because she was hired under a 1-year contract as an at-will
                                      employee, it was not possible for petitioner to expect to
                                      remain in the United States for a period greater than 2
                                      years, and (2) because her J–1 visa was not permanent and
                                      was not guaranteed to remain valid beyond the first 2 years,
                                      petitioner could not have expected to remain in the United
                                      States for more than 2 years. After taking into consideration
                                      all of the relevant objective facts and circumstances, we find
                                      petitioner’s arguments unpersuasive in establishing that she
                                      came to the United States for a period not expected to exceed
                                      2 years. There is a variety of facts that indicate petitioner’s
                                      expectation was to stay in the United States for more than
                                      2 years under the exchange teacher program.




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                                         Petitioner entered into several contractual agreements
                                      indicating that it was likely she expected to remain in the
                                      United States for at least 3 years. Petitioner, Amity, and the
                                      RCSD signed the Amity exchange teacher contract in June
                                      2004, which indicates that petitioner was contracted to
                                      Amity for the duration of the period specified on the Form
                                      DS–2019 issued to her. Amity was the sponsor of petitioner’s
                                      visa, as indicated on both Forms DS–2019, and that sponsor-
                                      ship covered a 3-year period. The fact that petitioner was
                                      issued two Forms DS–2019 does not change the fact that
                                      Amity’s sponsorship was always intended to cover a 3-year
                                      period. The record indicates that were it not for Amity’s mis-
                                      taken interpretation of a new Department of State policy,
                                      petitioner would have initially been issued a Form DS–2019
                                      for a 3-year period. In fact, Amity issued to petitioner a
                                      second Form DS–2019 as a matter of course in order to reach
                                      the same result. In addition, petitioner agreed to pay, and
                                      did pay, Amity’s fees when she entered into the 3-year
                                      administrative fee payment contract in July 2004. Petitioner
                                      paid Amity $1,500 the first year and $750 in each of the next
                                      2 years. The fact that petitioner contracted to pay Amity’s
                                      fees for its services over a 3-year period indicates that peti-
                                      tioner expected that she would participate in the exchange
                                      teacher program for more than 2 years. In July 2004 peti-
                                      tioner also signed Amity’s home return memo of under-
                                      standing, agreeing to adhere to the requirements of her J–
                                      1 visa and the Amity exchange teacher program regulations,
                                      which contemplated her return to the Philippines after 3
                                      years.
                                         Additionally, upon petitioner’s arrival in the United States
                                      she was granted a preliminary teaching credential. This
                                      credential provided that if petitioner passed the CBEST within
                                      1 year, she would be eligible to work as a special education
                                      instructor for 5 years. In August 2004 and again in Sep-
                                      tember 2005 petitioner requested a 1-year waiver of the
                                      CBEST requirements from the commission. These two waivers
                                      would have allowed petitioner to teach in the United States
                                      for a period of more than 2 years from the time she arrived
                                      in the United States without ever having to complete the
                                      CBEST requirements. If petitioner had expected to return to
                                      the Philippines in less than 2 years, these waivers would
                                      have been sufficient to enable her to do so without examina-




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                                      (447)                          SANTOS v. COMMISSIONER                                          459


                                      tion. However, in April 2005 petitioner began the CBEST, and
                                      she completed its requirements the following year. The fact
                                      that petitioner decided to take the CBEST, without being
                                      required to do so, indicates that from early on in her visit
                                      petitioner expected to remain in her position with the RCSD
                                      beyond 2 years.
                                         In determining petitioner’s expectations, it is also useful to
                                      look at her communications with Amity, AIC, and the RCSD
                                      regarding her participation in the exchange teacher program.
                                      Petitioner has introduced no evidence that she ever
                                      expressed to any of the parties involved that she had the
                                      desire to return to the Philippines after only 2 years. In fact,
                                      petitioner did not testify at trial that she had expected to
                                      return home after 2 years. Instead, she stated that she did
                                      not have any expectation regarding the duration of her stay
                                      in the United States. 5
                                         Also relevant to whether petitioner expected that she
                                      would remain in the United States for more than 2 years are
                                      the financial circumstances surrounding her participation in
                                      the exchange teacher program. Petitioner spent at least
                                      $5,000 on expenses and fees in order to come to the United
                                      States. Given that petitioner earned the equivalent of $400
                                      to $500 a month in the Philippines, this represents a consid-
                                      erable investment. These expenses, coupled with her ability
                                      to earn dramatically higher wages in the United States,
                                      make it all the more likely that petitioner would not have
                                      come to the United States expecting to return to her home
                                      country earlier than necessary.
                                         In addition to considering petitioner’s expectation
                                      regarding the length of her participation in the exchange
                                      teacher program, we must also consider the expectations of
                                      the RCSD, Amity, and AIC and/or Badilla. The record clearly
                                      indicates that all of the parties involved with petitioner’s
                                      invitation and employment in the United States expected
                                      that she would remain in the United States as a teacher for
                                      more than 2 years. This expectation is evidenced both by con-
                                      tracts that were entered into and by the testimony given at
                                      trial by representatives of the RCSD, Amity, and AIC and/or
                                      Badilla.
                                         5 When asked at trial whether there had been an expectation as to how long she would stay

                                      in the United States at the time she received her offer from the RCSD, petitioner responded
                                      ‘‘No’’.




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                                      460                135 UNITED STATES TAX COURT REPORTS                                         (447)


                                         Representatives from the RCSD, Amity, and AIC and/or
                                      Badilla all testified that they expected participants in the
                                      exchange teacher program, such as petitioner, to remain in
                                      the United States for at least 3 years. None of these individ-
                                      uals expressed any knowledge of special circumstances which
                                      had caused them to have a different expectation with regard
                                      to petitioner’s participation. The fact that Amity and the
                                      RCSD entered into the Amity exchange teacher contract
                                      indicates that both organizations expected that petitioner
                                      would stay in the United States for at least 3 years. This is
                                      also evidenced by the 3-year administrative fee payment con-
                                      tract between Amity and petitioner.
                                         It is also useful to consider the historical experience
                                      regarding the exchange teacher program. Representatives
                                      from Amity, AIC, and Badilla testified that despite their best
                                      efforts to encourage teachers to return to their home coun-
                                      tries after their participation in the exchange teacher pro-
                                      gram, the vast majority of Filipino participants decide to stay
                                      in the United States beyond the 3-year program term.
                                      Additionally, a representative from the RCSD testified that
                                      when teachers from the Philippines had been hired in the
                                      past as part of the exchange teacher program, many had
                                      decided to stay in the United States for more than 3 years
                                      and become residents. The record indicates that an over-
                                      whelming majority of the Filipino teachers who participate in
                                      the exchange teacher program remain in the United States
                                      for more than the 3-year period provided by the exchange.
                                      This information, while itself not determinative, is useful in
                                      adding context to our consideration of all of the relevant facts
                                      and circumstances in determining what the expectation was
                                      regarding the length of petitioner’s stay.
                                         In conclusion, after considering all of the relevant facts and
                                      circumstances, we find that petitioner was invited to the
                                      United States for a period that was expected to exceed 2
                                      years. Accordingly, petitioner’s wage income for the taxable
                                      years 2005 and 2006 is not exempt from taxation under
                                      article 21, and we sustain respondent’s determinations of the
                                      deficiencies.




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                                      (447)                          SANTOS v. COMMISSIONER                                          461


                                           To reflect the foregoing,
                                                                        Decisions will be entered under Rule 155.
                                                                               f




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