                  T.C. Summary Opinion 2009-115



                      UNITED STATES TAX COURT



         PAUL D. AND ALICIA L. MUSSHAFEN, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20482-07S.                Filed July 23, 2009.



     Paul D. and Alicia L. Musshafen, pro sese.

     William F. Castor, for respondent.



     GOLDBERG, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.    Pursuant to section

7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent

for any other case.   Unless otherwise indicated, subsequent

section references are to the Internal Revenue Code in effect for
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the years in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.

     Respondent determined deficiencies in petitioners’ Federal

income taxes for 2004 and 2005 of $7,916 and $8,324,

respectively, together with accuracy-related penalties under

section 6662(a) of $1,583.20 and $1,664.80, respectively.      After

petitioners’ concession, the issues for decision are:    (1)

Whether petitioners are entitled to a foreign earned income

exclusion under section 911(a) for 2004 and 2005; and (2) whether

petitioners are liable for accuracy-related penalties under

section 6662(a) for 2004 and 2005.

                            Background

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.

     Paul D. Musshafen (petitioner) has worked for Parker

Drilling Management Services, Inc. (PDMS), located in Houston,

Texas, since 1981.   PDMS operates a production oilfield in

Kuwait.   PDMS has assigned petitioner to work in several

different countries over the years, including Ecuador, Bolivia,

and Kuwait.   Petitioner was assigned to work in Kuwait in 2002 as

an onshore rig supervisor at a drilling rig site.   Petitioner was

working in Kuwait during the 2004 and 2005 tax years.    At the

time of trial he was working at a rig on an oilfield in the
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Kuwaiti desert near Amadhi, Kuwait, that was owned by the Kuwait

Drilling Co.

     During the entire time that petitioner has spent in Kuwait

he has lived in employer-furnished housing on the rig site, which

is a 45-minute drive from Kuwait City.     In addition to housing,

PDMS provided petitioner with food and medical services.

Generally, other than being driven between the airport and the

rig site, petitioner did not leave the site because of PDMS’

security precautions.   However, on occasion, he traveled to

Kuwait City under the recommendation that he stay within the area

secured by the Kuwaiti military.    Petitioner worked at the

jobsite on an alternating 35-days-on, 35-days-off schedule.

During petitioner’s 35-day duty periods he worked 12-hour days

and was on call 24 hours per day.    Petitioner does not presently

speak Arabic, but he is being taught the language at his jobsite.

     Petitioner spent his 35-day-off-duty periods in Chickasha,

Oklahoma.   Alicia Musshafen, a homemaker, and their daughter, who

was 16 years old in 2004, reside in Chickasha, Oklahoma, where

petitioners jointly own a house and a motor vehicle and maintain

a bank account.   Petitioner’s paychecks were directly deposited

into the bank account in Oklahoma.     Petitioner also has an

Oklahoma driver’s license, a U.S. passport, a resident visa

sponsored by PDMS and issued by the Kuwaiti Government, and a
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Kuwaiti identification card.   Any taxes or fees petitioner is

required to pay to the Kuwaiti Government are paid by PDMS.

      Mrs. Musshafen and petitioner’s daughter have never visited

Kuwait, primarily because:   (1) Their daughter attended high

school in Oklahoma; (2) petitioner returned to his hometown

during his 35-day-off-duty periods, which eliminated the need for

his family to visit him in Kuwait; and (3) there were safety and

security reasons that weighed against a visit to Kuwait.

      Petitioners have elected the foreign earned income exclusion

since 1992.   Ms. Thomas, a certified public accountant (C.P.A.),

has prepared petitioners’ tax returns since 1991.   In order to

determine whether petitioners were entitled to the foreign earned

income exclusion, Ms. Thomas performed her own research and

consulted with an expert at the Oklahoma Society of C.P.A.s and

with an attorney.    Petitioner and Ms. Thomas together concluded

that petitioners were entitled to the foreign earned income

exclusion on the basis of her research and consultations.

                             Discussion

I.   Foreign Earned Income Exclusion

      U.S. citizens are required to include in gross income all

income from whatever sources derived, unless a specific income

exclusion applies.   See sec. 61(a); Arnett v. Commissioner, 126

T.C. 89, 91 (2006), affd. 473 F.3d 790 (7th Cir. 2007).

“Exclusions from income are construed narrowly, and taxpayers
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must bring themselves within the clear scope of the exclusion.”

Arnett v. Commissioner, supra at 91-92.     There is a specific

income exclusion for a qualified individual whose tax home is in

a foreign country.   Sec. 911(a), (d).    At the election of a

qualified individual the foreign earned income of such individual

is excluded from gross income and exempt from taxation.      Sec.

911(a)(1).   A qualified individual is an individual whose tax

home is in a foreign country and who is either:     (1) A citizen of

the United States and a bona fide resident of a foreign country

for an uninterrupted period which includes an entire taxable year

(the bona fide residence test) or (2) a citizen or resident of

the United States who, during any period of 12 consecutive

months, is present in a foreign country during at least 330 full

days in such period (the physical presence test).     Sec.

911(d)(1).   Petitioner bears the burden of proving that he is a

qualified individual entitled to the foreign earned income

exclusion.   See Rule 142(a); Nelson v. Commissioner, 30 T.C.

1151, 1154 (1958); Cobb v. Commissioner, T.C. Memo. 1991-376.

     The term “tax home” means an individual’s home for purposes

of section 162(a)(2) (relating to travel expenses while away from

home); however, an individual shall not be treated as having a

tax home in a foreign country during any period for which his

abode is within the United States.     Sec. 911(d)(3).
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          Abode has been variously defined as one’s home,
     habitation, residence, domicile or place of dwelling.
     Black’s Law Dictionary 7 (5th ed. 1979). While an
     exact definition of abode depends upon the context in
     which the word is used, it clearly does not mean one’s
     principal place of business. Thus abode has a domestic
     rather than vocational meaning, and stands in contrast
     to tax home as defined for purposes of section
     162(a)(2). * * *

Bassett v. Commissioner, T.C. Memo. 1988-218 (quoting Bujol v.

Commissioner, T.C. Memo. 1987-230, affd. without published

opinion 842 F.2d 328 (5th Cir. 1988) (quotation marks omitted).

A taxpayer’s abode is the location where he has strong economic,

family, and personal ties.   Bujol v. Commissioner, supra.

     Several previous cases have dealt with this precise issue,

including Brobst v. Commissioner, T.C. Memo. 1988-456; Lemay v.

Commissioner, T.C. Memo. 1987-256, affd. 837 F.2d 681 (5th Cir.

1988); and Bujol v. Commissioner, supra.   Although Lemay and

Bujol involved taxpayers working on an offshore drilling rig in

the territorial waters of a foreign country and Brobst involved a

taxpayer working on an onshore oil storage facility, the facts of

the three cases are not materially different from those of the

present case.   In Brobst, Lemay, and Bujol the taxpayers had

alternating work schedules of 28 days on duty and 28 days off

duty, with off-duty periods spent in the United States.   In all

three cases the taxpayers lived in employer-furnished housing,

had little contact with foreign nationals, and maintain a home

and family in the United States.   In all three cases the Court
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concluded that the taxpayers were not entitled to the foreign

earned income exclusion because their abode was in the United

States.

     Similar to the taxpayers in the cases cited above,

petitioner had a rotating work schedule that placed him in Kuwait

every other 35-day period.   He spent his 35-day-off-duty periods

at his residence in Oklahoma.    Therefore, during 2004 and 2005 he

would have spent approximately 182.5 days in Kuwait and 182.5

days in Oklahoma.   Petitioner’s wife and daughter lived in

Oklahoma; petitioners’ daughter attended high school in Oklahoma;

and petitioners jointly owned a house and motor vehicle and

maintain a bank account in Oklahoma.     Petitioner also had an

Oklahoma driver’s license, a U.S. passport, a resident visa

sponsored by PDMS and issued by the Kuwaiti Government, and a

Kuwaiti identification card.    Further, petitioner has stipulated

that he was generally confined to the jobsite for security

reasons and, therefore, could have had only very limited

interaction with Kuwaiti nationals.

     Petitioner testified that he is contemplating moving his

family to Kuwait after his daughter graduates from high school,

renting an apartment or obtaining housing in an expatriate

community, and retiring there.    Petitioner added that Kuwait

would be a nice place to retire because, although the climate is

somewhat inhospitable, the Kuwaitis with whom he has come in
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contact are very friendly.     Even if we were to find petitioner’s

comments to be realistic, they are not dispositive in determining

the location of his abode under the statute.

      On the basis of the entire record, we find that petitioner’s

economic, family, and personal ties were in Oklahoma during 2004

and 2005.    Petitioner’s abode was in Oklahoma; therefore, he

could not have a tax home in a foreign country.    See sec.

911(d)(3).    Petitioner’s tax home must also have been in

Oklahoma.    Having determined that petitioner’s tax home was in

Oklahoma during the 2004 and 2005 tax years, we conclude that

petitioner is not a qualified individual, and we need not inquire

further as to whether petitioner meets the bona fide residence or

physical presence tests.    Respondent’s determination is

sustained, and petitioner is not entitled to the foreign earned

income exclusion for 2004 and 2005.

II.   Accuracy-Related Penalties

      Section 6662(a) and (b)(1) and (2) provides for a penalty

equal to 20 percent of the portion of an underpayment of tax

attributable to negligence or disregard of rules or regulations

or any substantial understatement of income tax.    “[T]he term

‘negligence’ includes any failure to make a reasonable attempt to

comply with the provisions” of the Internal Revenue Code “and the

term ‘disregard’ includes any careless, reckless, or intentional

disregard.”    Sec. 6662(c).   A substantial understatement exists
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“if the amount of the understatement for the taxable year exceeds

the greater of--(i) 10 percent of the tax required to be shown on

the return for the taxable year or (ii) $5,000.”     Sec.

6662(d)(1)(A).

     However, a taxpayer will not be liable for an accuracy-

related penalty under section 6662(a) if the reasonable cause

exception of section 6664(c) applies.     “No penalty shall be

imposed * * * with respect to any portion of an underpayment if

it is shown that there was a reasonable cause for such portion

and that the taxpayer acted in good faith with respect to such

portion.”   Sec. 6664(c)(1).   “[T]he most important factor is the

extent of the taxpayer’s effort to assess the taxpayer’s proper

tax liability.”   Sec. 1.6664-4(b)(1), Income Tax Regs.

     Petitioners engaged Ms. Thomas, a C.P.A., to prepare their

Federal income tax returns and determine whether they were

eligible for the foreign earned income exclusion.     Ms. Thomas

conducted her own research and consulted an expert at the

Oklahoma Society of C.P.A.s and an attorney.     Ms. Thomas reached

the reasonable, albeit incorrect, conclusion that petitioner was

entitled to the foreign earned income exclusion because his tax

home was in Kuwait.   Tax home and abode are vague legal concepts

that are not clearly defined by statute and therefore require a

great deal of subjective analysis.      Given the nature of this area
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of Federal income tax law, it does not necessarily follow that an

incorrect conclusion is also an unreasonable conclusion.

     Petitioners, after considering all of the information

available to them and in good faith reliance on Ms. Thomas’

professional opinion, claimed the foreign earned income exclusion

for both years.   Taxpayers and tax professionals are often

required to make informed decisions relating to ambiguous areas

of tax law.   It follows that taxpayers and tax professionals will

not always make the correct decision.

     The record establishes that petitioners acted with

reasonable cause and in good faith.     In this case it is

reasonable for the petitioners to rely on the advice given them

by Ms. Thomas.    Therefore, we hold that petitioners are not

liable for the penalties pursuant to section 6662(a).

     To reflect the foregoing,


                                           Decision will be entered

                                      for respondent as to the

                                      deficiencies and for

                                      petitioners as to the

                                      accuracy-related penalties.
