                          T.C. Memo. 2019-135



                     UNITED STATES TAX COURT



JOSEPH S. BELLWOOD AND JACQUELINE E. BELLWOOD, Petitioners v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent



   Docket No. 13226-17.                       Filed October 7, 2019.



          In 2013, 2014, and 2015, P-H flew helicopters in Saudi Arabia
   for a U.S. company that provided air ambulance services for the Saudi
   Red Crescent Authority. P-H worked in Saudi Arabia on a repeating
   “28 & 28” schedule, meaning 28 days on duty followed by 28 days
   off duty. During the 28 days on duty, P-H lived in Saudi Arabia and
   resided in employer-provided housing when he was not otherwise
   working. During the 28 days off duty, P-H traveled to the United
   States and resided in his own home in Georgia with P-W and their
   youngest son. During 2013, 2014, and 2015, P-H retained his U.S.
   citizenship, driver’s license, voter registration, bank account, and
   healthcare in the United States.

          For 2013, 2014, and 2015, P-H used tax preparation software to
   complete the couple’s tax returns, and on each return they claimed a
   “foreign earned income” exclusion (“FEIE”) under I.R.C. sec. 911(a)
   for the income P-H earned while working in Saudi Arabia. The
   returns also claimed deductions for 2013, 2014, and 2015 for
                                      -2-

[*2] unreimbursed employment expenses related to P-H’s work in Saudi
     Arabia.

            Upon examination of Ps’ returns, R disallowed the FEIEs and
     the deductions for unreimbursed employment expenses, and R
     determined a tax deficiency against Ps for each of 2013, 2014, and
     2015. Additionally, R determined an accuracy-related penalty against
     Ps for each year.

           Held: For 2013, 2014, and 2015, P-H was not a “qualified
     individual” for purposes of the FEIE because Ps failed to show that P-
     H’s “abode” was not “within the United States” and that he was a
     “bona fide resident” of Saudi Arabia for purposes of I.R.C. sec.
     911(d)(1)(A).

           Held, further, Ps failed to substantiate unreimbursed
     employment expenses underlying deductions that they claimed for
     2013, 2014, and 2015 and thus are not entitled to such deductions.

           Held, further, Ps failed to show reasonable cause for their
     substantial understatements of income tax and are thus liable for
     accuracy-related penalties under I.R.C. sec. 6662(a) for 2013, 2014,
     and 2015.



     Joseph S. Bellwood and Jacqueline E. Bellwood, for themselves.

     Erika B. Cormier, for respondent.
                                        -3-

[*3]        MEMORANDUM FINDINGS OF FACT AND OPINION


       GUSTAFSON, Judge: Pursuant to section 6212(a),1 on March 14, 2017, the

Internal Revenue Service (“IRS”) issued to petitioners, Joseph S. Bellwood and

Jacqueline E. Bellwood, a notice of deficiency, which determined the following

deficiencies in tax and accuracy-related penalties under section 6662(a):

                                                                  Penalty
            Year                    Deficiency                  sec. 6662(a)
           2013                       $16,225                     $3,245
           2014                        22,650                       4,530
           2015                        26,597                       5,319

Mr. and Mrs. Bellwood timely filed a petition under section 6213(a) for

redetermination of the deficiencies and the penalties.

       The issues that remain for decision2 are: (1) whether for 2013, 2014, or

2015, Mr. Bellwood was a “qualified individual” for purposes of the foreign



       1
        Unless otherwise indicated, all section references are to the Internal
Revenue Code of 1986 (26 U.S.C.) as amended and in effect for the relevant times,
and all Rule references are to the Tax Court Rules of Practice and Procedure. All
dollar amounts are rounded to the nearest dollar.
       2
       The Commissioner also determined that the Bellwoods had unreported
income of $766 for 2014 and $8,314 for 2015; however, the Bellwoods conceded
the $766 adjustment for 2014, and the Commissioner conceded the $8,314
adjustment for 2015.
                                        -4-

[*4] earned income exclusion (“FEIE”) of section 911 (we hold that he was not);

(2) whether the Bellwoods were entitled to deduct unreimbursed employment

expenses for 2013, 2014, or 2015 (we hold that they were not); and (3) whether

the Bellwoods are liable for accuracy-related penalties for their 2013, 2014, and

2015 returns (we hold that the Bellwoods are liable for such penalties).

                              FINDINGS OF FACT

      Mr. Bellwood is a U.S. citizen. He was born in Maine, and his parents

continue to live there. In 1987 he joined the U.S. Army and served his country as

a helicopter pilot for 22 years before retiring in 2009. When he retired, Mr.

Bellwood returned to Maine where he lived with his wife, Mrs. Bellwood, and

their youngest son, who was an avid tennis player. (The Bellwoods have an older

son who lived in New Jersey, but it is unclear when he moved to New Jersey or

whether he lived with his parents in Maine in 2009.) In 2012 Mr. Bellwood

received an offer from a U.S. company, PHI, Inc. (“PHI”), to fly helicopters on

assignment in Ha’il, Saudi Arabia. Mr. Bellwood accepted the offer, and at some

point before his departure in 2013, Mr. and Mrs. Bellwood moved from Maine to

Georgia, where they believed their young son would have better opportunities to

develop as a tennis player. From 2013 through 2015, Mrs. Bellwood and their
                                        -5-

[*5] young son lived in the family’s home in Georgia while Mr. Bellwood traveled

between Georgia and Saudi Arabia for work.

Mr. Bellwood’s employment arrangements with PHI

      The offer letter from PHI stated that Mr. Bellwood’s initial start date would

be March 14, 2012, and that he would be employed in the United States at 50%

pay until he was ultimately deployed to Saudi Arabia. Mr. Bellwood testified that

during the initial stages of his employment with PHI in 2012, he was kept on

retainer in the United States at a reduced rate of pay while PHI secured contracts

for work in Saudi Arabia. Once the contracts were secured, presumably sometime

in 2012, PHI nominally transferred Mr. Bellwood to Ha’il, Saudi Arabia, effective

December 31, 2012, though Mr. Bellwood did not actually depart for Saudi Arabia

until January 18, 2013.

      As stated in PHI’s offer letter, Mr. Bellwood was contracted to work on a

repeating “28 & 28 schedule”--meaning approximately 28 days on duty followed

by 28 days off duty, subject to variation according to PHI’s needs. In addition, the

offer letter informed Mr. Bellwood of PHI’s intent to repatriate him to the United

States in the event that his assignment in Saudi Arabia ended, which happened

sometime in 2016. Nevertheless, from 2013 through 2015, Mr. Bellwood was a

full-time employee, based out of Saudi Arabia. During his employment
                                       -6-

[*6] Mr. Bellwood would travel to Saudi Arabia for his 28 days on duty, and then

he would return to his home in Georgia where he would spend his 28 days off

duty. He repeated this process with little variation from January 2013 through

December 2015 (though there was a stint in early 2015 in which his work and

travel were limited because of illness). During his days on duty, Mr. Bellwood did

not leave Saudi Arabia; and during his days off duty, he did not stay in Saudi

Arabia.

Mr. Bellwood’s housing in Saudi Arabia

      When Mr. Bellwood was in Saudi Arabia, he lived in housing provided by

PHI. From January 18, 2013, until sometime in February 2014, PHI provided Mr.

Bellwood with a dedicated hotel room where he stayed when he was in Saudi

Arabia and where he left his belongings when he returned to the United States.

Sometime in February 2014, PHI constructed a compound with “efficiency

apartments” in which Mr. Bellwood and other employees stayed while they were

in Saudi Arabia. The compound consisted of 14 single-story efficiency apartments

in a U-shape around a pool and was surrounded by a 15-foot-high wall with a

gated entrance. Mr. Bellwood testified that the apartments were furnished for the

employees and that, except for minor things such as a toaster oven, he did not

purchase anything for his apartment. Mr. Bellwood stayed in the same apartment
                                         -7-

[*7] each time he returned to Saudi Arabia during the remainder of 2014 and

during 2015, and he left his belongings in the apartment each time he left Saudi

Arabia.

Mr. Bellwood’s social activities in Saudi Arabia

      Although PHI’s employees lived in a gated compound, they were free to

travel outside the compound. Mr. Bellwood testified that his activities in Saudi

Arabia included traveling to the grocery, eating at local restaurants in the city,

visiting a barber when needed, and socializing with the locals from time to time.

He was prohibited from participating in civic activities because he was not a

citizen.

Mr. Bellwood’s retained connections to the United States

      During 2013, 2014, and 2015, Mr. and Mrs. Bellwood continued to own

their home in Georgia where Mrs. Bellwood lived with their youngest son; during

that same time, their older son lived in New Jersey, and Mr. Bellwood’s parents

lived in Maine. Mr. Bellwood obtained a driver’s license and registered his

vehicle in Georgia; he retained his U.S. citizenship and registered to vote in

Georgia; and he sought medical care each year while he was in Georgia, which we

infer included January through March 2015, when he was too ill to work in Saudi

Arabia. Mr. Bellwood’s sole bank account was through a credit union in Maine,
                                        -8-

[*8] and he generally conducted his affairs indirectly through his Georgia address

while he was in Saudi Arabia or directly while in Georgia during his days off duty.

Mr. Bellwood was unable to receive mail or make phone calls while he was in

Saudi Arabia, and he continually used his Georgia address as his mailing address.

Mr. Bellwood’s time spent in the United States and Saudi Arabia

      Mr. Bellwood was in Saudi Arabia for work on approximately 204 days in

2013, 210 days in 2014, and 161 days in 2015. He generally worked 12-hour

shifts; and because of the demanding nature of his work, he spent most of his

off-duty time either resting or preparing for the next shift. During those same

years, Mr. Bellwood was in the United States on his days off on approximately

167 days in 2013, 152 days in 2014, and 209 days in 2015.3 When in the United

States, he spent time with his family or on hobbies (which he could not do in

Saudi Arabia); he tended to his healthcare; and, presumably, he spent some time at

the end of each off-duty period preparing to return to work.


      3
        The parties stipulated a schedule of days that Mr. Bellwood spent in the
United States or Saudi Arabia in each year. For some days, he evidently spent part
of the day in both countries, and such a day is double-counted as both one day in
the United States and one day in Saudi Arabia. For one year (2014), a few days
are not accounted for. As a result the parties have effectively stipulated that
Mr. Bellwood’s 2013 year included 371 days, his 2014 year included 362 days,
and his 2015 year included 370 days. We do not attempt to correct these numbers
or to reconcile them to a 365-day year.
                                         -9-

[*9] Tax returns and notice of deficiency

      A. TurboTax and Form 2555

      The Bellwoods timely filed Forms 1040, “U.S. Individual Income Tax

Return”, for 2013, 2014, and 2015. Mr. Bellwood testified that he used TurboTax

software each year to help him prepare the returns and that each year the software

guided him to claim the FEIEs for the income he earned working in Saudi Arabia.

The Bellwoods attached Forms 2555, “Foreign Earned Income”, to each return.

      On the Form 2555 for 2013,4 Mr. Bellwood completed Part I of the form

and provided general information including: his foreign address in Ha’il, Saudi

Arabia; the fact that his employer was a U.S. company; and the fact that he was a

U.S. citizen. However, in the portion of Part I that directs a taxpayer to list his or

her “tax home(s)” and “date(s) established”, Mr. Bellwood listed “Maine”,

established on “01- 01- 2013”, and he did not list either Saudi Arabia or Georgia

as a tax home. Under Part II of the Form 2555, Mr. Bellwood stated that his

foreign residence began “01-01-2013” and “CONTINUE[D]”; he listed various

dates that he was present in the United States during 2013 (though those dates

      4
        The Form 2555 is structured so that the taxpayer will complete Part I,
“General Information”, and then either Part II, “Taxpayers Qualifying Under Bona
Fide Residence Test”, or Part III, “Taxpayers Qualifying Under Physical Presence
Test”; the remaining Parts IV-IX direct the qualifying taxpayer in the calculation
of the FEIE.
                                       - 10 -

[*10] were inconsistent with an August 2016 schedule he later prepared and

submitted to the IRS); he checked boxes indicating he was employed abroad and

entered the foreign country under a work visa and that the visa limited his stay in

the foreign country (though he did not provide the requested “explanation” as to

the nature of the limitation); and he checked the box to indicate he maintained a

home in the United States while living abroad though he did not provide the

requested “explanation” regarding the home (for example, the address, whether it

was rented, the names of any occupants, and their relationship to Mr. Bellwood).

After providing the general information in Part I and the qualifying information in

Part II, Mr. Bellwood’s Form 2555 proceeds with his calculation of the FEIE for

2013, which he determined to be $77,6505 and reported as negative income on line

21 of the Bellwoods’ Form 1040.

      On the Form 2555 for 2014, Mr. Bellwood completed Part I of the form in a

similar manner as in the prior year, stating that his tax home was “Maine” but

giving an established date of “01-01-2014” and again failing to list Georgia or

Saudi Arabia as a tax home. For 2014, however, Mr. Bellwood did not complete

      5
       The calculation began with Mr. Bellwood’s foreign earned income for 2013
($162,748), which would have allowed a maximum FEIE of $97,600 (i.e., the cap
for 2013); however, the Bellwoods reduced the $97,600 amount by $19,950 for
“[u]npaid per diem” deductions that they would later claim under Schedule A,
“Itemized Deductions”, of their return.
                                        - 11 -

[*11] Part II of the form but instead completed Part III, for the “Physical Presence

Test” (rather than Part II for the “Bona Fide Residence Test”). Under Part III

Mr. Bellwood listed Saudi Arabia as his principal country of employment during

that period; and he provided “01-01-2014” through “12-31-2014” as the supposed

period of his “physical presence” in Saudi Arabia; but he then included a data

table stating that he was physically present in the United States on 147 full days

during 2014 (and therefore present in Saudi Arabia for no more than 218 days),

whereas the physical presence test of section 911(d)(1)(B) requires taxpayers to be

present in the foreign country for 330 full days in a 12-month period. Under Parts

IV-IX, Mr. Bellwood calculated his FEIE for 2014 to be $99,2006 (the maximum

for that year), and he reported that amount as negative income on line 21 of the

Bellwoods’ Form 1040.

      On the Form 2555 for 2015, Mr. Bellwood reported in Part I, as in the prior

years: that his foreign address was in Ha’il, Saudi Arabia; that his employer was a

U.S. company; and that he was a U.S. citizen. Again he listed “Maine” as his tax

home, but he changed the date established to “08-03-2012”; and again he did not

list Saudi Arabia or Georgia as a tax home. As in 2013 he claimed the FEIE under

Part II (for the “Bona Fide Residence Test”) and stated that his bona fide residence

      6
          The Bellwoods did not reduce the FEIE for any unpaid per diem in 2014.
                                      - 12 -

[*12] began “08-03-2012” and “CONTINUE[D]”. Mr. Bellwood listed dates of

his presence in the United States from January through December of 2015;

however, those dates appear inconsistent with his expense reimbursement

vouchers from PHI, and his August 2016 schedule indicated that illness prevented

his presence in Saudi Arabia until March 2015. As in 2014 Mr. Bellwood claimed

the maximum FEIE ($100,800 for 2015) and reported that amount as negative

income on the Bellwoods’ Form 1040.

      B. Unreimbursed employment expenses

      PHI paid Mr. Bellwood a $50 per diem for expenses, which he did not

report as income (and which is not at issue here). However, Mr. Bellwood

believed that the U.S. State Department paid its employees in Saudi Arabia a

larger per diem of $155. He considered the $105 difference to constitute “unpaid

per diem” in his case, and on his return he deducted that amount as an

unreimbursed employment expense. That is, Mr. Bellwood apparently presumed

that he had incurred the same expenses that a State Department employee would

have incurred but reckoned that in his case those expenses were unreimbursed to

the extent of the “unpaid” $105 per day. This resulted in Mr. Bellwood’s claiming
                                       - 13 -

[*13] unreimbursed employment expenses of $19,950 for 2013; $22,785 for 2014;

and $25,042 for 2015.7

      C. Notice of deficiency

      On March 14, 2017, the IRS issued Mr. and Mrs. Bellwood the notice of

deficiency for 2013, 2014, and 2015. For each year the IRS determined an

underpayment of tax and an accuracy-related penalty under section 6662(a); and

three months earlier that penalty determination had been personally approved in

writing by the supervisor’s signing a “Civil Penalty Approval Form” on

December 6, 2016. Mr. and Mrs. Bellwood timely petitioned this Court on June

12, 2017. At that time, they resided in Georgia.

                                    OPINION

I.    Burden of proof

      In general, an IRS notice of deficiency is presumed correct, “and the

petitioner has the burden of proving it to be wrong”. Welch v. Helvering, 290

U.S. 111, 115 (1933); see also Rule 142(a). Moreover, with respect to the “bona

      7
       The amounts Mr. Bellwood reported as unreimbursed employment
expenses are not consistent with the number of days he spent in Saudi Arabia
according to the August 2016 schedule that the parties stipulated. For example,
the $19,950 that he reported for 2013, if divided by $105, yields 190 days spent in
Saudi Arabia in 2013 rather than the 204 days indicated on his August 2016
schedule. This discrepancy does not affect the outcome of this case, so we do not
attempt to resolve it. We accept the parties’ stipulation.
                                        - 14 -

[*14] fide residence” issue discussed below in part IV, the Bellwoods bear a

somewhat higher burden than mere preponderance of the evidence. A taxpayer

who qualifies under section 911(d)(1)(A) is not simply someone who “proves” that

he has been a bona fide resident of a foreign country but rather is someone who

“establishes to the satisfaction of the Secretary that he has been a bona fide

resident of a foreign country”. (Emphasis added.) We have construed this

statutory phrase to set a higher-than-ordinary standard of proof--i.e., “strong

proof”--of bona fide resident status in a foreign country, Schoneberger v.

Commissioner, 74 T.C. 1016, 1024 (1980), which is not as high a standard as

“beyond reasonable doubt” but is higher than preponderance of the evidence.

II.   Basic principles of the FEIE

      Section 61(a) provides the following broad definition of the term “gross

income”: “Except as otherwise provided in this subtitle, gross income means all

income from whatever source derived”. However, section 911(a) provides that a

“qualified individual” may elect to exclude from gross income his “foreign earned

income”. To qualify for the FEIE, the taxpayer must satisfy three conditions, the

first two of which, if satisfied, render the taxpayer a “qualified individual”, and the

third of which relates to the type of income the taxpayer receives:
                                        - 15 -

[*15] (1)    The taxpayer’s “tax home” for the period must be “in a foreign

country”. Sec. 911(d)(1).

      (2)    The taxpayer must be (a) a U.S. citizen who is “a bona fide resident of

a foreign country * * * for * * * an entire taxable year”, sec. 911(d)(1)(A), or (b) a

U.S. citizen or resident who is “present in a foreign country or countries during at

least 330 full days” of a 12-month period, sec. 911(d)(1)(B). And--

      (3)    The taxpayer must have “foreign earned income”--i.e., income earned

from personal services rendered in a foreign country. Sec. 911(a)(1), (b)(1)(A),

(d)(2).

      The Commissioner does not dispute that the compensation Mr. Bellwood

received for flying helicopters in Saudi Arabia was “foreign earned income”, and

consequently we assume that it was. Thus, if during 2013, 2014, and 2015

Mr. Bellwood met the first two conditions listed above and was therefore a

“qualified individual” for purposes of section 911, then he was entitled to exclude

a portion of the compensation he received from PHI from gross income for those

years. The undisputed facts show that Mr. Bellwood was not “present in a foreign

country or countries during at least 330 full days” of any 12-month period during

the years at issue but was instead, under his repeating “28 & 28 schedule”, present
                                          - 16 -

[*16] in the United States for more than 150 full days during each year in issue, so

the 330-day test of section 911(d)(1)(B) is not satisfied in this case.

       Consequently, the Bellwoods first must show--by a preponderance of

evidence--that Mr. Bellwood’s “tax home” was in a foreign country, within the

meaning of section 911(d)(1);8 and second, they bear the increased burden of

giving “strong proof” that he was a “bona fide resident”, within the meaning of

section 911(d)(1)(A), of one or more foreign countries for an uninterrupted period

including a full taxable year. These two requirements call for overlapping

inquiries, but we address each in turn.

III.   “Tax home” and “abode”

       Under section 911(d)(1) the FEIE is available only to an individual “whose

tax home is in a foreign country”. Section 911(d)(3) defines the term “tax home”

as “[an] individual’s home for purposes of section 162(a)(2) (relating to traveling

expenses while away from home)”, which is typically considered to be the location

of the individual’s principal place of business, Harrington v. Commissioner, 93

T.C. 297, 307 (1989), and, of course, Saudi Arabia was Mr. Bellwood’s principal


       8
        “[T]he taxpayer must present ‘strong proof’ that he was a bona fide resident
of a foreign country, whereas he need only establish that his tax home was in a
foreign country by a preponderance of evidence.” Ritchie v. Commissioner, T.C.
Memo. 1989-426, 1989 Tax Ct. Memo LEXIS 424, at *25.
                                       - 17 -

[*17] place of business. However, section 911(d)(3) further provides: “An

individual shall not be treated as having a tax home in a foreign country for any

period for which his abode is within the United States.” (Emphasis added.)

Consequently, if Mr. Bellwood’s “abode” was in the United States during the

years in issue, he does not satisfy the “tax home” requirement of section 911(d)(1),

notwithstanding that Saudi Arabia was his principal place of business. Section

911(d)(3) does not define the term “abode”, so we look to other authorities for a

definition.

      One’s “abode” is where he “abides”. Acone v. Commissioner, T.C. Memo.

2017-162, at *12. However, an individual’s abode cannot be determined by

simply identifying the location where he spent the greatest number of days during

a given period, especially if a location where he spent fewer days was his family

home where he spent those days with his wife and youngest son. This Court and

at least one Court of Appeals have recognized a domestic-vs.-vocational

distinction for determining one’s “abode” under section 911:

             “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).
                                       - 18 -

[*18] Bujol v. Commissioner, T.C. Memo. 1987-230, 1987 Tax Ct. Memo LEXIS

234, at *8-*9, aff’d without published opinion, 842 F.2d 328 (5th Cir. 1988), cited

with approval in Lemay v. Commissioner, 837 F.2d 681, 683-684 (5th Cir. 1988),

aff’g T.C. Memo. 1987-256. Consequently, when one of the locations with which

an individual is connected is in the United States (e.g., when during the relevant

periods the taxpayer owns a home in the United States and spends numerous days

at that home, and when the taxpayer’s spouse and youngest child live at that home

during the relevant periods), we consider the domestic or vocational nature of the

time spent in each location in addition to counting the number of days.

Accordingly, we compare the domestic and vocational qualities of Mr. Bellwood’s

respective dwellings, and the time he spent at each, to help determine whether his

“abode” remained in the United States.

      Mr. Bellwood owned a home in Georgia where he resided during his days

off duty in 2013, 2014, and 2015. When working in Saudi Arabia, Mr. Bellwood

stayed in a hotel room during 2013 and in an efficiency apartment during 2014 and

2015 neither of which he owned and both of which were provided by his

employer. “Maintenance of a dwelling in the United States” does not necessarily

establish one’s abode here, even if “that dwelling is used by the individual’s

spouse and dependents”, 26 C.F.R. sec. 1.911-2(b), Income Tax Regs., nor does
                                        - 19 -

[*19] staying in a hotel room or an efficiency apartment necessarily disqualify an

individual from establishing his abode in a foreign country. Nevertheless, we do

not overlook the domestic or vocational qualities of those dwellings; and it is clear

that Mr. Bellwood’s stronger domestic connection was with the Georgia house and

not the Saudi Arabian hotel and apartment.

      During the time Mr. Bellwood spent in Saudi Arabia, his regular activities

were primarily vocational. Mr. Bellwood testified that his non-work-related

activities in Saudi Arabia were limited because of the demanding nature of his

work--he went to the barber or grocery store as needed and visited the occasional

restaurant, but most of his time in Saudi Arabia was spent either working or

resting and preparing for his next shift. That is true, but only because when

Mr. Bellwood had spare time, he did not wish to spend it in Saudi Arabia. Rather,

during his days off duty, Mr. Bellwood returned to his home in the United States

where he spent time with his family, pursued his hobbies, and managed the day-to-

day affairs of his personal life. In Georgia he maintained his registration to vote,

received his mail, updated his driver’s license, and registered his vehicle. Thus,

the nature of Mr. Bellwood’s respective dwellings and the manner in which he

spent his time at each indicate that his “abode” was in the United States, and that

he traveled to Saudi Arabia for work only.
                                         - 20 -

[*20] The strength of a taxpayer’s ties to the United States may further indicate

whether his or her “abode” remains in the United States, especially when the

taxpayer’s ties to a foreign country are transitory or limited. Harrington v.

Commissioner, 93 T.C. at 308. When we compare the ties Mr. Bellwood retained

in the United States against his ties to Saudi Arabia, we are further convinced that

his “abode” was in the United States. As we have noted, Mr. Bellwood retained

his U.S. citizenship. In Georgia Mr. Bellwood owned a home where his wife and

young son lived; he retained his voter’s registration, vehicle registration, and

driver’s license; he retained his doctor, dentist, and pharmacist. His mailing

address was in Georgia; his only bank account was in Maine; and his oldest son

and parents remained in the United States. In contrast, Mr. Bellwood’s only ties to

Saudi Arabia were his contract for employment with PHI and a toaster oven that

he purchased for his apartment.

      Even though we accept his testimony that he made friends in Saudi Arabia

and visited local shops and restaurants on occasion, Mr. Bellwood failed to

establish the significance of any tie to Saudi Arabia beyond his contract with PHI.

As for that contract, the significance of this tie is weakened because, first, the

contract was contingent upon Mr. Bellwood’s retaining professional licenses in

the United States and, second, PHI stated that in the event Mr. Bellwood was no
                                          - 21 -

[*21] longer assigned to Saudi Arabia, PHI intended to repatriate him to the

United States and reassign him elsewhere (which ultimately happened in 2016).

Thus, significant ties that Mr. Bellwood retained in the United States, when

compared to the relative lack of such ties to Saudi Arabia, indicate that Mr.

Bellwood’s “abode” remained in the United States during 2013, 2014, and 2015.

      On the basis of the foregoing, we conclude that the Bellwoods fail to satisfy

the “tax home” requirement and are thus unable to claim the FEIE for any of the

relevant years. Although our FEIE discussion could end here, we now proceed to

discuss bona fide residence in part IV.

IV.   Bona fide residence

      Whether an individual has taken up bona fide residence in a foreign country

depends on the facts and circumstances of the case. The factors that courts have

considered in analyzing those facts and circumstances include the following:

             (1) intention of the taxpayer;
             (2) establishment of his home temporarily in the foreign
      country for an indefinite period;
             (3) participation in the activities of his chosen community
      on social and cultural levels, identification with the daily lives of the
      people and, in general, assimilation into the foreign environment;
             (4) physical presence in the foreign country consistent with
      his employment;
             (5) nature, extent and reasons for temporary absences from
      his temporary foreign home;
                                       - 22 -

[*22]          (6) assumption of economic burdens and payment of taxes to
        the foreign country;
               (7) status of resident contrasted to that of transient or
        sojourner;
               (8) treatment accorded his income tax status by his
        employer;
               (9) marital status and residence of his family;
               (10) nature and duration of his employment; whether his
        assignment abroad could be promptly accomplished within a definite
        or specified time;
               (11) good faith in making his trip abroad; whether for purpose
        of tax evasion.

Sochurek v. Commissioner, 300 F.2d 34, 38 (7th Cir. 1962), rev’g and remanding

36 T.C. 131 (1961). This Court consults those “Sochurek factors” in determining

bona fide resident status, see Estate of Sanders v. Commissioner, 144 T.C. 63, 82-

83 (2015), vacated and remanded on other grounds, 834 F.3d 1269 (11th Cir.

2016); Schoneberger v. Commissioner, 74 T.C. at 1023, and we consider them

now.

        1.    Intention. The Court of Appeals in Jones v. Commissioner, 927 F.2d

849, 854 (5th Cir. 1991), rev’g T.C. Memo. 1989-616, noted that “intent plays

perhaps the most important part in determining the establishment and maintenance

of a foreign residence”. We take as sincere Mr. Bellwood’s testimony that he

intended to “remain employed in Saudi Arabia”, but the relevant intention for

which we look is, of course, not merely the intention to be employed in a foreign
                                        - 23 -

[*23] country. Rather, we look for objective indicia of an intention to actually

establish residence in the foreign country. In Jones the taxpayer voluntarily

declined a residency payment from the State of Alaska, and the court found this to

be a sufficient demonstration of the taxpayer’s objective intent to establish his

residence in a foreign country. Id. We have also held that evidence of “specific,

contemporaneous documentation” of a “permanent transfer” for a “sufficiently

substantial period of time” can persuade this Court that a taxpayer intended to be a

resident of a foreign country. Cobb v. Commissioner, T.C. Memo. 1991-376,

1991 Tax Ct. Memo LEXIS 420, at *16.

      Mr. Bellwood presented no evidence that his situation in Saudi Arabia ever

involved an objective consequence remotely equivalent to declining a residency

payment as in Jones, nor are we convinced that Mr. Bellwood’s assignment was

akin to a “permanent transfer” for a “sufficiently substantial period of time” as in

Cobb. Admittedly, Mr. Bellwood was a “full-time” helicopter pilot for PHI and

was “based in the Kingdom of Saudi Arabia”. However, we are unconvinced that

his assignment was indeed “permanent” or for a “sufficiently substantial period of

time” to reflect an intention to become a resident of Saudi Arabia. The offer letter

from PHI first refers to Mr. Bellwood as being assigned in the United States

during an introductory period and that he would be “reassign[ed] to Saudi Arabia”;
                                        - 24 -

[*24] the letter then describes various contingencies that could terminate Mr.

Bellwood’s employment; the letter then states that “[i]t is PHI’s intention to

repatriate * * * [Mr. Bellwood] in the event that * * * [he is] no longer assigned to

Saudi Arabia”. (Mr. Bellwood’s testimony suggests that such a repatriation

ultimately occurred sometime in 2016.) This factor of intention is adverse to Mr.

Bellwood.

      2.     Establishment of home. Mr. Bellwood did not establish a home in

Saudi Arabia for any period, let alone an indefinite one. Mr. Bellwood stayed in

whatever accommodations PHI provided him during his 28-day stints on duty in

Saudi Arabia, and he moved from one accommodation (a hotel room) to another

(an efficiency apartment) at PHI’s direction. Although he left belongings in the

accommodations during his off-duty periods--when he returned to his house in

Georgia--we are not persuaded that such accommodations could be considered

“establishment of his home” for purposes of bona fide residence. This factor is

adverse to Mr. Bellwood.

      3.     Activities and assimilation. Mr. Bellwood testified that he made

friends in Saudi Arabia and that he traveled around Ha’il where he worked. He

visited the barber as needed and traveled about the city for various tasks between

his 12-hour work shifts. However, Mr. Bellwood also testified that because of the
                                        - 25 -

[*25] demanding nature of his work, most of his time off duty was spent resting or

preparing for his next shift. Ultimately, the record does not establish that Mr.

Bellwood participated in activities or attempted to assimilate the local culture in a

manner that would indicate bone fide residence. Thus, this factor is adverse to Mr.

Bellwood.

      4.     Physical presence consistent with employment. Although the exact

numbers are unclear, the record indicates that Mr. Bellwood was physically

present in Saudi Arabia on approximately 204 days during 2013, 210 days during

2014, and 161 days during 2015; and he was physically present in the United

States on approximately 167 days in 2013, 152 days in 2014, and 209 days in 2015

(noting that he testified to spending most of the first three months of 2015 in the

United States because of illness). “The phrase ‘consistent with his employment’

should excuse an employment-related absence from the country of supposed

residence; it should not * * * set the limit on his presence in the foreign country.”

Acone v. Commissioner, at *18. By the numbers, Mr. Bellwood spent more days

in Saudi Arabia during 2013 and 2014, but he did not appear to spend any of his

off-duty days there. In other words, Mr. Bellwood was in Saudi Arabia when

work required him to be there, but he was in the United States whenever he could

be there. This factor is adverse to Mr. Bellwood.
                                        - 26 -

[*26] 5.     Temporary absences. The “nature, extent and reasons for * * *

[Mr. Bellwood’s] temporary absences from” Saudi Arabia are adverse to his claim

of bona fide resident status. Mr. Bellwood spent all of his off-duty days in, or in

transit to, the United States. Although Mr. Bellwood did not provide any evidence

showing that some of the days in the United States were spent in connection with

his work, e.g., maintaining his pilot’s license, etc., the Court presumes this to be

true; nevertheless, such days would be minimal in comparison to the number of

days spent in the United States off duty. As Mr. Bellwood testified, there is

nothing in the FEIE requirements that would prohibit a taxpayer from leaving his

or her foreign country “for brief or temporary trips back to the United States for

vacation or business”, but Mr. Bellwood has failed to show such trips were either

“brief or temporary”. Indeed, he spent more than one-third of each year in the

United States, and for roughly 28 days at a time. This factor is adverse to Mr.

Bellwood.

      6.     Economic burdens and taxes. Mr. Bellwood appears to have assumed

few economic burdens and has paid no tax in Saudi Arabia. His employer

provided his lodging and reimbursed him $50 for each day he spent in Saudi

Arabia. Mr. Bellwood offered no evidence to show the cost of any meals that he

paid for while in Saudi Arabia, and he certainly did not show that PHI’s per diem
                                        - 27 -

[*27] did not cover most if not all of such expenses. Rather, he testified that the

location was a “third-world country”, from which we infer that he perceived his

cost of living to be low. This factor is adverse to Mr. Bellwood.

      7.     Status of resident vs. transient sojourner. We are unable to determine

Mr. Bellwood’s legal status under Saudi Arabian law. Mr. Bellwood testified that

he was in Saudi Arabia under a work visa, but the visa was not introduced into the

record. Mr. Bellwood acknowledged that he could not participate in civic life in

Saudi Arabia because he was not a citizen. As for the issue of transience, Mr.

Bellwood testified that he intended to remain in Saudi Arabia for as long as his

employment contract lasted, but not beyond that time; furthermore, he testified

that he never intended to bring his family to Saudi Arabia, and that he always

intended to return to his home in Georgia. The facts tend to indicate that Mr.

Bellwood was thus a “transient” in Saudi Arabia. This factor is adverse to Mr.

Bellwood.

      8.     Employer’s tax treatment. The record does not include tax returns

that PHI filed in Saudi Arabia. Each of Mr. Bellwood’s Forms W-2, “Wage and

Tax Statement”, show Mr. Bellwood’s address in Georgia, but they do not show

anything regarding Saudi Arabia or Mr. Bellwood’s status as a resident of that

country. Especially given the Forms W-2, we cannot tell whether PHI’s tax
                                       - 28 -

[*28] treatment of Mr. Bellwood was different from its tax treatment of any

employee who worked strictly within the United States. This factor is adverse to

Mr. Bellwood.

      9.     Marriage and family. Mr. Bellwood’s family was obviously

important to him during the relevant years; and during that time his wife and

youngest son lived in Georgia, his oldest son lived in New Jersey, and his parents

lived in Maine. Mr. Bellwood’s family never came to visit him in Saudi Arabia,

and he never intended to bring them to Saudi Arabia. This factor is adverse to Mr.

Bellwood.

      10.    Nature and duration of employment. Mr. Bellwood’s employment as

an air ambulance pilot for PHI’s customer, the Saudi Red Crescent Authority, was

undoubtedly full-time employment based in Saudi Arabia during the relevant

years. Mr. Bellwood testified credibly that he intended to, and he in fact did,

retain this position until PHI’s contract in Ha’il ended, sometime during 2016.

This factor is favorable to Mr. Bellwood.

      11.    Good faith vs. tax evasion. We see no indication of bad faith, but

only good faith, in Mr. Bellwood’s taking his job for PHI and working in Ha’il,

Saudi Arabia. Nothing in the record indicates that Mr. Bellwood took the job

outside of the United States for any tax-related reason, much less for a motive of
                                        - 29 -

[*29] tax evasion. Indeed, Mr. Bellwood testified credibly that he claimed the

FEIE only because the TurboTax software showed it to be appropriate and because

of his understanding that he qualified for the credit. This factor is favorable to Mr.

Bellwood.

      In sum, nine Sochurek factors weigh against finding bona fide residence in

Saudi Arabia, and two weigh in favor. These two favorable factors do not

constitute the “strong proof” of bona fide residence that a taxpayer must provide.

Thus, Mr. Bellwood was not a bona fide resident of a foreign country during the

years in issue, and consequently, he is not eligible for the FEIE.

V.    Unreimbursed employment expenses

      Section 162(a) allows a deduction for ordinary and necessary business

expenses paid or incurred during the taxable year in carrying on any trade or

business. Such deductions may include unreimbursed employment expenses,

such as expenses incurred while away from home in the pursuit of a trade or

business. Sec. 162(a)(2). However, the taxpayer bears the burden of proving

entitlement to any deduction claimed. Rule 142(a); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934). This includes the burden of substantiation.

Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), aff’d per curiam, 540 F.2d

821 (5th Cir. 1976).
                                        - 30 -

[*30] As a general matter, travel, meals, and entertainment expenses are subject to

especially strict substantiation rules. See sec. 274(d) (flush language).

Nevertheless, the Commissioner has prescribed rules for certain per diem

allowances to be regarded as equivalent to substantiation in some instances. See

26 C.F.R. sec. 1.274-5(g), Income Tax Regs.; Rev. Proc. 2011-47, 2011-42 I.R.B.

520. Under such rules, an employee may be able to deduct certain expenses at the

Federal per diem rate based on the locality of the employee’s travel; however, if

the employee’s employer provides a per diem allowance to the employee, then the

amount that is deemed substantiated is limited to the lesser of the employer’s per

diem or the Federal per diem. Rev. Proc. 2011-47, sec. 4.01, 4.02, 2011-42 I.R.B.

at 522.

      The Bellwoods claimed deductions for unreimbursed employment expenses.

Mr. Bellwood testified that he calculated those amounts using the difference

between the State Department’s per diem allowance (which is unsubstantiated in

the record) for the locality where he worked and the per diem allowance he

received from PHI. Even if we presume that PHI would not have provided further

reimbursement upon Mr. Bellwood’s request, Mr. Bellwood was limited to the

lesser of the PHI per diem or the Federal (State Department) per diem, unless he
                                       - 31 -

[*31] could substantiate the excess amount. Thus, because the Bellwoods failed to

substantiate the excess expenses, the deductions are disallowed.

VI.   Accuracy-related penalties

      We now consider whether the Bellwoods are liable for accuracy-related

penalties. See sec. 6662(a). A taxpayer is liable for an accuracy-related penalty as

to any portion of an underpayment attributable to, among other things, a

substantial understatement of income tax or negligence. Sec. 6662(a) and (b)(1)

and (2). There is a substantial understatement of income tax if the amount of the

understatement exceeds the greater of 10% of the tax required to be shown on the

return or $5,000. Sec. 6662(d)(1)(A); 26 C.F.R. sec. 1.6662-4(b)(1), Income Tax

Regs. The notice of deficiency, which made determinations we have sustained,

determined an underpayment due to a substantial understatement of income tax

required to be shown on the Bellwoods’ return for each of 2013, 2014, and 2015.

      The Commissioner has the burden of production and must present sufficient

evidence that it is appropriate to impose a penalty. See sec. 7491(c); Higbee v.

Commissioner, 116 T.C. 438, 446 (2001). The burden of production with respect

to penalties under section 7491(c) includes evidence of written supervisory

approval as required by section 6751(b)(1), Graev v. Commissioner, 149 T.C. 485,

493 (2017), supplementing and overruling in part 147 T.C. 460 (2016), and the
                                          - 32 -

[*32] Commissioner has sustained that burden by providing a copy of the Civil

Penalty Approval Form, signed by a supervisor approving the initial

determination. It is clear that the amounts of the understatements, even when the

deficiencies are recomputed under Rule 155 with respect to the conceded amounts,

see supra note 2, will remain “substantial” for purposes of section 6662(d)(1)(A).

      Once the Commissioner has met the burden of production, the taxpayer

must come forward with persuasive evidence that the penalty is inappropriate

because, for example, he or she acted with reasonable cause and in good faith.

Sec. 6664(c)(1); Higbee v. Commissioner, 116 T.C. at 448-449. The decision as

to whether a taxpayer acted with reasonable cause and in good faith is made on a

case-by-case basis, taking into account all pertinent facts and circumstances. See

26 C.F.R. sec. 1.6664-4(b)(1), Income Tax Regs. Generally, the most important

factor is the extent of the taxpayer’s effort to assess her or his proper tax liability.

Id. Other circumstances include the experience, knowledge, and education of the

taxpayer, as well as the extent to which the taxpayer reasonably and in good faith

relied on the advice of a competent professional tax adviser. Id. para. (c)(1); see

Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, 99 (2000), aff’d, 299

F.3d 221 (3d Cir. 2002).
                                       - 33 -

[*33] Taxpayers often invoke this “reasonable cause” defense by showing reliance

on the advice of a tax professional. E.g., Woodsum v. Commissioner, 136 T.C.

585, 592 (2011). Such a contention requires the taxpayer to show three things by

a preponderance of the evidence: “(1) The adviser was a competent professional

who had sufficient expertise to justify reliance, (2) the taxpayer provided

necessary and accurate information to the adviser, and (3) the taxpayer actually

relied in good faith on the adviser’s judgment.” Neonatology Assocs., P.A. v.

Commissioner, 115 T.C. at 99.

      When asked about return preparation at trial, Mr. Bellwood stated that he

relied on TurboTax software for preparing his returns and that he input the

information requested. Although this Court has not held that TurboTax or other

tax preparation software would qualify or fail to qualify as advice of a “competent

professional”, we have held that “[t]ax preparation software such as TurboTax is

only as good as the information the taxpayer puts into it. The misuse of tax

preparation software, even if unintentional or accidental, is no defense to

accuracy-related penalties under section 6662.” Langley v. Commissioner, T.C.

Memo. 2013-22, at *9-*10 (citations omitted). Despite Mr. Bellwood’s testimony

as to the information he input into TurboTax, there are various foot faults evident

on his returns that indicate errors in his use of the software. For example, on each
                                        - 34 -

[*34] of his Forms 2555, Mr. Bellwood listed “Maine” as his tax home (but did

not list either Georgia or Saudi Arabia), which would seem to contradict both his

testimony that he moved from Maine to Georgia in 2013 and that he maintained a

foreign tax home for 2013 through 2015. On his Form 2555 for 2014, Mr.

Bellwood completed Part III for the 330-day Physical Presence Test, but he listed

dates that showed he was in Saudi Arabia for only 210 days during 2014, 120 days

fewer than the test required. On his Form 2555 for 2015, Mr. Bellwood completed

Part II for the bona fide residency test and listed days of physical presence in

Saudi Arabia including “01-14-2015” to “02-15-2015” and “03-11-2015” to

“04-12-2015”, but these dates seem plainly wrong: On his August 2016 schedule,

he did not list any days in Saudi Arabia prior to March 24, 2015, but stated

“[i]llness from late JAN thru early MAY 2015”; and his expense vouchers for

2015 also indicate that no voucher was submitted for February 2015 “due to

missing work for the entire month”. These inconsistencies or inaccuracies on the

returns show several respects in which Mr. Bellwood failed to properly input

information into TurboTax, and we cannot fault TurboTax for his unwarranted

claim of the FEIE. Therefore, even if tax preparation software should be thought

of as the equivalent of a “competent professional”, the Bellwoods would not be
                                       - 35 -

[*35] able to show justified reliance on advice from such a professional to claim

the FEIE.

      As for the unreimbursed employment expenses deducted for each year,

Mr. Bellwood failed to provide any substantiation for deducting those expenses.

Furthermore, Mr. Bellwood testified that his reason for deducting such expenses

was that someone--whom he could not remember at trial--told him the deductions

were allowed. Such facts do not establish reasonable cause.

      On the basis of the evidence, the Bellwoods failed to show the Court that

the accuracy-related penalties determined by the IRS were inappropriate.

      To reflect the foregoing,


                                                      An appropriate decision will be

                                                entered.
