                          T.C. Memo. 2000-365



                       UNITED STATES TAX COURT



                 JOSÉ ANGEL LUJÁN, Petitioner v
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 24268-97.                   Filed December 4, 2000.



     José Angel Luján, pro se.

     James P. Dawson and Tamara S. Moravia-Israel, for

respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


     JACOBS,     Judge:   Respondent    determined   the   following

deficiencies in petitioner’s Federal income taxes and an addition

to tax:
                                         - 2 -

                                                          Addition to Tax
       Year                     Deficiency                   Sec. 6654

       1993                      $15,511                         $651
       1994                       62,745                        3,232

       All section references are to the Internal Revenue Code in

effect for the years in issue.

       The primary issue we must resolve is whether petitioner, an

Argentinean citizen, is subject to U.S. tax on compensation he

received during 1993 and 1994.           Resolution of this issue requires us

to decide whether during 1993 and 1994 petitioner was a “resident

alien”, as that term is defined in section 7701(b)(1)(A), which in

turn     requires     us   to    determine   whether      petitioner    meets   the

“substantial presence test” of section 7701(b)(3) for those years.

If petitioner is subject to U.S. tax on the compensation he received

during 1993 and 1994, we then must resolve whether petitioner is

liable    for   the    section    6654   addition    to   tax   (failure   to   pay

estimated income tax) for 1993 and 1994.

                                  FINDINGS OF FACT

       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.

Background

       Petitioner’s mailing address was in Buenos Aires, Argentina, at

the    time     he     filed     his     petition    contesting     respondent’s

determination.
                                        - 3 -

     Petitioner was born and raised in Argentina.                 He received a law

degree from the Universidad de Buenos Aires in 1971.                       In 1983, he

entered the United States on a student visa.               Petitioner’s wife and

children accompanied him.

     Petitioner took courses at the University of Texas and its law

school, receiving a master’s degree in comparative jurisprudence in

1984, and a master’s degree in Latin American studies in 1990.

After completing his studies, petitioner accepted employment as an

international     attorney    with   an    Austin,    Texas,         law     firm.      In

addition,   he    worked    for   law     firms    located      in     New      York   and

Washington, D.C.

     At all relevant times, petitioner’s family lived in Austin.                        In

so doing, petitioner’s children were able to complete high school in

the United States.

     Petitioner’s      personal      belongings,          as    well       as    several

automobiles that he and his wife owned, were located in Austin.

Petitioner and his wife each held a driver’s license issued by the

State of Texas.     Petitioner also maintained an Argentinean driver’s

license.

     At all relevant times, petitioner and his wife maintained

savings and      checking    accounts     in    Austin.        Petitioner        did   not

maintain a bank account in Argentina.
                                        - 4 -

     On May 3, 1993, petitioner was issued a B-1/B-2 visa (which

type of visa is issued to a nonresident alien for entry into the

United States for business purposes), expiring on May 2, 2003.

Consulting Work

     Lone    Star    Power     Argentina-I,     L.P.    (Lone     Star),    a     U.S.

partnership, retained petitioner, as a consultant, in connection

with its procuring permission from the Argentinean Government to

construct    and    operate    an     electrical   power    plant    in    Santa    Fe

Province,    Argentina      (located    approximately      400    kilometers      from

Buenos   Aires).      For     these    services,   Lone    Star    agreed    to    pay

petitioner $15,000 per month and reimburse him for expenses he

incurred in connection with his travel to (and stay in) Argentina.

     Petitioner performed the majority of his services for Lone Star

in Argentina.       During his business trips to Argentina petitioner

stayed at various hotels, took cabs, and dined at restaurants.

During 1993, Lone Star paid petitioner $50,000 in compensation and

reimbursed him for his expenses.

     Falcon Seaboard Power Corp. (Falcon Seaboard), headquartered in

Houston, Texas, replaced Lone Star with regard to the proposed

construction of the power plant project.                  On February 2, 1994,

petitioner and Falcon Seaboard entered into an agreement similar to

that which    petitioner       had    entered   into   with   Lone   Star    (i.e.,

petitioner received $15,000 per month as a consulting fee and

reimbursement for his out-of-pocket expenditures).
                                  - 5 -

     In November 1994, Falcon Seaboard established a presence in

Argentina by organizing a wholly owned subsidiary, Falcon Seaboard

Argentina,   S.A.   (Falcon   Seaboard    Argentina).    Falcon   Seaboard

Argentina did not maintain an office in Argentina; rather, it

utilized the office of its attorney, Ernesto Galante (Mr. Galante),

in Buenos Aires, on a space-available basis.

     Petitioner’s    business   cards     showed   petitioner’s   business

address to be both that of Falcon Seaboard in Houston and that of

Mr. Galante in Buenos Aires.

     During 1994, Falcon Seaboard paid petitioner $180,000 as a

consulting fee and an unspecified amount as reimbursement for his

hotel, taxi, and meal expenses in Argentina.

     Over time, Falcon Seaboard realized that construction of the

power plant project was not feasible, and ultimately abandoned the

project.

     After petitioner’s consulting services were terminated, he

returned to Austin.    Prior to his termination, petitioner traveled

to Austin as often as possible to be with his family.       The following

summarizes petitioner’s entrances to and exits from the United

States during 1993 and 1994 from petitioner’s and governmental

records:
                                        - 6 -

                                        1993

Entry      Entry      Exit Out   Exit out   Exit   Entry       Exit out    Days    Total
into       into       of U.S.    of U.S.    out    into        of          withi   Days
U.S. per   U.S. per   per P’s    per INS    of     Argentina   Argentina   n the   withi
INS        VISA       Memo                  U.S.   per         per         U.S.    n the
                                            per    Passport    Passport            U.S.
                                            VISA

                                 01/15/93          01/16/93                15
                                                                           days

02/02/93   02/02/93                                            02/01/93

                                 02/07/93          02/08/93                6
                                                                           days

02/16/93   02/16/93                                            02/15/93

                                 03/22/93          03/23/93                35
                                                                           days

03/28/93   03/28/93

                                 04/20/93          04/21/93                24
                                                                           days

           05/28/93                                            05/27/93

                      07/13/93                     07/14/93                47
                                                                           days

08/13/93                                                       08/12/93

                                 08/25/93          08/26/93                13
                                                                           days

10/01/93                                                       10/01/93

                                 10/26/93          10/27/93                26
                                                                           days

11/19/93   11/19/93                                            11/19/93

                                 12/01/93          12/02/93                13
                                                                           days

12/18/93   12/18/93                                            12/18/93    14
                                                                           days

                                                                                   193
                                                                                   days
                                           - 7 -

                                           1994

Entry into   Entry into   Exit out   Exi     Entry       Exit out    Days      Total Days
U.S. per     U.S. per     of U.S.    t       into        of          within    within the
INS          VISA         per INS    out     Argentina   Argentina   the       U.S.
                                     of      per         per         U.S.
                                     U.S     Passport    Passport
                                     .
                                     per
                                     VIS
                                     A

                          01/30/94           02/01/94                30 days

02/19/94     02/19/94                                    02/18/94

                          03/04/94           03/05/94                14 days

             03/24/94

                                             04/03/94                10 days

04/12/94     04/12/94                                    04/11/94

                          04/24/94           04/24/94                13 days

04/26/94

                                             05/01/94                5 days

05/08/94     05/08/94                                    05/07/94

                                             05/16/94                8 days

06/18/94                                                 06/17/94

                                             07/02/94                15 days

07/16/94     07/16/94                                    07/15/94

                          07/27/94           07/28/94                12 days

08/05/94     08/05/94

                          08/25/94           08/26/94                21 days

09/16/94                                                 09/15/94

                                             10/10/94                25 days

10/22/94     10/22/94                                    10/21/94

                                             11/01/94                11 days

11/23/94     11/23/94                                    11/22/94

                          12/02/94                                   10 days

12/21/94                                                             11 days

                                                                               185 days
                                   - 8 -

Argentinean Activities

     At all relevant times, petitioner maintained an Argentinean

driver’s license.    Beginning in July 1993, he served as an adviser

to the Argentinean military and was active in several Argentinean

political groups.

Absence of Filing 1993 and 1994 Tax Returns

     Petitioner did not file U.S. or Argentinean income tax returns

for 1993 or 1994.        Moreover, he did not pay any U.S. estimated

income taxes for these years.

Notice of Deficiency

     In   the   notice   of   deficiency,   respondent   determined   that

petitioner was a resident alien for 1993 and 1994, which required

him to file U.S. income tax returns for those years, reflecting the

compensation he received ($50,000 for 1993 and $180,000 for 1994).

Respondent further determined that for both years, petitioner was

liable for the section 6654(a) addition to tax for failure to pay

estimated income tax.

                                  OPINION

     In general, all U.S. citizens, wherever resident, and all

resident alien individuals (citizens of a foreign country), are

liable for income taxes imposed by the Internal Revenue Code,

whether the income received is from sources within or without the

United States.    See sec. 1.1-1(b), Income Tax Regs.      An individual

is a nonresident alien, and generally not subject to U.S. income tax
                                          - 9 -

on foreign source income, if the individual is neither a U.S.

citizen nor a U.S. resident.              See sec. 7701(b)(1)(B).        An alien

individual is treated as a U.S. resident for any calendar year if at

any time during the year that individual:                  (1) Is a lawful U.S.

permanent resident (the green card test); (2) meets the substantial

presence test; or (3) makes an election to be treated as a lawful

U.S. resident.          See sec. 7701(b)(1)(A); sec. 301.7701(b)-1(b),

Proced. & Admin. Regs.

     There is no evidence in the record that petitioner was a lawful

U.S. permanent resident or that he made an election to be treated as

a resident pursuant to section 301.7701(b)-4(c)(3)(v), Proced. &

Admin. Regs. Accordingly, petitioner is considered a resident alien

only if he meets the section 7701(b)(3)(A) substantial presence

test.

     The substantial presence test is an objective test: an alien

individual is treated as a U.S. resident alien with respect to any

year in which the alien is present in the United States on at least

31 days during the current calendar year and for at least 183 days

during       the   current   year   and    the    2   preceding   calendar   years,

calculated pursuant to a weighted formula.1              See sec. 7701(b)(3)(A).


         1
           Pursuant to sec. 7701(b)(3)(A), (1) each day of
 presence in the current year is counted as a full day, (2) each
 day of presence in the first preceding year is counted as one-
 third of a day, and (3) each day of presence in the second
 preceding year is counted as one-sixth of a day. See also sec.
 301.7701(b)-1(c)(1), Proced. & Admin. Regs. In sum, the
 applicable multipliers are:
                                                    (continued...)
                               - 10 -

An individual is treated as present in the United States on any day

that the individual is physically present in the United States at

any time during the day.   See sec. 7701(b)(7)(A).    As such, the day

of entry into the United States and the day of departure from the

United States are both counted.

     The parties disagree as to the number of days petitioner was

present in the United States during 1993 and 1994.           Although

petitioner does not dispute the entry dates in the Immigration and

Naturalization Service records, he disagrees with several departure

dates that respondent utilizes.       We believe the departure dates

utilized by respondent are accurate.

     Petitioner contends that he was not physically present in the

United States for 183 days in either 1993 or 1994.         Petitioner

maintains that at most, he was present in the United States for 171

days in 1993 and 164 days in 1994.      Respondent, on the other hand,

maintains that petitioner was in the United States for 193 days in

1993 and 185 days in 1994.2       The record supports respondent’s




     1
      (...continued)
                 Current year           =    1
                 1st preceding year     =    1/3
                 2nd preceding year     =    1/6
         2
           During opening statement at trial, respondent’s counsel
 referred to petitioner being present in the United States for 158
 days in 1994, whereas on brief, respondent refers to petitioner
 being present in the United States for 185 days in 1994. The
 record supports a finding that petitioner was present in the
 United States for 185 days in 1994, see supra p. 7.
                                        - 11 -

calculations.      In   determining        the      number    of     days,      petitioner

incorrectly failed to include the day of entry into the United

States and the day of departure from the United States.

     On   the   basis   of   the       record      before    us,    we    conclude       that

petitioner meets the substantial presence test for both years in

issue; accordingly, petitioner is deemed a U.S. resident alien for

1993 and 1994 and is subject to U.S. tax on the compensation he

received.

     We now turn our attention to whether petitioner is liable for

the section 6654 addition to tax for the years in issue.                                  The

section 6654 addition is imposed on an individual taxpayer who fails

to make timely payments of estimated tax.                          An underpayment of

estimated   tax   exists     if    a    tax     payment     for     any    of    the     four

installment period due dates (usually quarterly) is less than the

amount of taxes required to be paid each installment.                              See sec.

6654(b)(1).     The amount of the addition is determined by applying

the applicable interest rate to the amount of the underpayment for

the period of time that the underpayment exists.                     See sec. 6654(a).

     Petitioner failed to make any estimated tax payments in 1993

and 1994, and he does not qualify for any exception to the section

6654 addition to tax.        Consequently, he is liable for the section

6654 addition to tax for both years as determined by respondent.

     In   reaching   our     holdings,        we    have    considered       all    of   the

arguments petitioner presented for contrary holdings (including
                                 - 12 -

petitioner’s claim that he qualifies for the “closer connection

exception” of section 7701(b)(3)(B) and section 301.7701(b)-2(a),

Proced. & Admin. Regs.) and, to the extent not discussed above, find

them to be not relevant or without merit.

     To reflect the foregoing,



                                          Decision will be entered

                                     for respondent.
