       GERD TOPSNIK, PETITIONER v. COMMISSIONER                   OF
             INTERNAL REVENUE, RESPONDENT
          Docket No. 22577–11.         Filed September 23, 2014.

         In 2004, P, a German citizen, made an installment sale of
      his stock in a U.S. corporation, and he received payments in
      2004–09 (years in issue) pursuant to a promissory note
      executed in connection with the sale. The 2004 payments con-
      sisted of a large downpayment and four smaller, equal
      monthly payments, which continued throughout 2005–09. He
      filed U.S. individual income tax returns for 2004 and 2005 on
      which he erroneously reported identical portions of the gain.
      He did not file U.S. returns for 2006–09. R challenged P’s
      installment sale reporting for 2004 and 2005 and filed sub-
      stitutes for returns for 2006–09 on which he included in P’s
      income appropriate portions of P’s installment sale gain. R
      alleges that P is liable for income tax deficiencies for 2004 and
      2006–09, almost entirely attributable to the gain on his
      installment sale of stock, additions to tax under I.R.C. sec.
      6651(a)(1) and (2) for 2004 and 2006–09, and an addition to
      tax under I.R.C. sec. 6654 for 2005, all of which were included
      in a jeopardy assessment pursuant to which R levied on the
      installment payments due P in partial satisfaction of P’s
      liabilities. P alleges that, during the years in issue, he was a
      German resident and a U.S. nonresident alien, having ‘‘infor-
      mally’’ abandoned his status as a lawful permanent resident
      (LPR) (i.e., a resident alien taxable on his worldwide income)
      in 2003 and, therefore, was not subject to U.S. taxation pursu-
      ant to arts. 4 and 13 of the U.S.-Germany Income Tax Treaty
      (treaty). R counters that (1) because P did not formally
      abandon his LPR status (obtained in 1977) until 2010, he
      remained an LPR during the years in issue and (2) because
      he was not taxable by Germany as a German resident during
      those years, he was not a German resident under art. 4 of the
      treaty. Therefore, he was not exempted from U.S. taxation by
      the treaty. P also alleges that, because R moved to dismiss P’s
      2011 Federal District Court suit to review R’s jeopardy assess-
      ments and levies encompassing the years in issue, in part, for
      improper venue on the ground that P was a resident of Ger-

240
(240)                  TOPSNIK v. COMMISSIONER                            241


        many, R is now judicially estopped from arguing that P was
        not a German resident during the years in issue.
           1. Held: Because he did not formally abandon his LPR
        status pursuant to sec. 301.7701(b)–1(b)(1) and (3), Proced. &
        Admin. Regs., until 2010, P remained an LPR during the
        years in issue, taxable by the United States on his worldwide
        income, including the gain on his 2004 installment sale of
        stock.
           2. Held, further, LPR status for Federal income tax pur-
        poses turns on Federal income tax law and is only indirectly
        determined by immigration law.
           3. Held, further, because P was not subject to German tax-
        ation as a German resident during the years in issue, he was
        not a German resident pursuant to art. 4 of the treaty and,
        therefore, is not exempted by the treaty from U.S. taxation
        during those years.
           4. Held, further, as a U.S. but not a German resident, P is
        taxable by the United States, pursuant to art. 13, para. 5 of
        the treaty, on his gain recognized during the years in issue
        from his 2004 installment sale of stock in a U.S. corporation.
           5. Held, further, because the prior Federal District Court
        litigation concerned only P’s status as a German resident for
        a year after the years in issue, R is not estopped from
        asserting that P was not a German resident under the treaty
        during the years in issue.
           6. Held, further, R’s additions to tax sustained except for
        the I.R.C. sec. 6651(a)(2) addition to tax for 2004, which must
        be recalculated.

  Charles Herbert Magnuson, for petitioner.
  Najah J. Shariff and Catherine G. Chang, for respondent.
  HALPERN, Judge: By notice of deficiency (notice)
respondent determined deficiencies and related additions to
tax for petitioner’s 2004–09 tax years as follows:

                                            Additions to tax

           Year       Deficiency     Sec. 6651(a)(1)      Sec. 6654

           2004        $135,316          $28,893              ---
           2005            ---              ---              $224
           2006          75,167           16,913              ---
           2007          62,766           14,122              ---
           2008          61,068           13,740              ---
           2009          60,858            5,477              ---
242           143 UNITED STATES TAX COURT REPORTS                      (240)


  The notice also seeks to impose additions to tax for 2004
and 2006–09 under section 6651(a)(2) 1 (failure to timely pay
tax shown on return) but alleges that the ‘‘[a]mount cannot
be determined at this time.’’
  The issues for decision are (1) whether petitioner was sub-
ject to U.S. taxation as a resident alien during the years in
issue and (2) if so, whether petitioner is liable for additions
to tax under sections 6651(a)(1) (failure to timely file tax
return), 6651(a)(2) (failure to pay tax shown on return), and
6654 (failure to pay estimated tax). 2 Petitioner alleges that
he was a German resident during the years in issue and,
therefore, was exempt from U.S. taxation pursuant to articles
4 and 13 of the Convention for the Avoidance of Double Tax-
ation and the Prevention of Fiscal Evasion With Respect to
Taxes on Income and Capital and to Certain Other Taxes,
U.S.-Ger., Aug. 29, 1989, 1708 U.N.T.S. 3 (entered into force
Aug. 21, 1991), available at https://treaties.un.org/doc/
Publication / UNTS / Volume%201708 / volume–1708–1–29534–
English.pdf (U.S.-Germany Treaty or treaty). 3 Petitioner,
thus, seeks our determination that there are no deficiencies
in, or additions to, tax for the years in issue and that he is
entitled to a refund of all payments made by him (for 2004
and 2005) and all amounts collected by respondent pursuant
to a jeopardy assessment and levy on the installment pay-
  1 Unless  otherwise indicated, all section references are to the Internal
Revenue Code in effect for the years in issue, and all Rule references are
to the Tax Court Rules of Practice and Procedure. We round all dollar
amounts to the nearest dollar.
  2 In his pretrial memorandum, petitioner alleges that he ‘‘is to be grant-

ed an allowance of entitlements such as for IRC § 7430 cost and fees and
any other further relief a court may deem appropriate under the cir-
cumstances’’, and he seeks ‘‘reasonable fees and costs’’ in both his petition
and amended petition. Petitioner’s claim for litigation and administrative
costs is not timely. See Rule 231. In any event, on brief, petitioner has not
pursued those claims for relief. Therefore, we consider them to have been
abandoned. See Mendes v. Commissioner, 121 T.C. 308, 312–313 (2003) (‘‘If
an argument is not pursued on brief, we may conclude that it has been
abandoned.’’).
  3 In response to respondent’s argument that petitioner spent more time

in the Philippines and Thailand than he did in Germany during the years
in issue, petitioner suggests that, if respondent is correct, petitioner was
a resident of one or the other and, therefore, exempt from U.S. taxation
under U.S. bilateral treaties with those two countries. See discussion infra
note 19.
(240)                 TOPSNIK v. COMMISSIONER                             243


ments arising out of petitioner’s 2004 installment sale of
stock.
                           FINDINGS OF FACT 4

   The parties have stipulated certain facts and the authen-
ticity of certain documents. The facts stipulated are so found,
and the documents stipulated are accepted as authentic.
   At the time petitioner filed the petition, he resided in Ger-
many.
Principal Transaction Resulting in Proposed Deficiencies
   In 1986, petitioner and another individual organized
Gourmet Foods, Inc. (GFI), a California corporation in the
business of producing, preparing, purchasing, and selling
gourmet foods, with its principal place of business in Rancho
Dominguez, California. In 2001, petitioner sued a number of
individuals and entities involved with GFI’s business for, in
effect, maneuvering to prohibit him from cashing in on his
investment in the business. The parties to that litigation ulti-
mately settled their dispute. Pursuant to the settlement, on
July 30, 2004, petitioner sold his interest in GFI, to GFI, for
$5,427,000. 5 The purchase price was paid in installments, a
2004 ‘‘down payment’’ of $1.6 million ‘‘less any advances pre-
viously made’’, and monthly payments (pursuant to a promis-
sory note) of $42,500 commencing in October 2004. 6 That
arrangement resulted in payments to petitioner of $1.77 mil-
lion in 2004 ($1.6 million plus four payments of $42,500) and
$510,000 (12 × $42,500) in each of the subsequent years in
   4 In his answering brief, petitioner does not object to any of respondent’s

proposed findings of fact. We will, therefore, assume that they are correct
except to the extent that they are clearly inconsistent with either evidence
in the record or petitioner’s proposed findings of fact. See, e.g., Jonson v.
Commissioner, 118 T.C. 106, 108 n.4 (2002), aff ’d, 353 F.3d 1181 (10th Cir.
2003); Bland v. Commissioner, T.C. Memo. 2012–84, 2012 WL 967651, at
*1 n.3.
   5 Presumably, the ‘‘sale’’ was, in substance, GFI’s redemption of peti-

tioner’s GFI stock.
   6 The settlement agreement states that petitioner received advances be-

fore 2004 totaling $766,418, which, pursuant to the terms of the settlement
agreement, should have been deducted from the $1.6 million down pay-
ment in 2004. The parties have stipulated, however, and the stipulated ex-
hibits confirm, that GFI did, in fact, make a $1.6 million down payment
to petitioner in 2004.
244        143 UNITED STATES TAX COURT REPORTS            (240)


issue (2005–09). All of the monthly installment payments
were reduced by California withholding taxes. GFI mailed
the checks and the yearend Forms 1099–MISC, Miscella-
neous Income, to petitioner at his daughter’s British
Columbia, Canada, address.
Petitioner’s Return Filings for the Years in Issue
  Petitioner filed an untimely 2004 Form 1040, U.S. Indi-
vidual Income Tax Return, on June 4, 2007. On his 2004
return, petitioner reported $723,600 as the gross sale pro-
ceeds from the sale of a capital asset acquired on June 30,
1986, and sold on June 30, 2004, a $99,789 basis for the
asset, and net long-term capital gain of $623,811. Petitioner
also reported net losses of $73,569 from Gourmet Foods,
Thailand, and ‘‘Gerd Topsnik Reitershausen’’ and from ‘‘oper-
ating a hotel’’. Petitioner reported his daughter’s British
Columbia, Canada, address as his home address.
  Petitioner untimely filed his 2005 Form 1040 on December
10, 2007. As he did for 2004, petitioner reported net long-
term capital gain of $623,811 from the sale of a capital asset
acquired on June 30, 1986, and sold on June 30, 2004. Also
consistent with his 2004 return, petitioner reported net
losses of $61,671 from the same business operations in Thai-
land and Reitershausen. Petitioner also reported $983 of tax-
able interest. On that return, too, he reported his daughter’s
British Columbia address as his home address.
  Petitioner did not file Forms 1040 for 2006–09. Con-
sequently, respondent made substitutes for returns (SFRs)
for petitioner for those years pursuant to section 6020(b). On
each of the SFRs for 2006–09, respondent listed capital gain
income of $439,671, provided offsets for the applicable
standard deduction and personal exemption, and, for 2006,
included $35,700 for ‘‘state tax refunds, credits or offsets.’’
Also, for each year, respondent imposed additions to tax
under section 6651(a)(1) and (2).
  In November 2009, petitioner filed a Form 1040X,
Amended U.S. Individual Income Tax Return, for 2005
seeking a refund of his tax payments for that year and, in
May 2010, he filed Forms 1040NR, U.S. Nonresident Alien
Income Tax Return, for 2006–09 showing zero tax due for
each of those years.
(240)                 TOPSNIK v. COMMISSIONER                           245


Respondent’s Adjustments 7
   Respondent challenges the accuracy of petitioner’s 2004
and 2005 installment sale reporting of his gain on the install-
ment sale of his GFI stock. 8
   Respondent first computed the gross profit percentage
(GPP) under section 453(c) by dividing petitioner’s $4,678,582
total gain on the sale (derived by subtracting petitioner’s
$748,418 basis for his GFI stock, as determined by
respondent, from the total sale price of $5,427,000) by the
sale price of $5,427,000, which results in a GPP of 0.8621.
Applying the GPP to the total payments petitioner received
in 2004 results in installment sale gain of $1,525,917 (0.8621
× $1.77 million) for 2004 and installment sale gain of
$439,671 (0.8621 × $510,000 9) for 2005–09. Those computa-
tions resulted in an increase in petitioner’s capital gain
   7 In addition to his capital gain adjustments and imposition of additions

to tax under secs. 6651(a)(1) and (2) and 6654, respondent (1) adjusted pe-
titioner’s reported itemized deductions for 2004 and 2005, (2) made adjust-
ments to his reported alternative minimum tax (AMT) for 2004 and 2005
and imposed AMT for 2006–09, (3) included taxable interest in his income
for 2006, (4) for 2006 and 2007, disallowed expenses subject to the 2% ad-
justed gross income limitation, and (5) made adjustments with respect to
unreported State tax refunds and a deduction for tax preparation fees for
2006. Petitioner disputes all of the adjustments, but solely on the basis
that he was exempt from U.S. taxation under the U.S.-Germany Treaty.
He does not dispute respondent’s computation of the adjustments that give
rise to the tax deficiencies. Because the entire discussion by both parties
focuses on whether petitioner is required to pay U.S. income tax on the
capital gain arising from his installment sale of GFI stock, and because
that is by far respondent’s largest adjustment and is responsible for the
AMT adjustments and the deduction disallowances, we shall limit our dis-
cussion of respondent’s adjustments to his computation of that gain for
each of the years at issue, which, as noted, petitioner appears to accept
as accurate. For the same reasons, we shall limit our discussion of peti-
tioner’s taxability by the United States to his taxability on that gain.
   8 With exceptions not relevant herein, an installment sale constitutes a

‘‘disposition of property where at least 1 payment is to be received after
the close of the taxable year in which the disposition occurs.’’ Sec.
453(b)(1). The gain from such a sale must be reported under the install-
ment method, i.e., by recognizing as gain for each taxable year in which
payments are received ‘‘that proportion of the payments received in that
year which the gross profit * * * [on the sale or other disposition] bears
to the total contract price.’’ See sec. 453(a), (c).
   9 This $510,000 is the amount petitioner received annually (12 monthly

payments of $42,500) from 2005–09.
246           143 UNITED STATES TAX COURT REPORTS                      (240)


income for 2004 of $902,106 ($1,525,917 less the $623,811
gain petitioner reported) and a decrease in petitioner’s cap-
ital gain income reported for 2005 of $184,140 ($623,811
reported less the $439,671 gain derived by application of the
GPP to the $510,000 paid to petitioner during the year).
   Because petitioner did not initially file returns or pay tax
for 2006–09, respondent’s adjustment for each of those years,
with respect to petitioner’s sale of his GFI stock, was to
attribute to petitioner the gain of $439,671 he realized with
respect to the $510,000 he received during the year.
Jeopardy Assessment, Levies, and Subsequent Litigation
   On March 16, 2011, respondent issued a jeopardy assess-
ment of petitioner’s liabilities for taxes, penalties, and
interest for the years in issue and, thereafter, levied on the
GFI installment payments in partial satisfaction of those
liabilities.
   On August 23, 2011, petitioner filed a complaint and,
thereafter, an amended complaint against the United
States in the U.S. District Court for the Central District
of California requesting a review of respondent’s jeop-
ardy assessments and levies, including the foregoing
jeopardy assessment and levies, refunds for 2004 and 2005,
and damages for unauthorized collection actions. The defend-
ant United States moved to dismiss the case on several
grounds, including improper venue. After noting that peti-
tioner ‘‘does not reside in any judicial district since he cur-
rently resides in Germany’’, the District Court held that,
under the venue provisions of 28 U.S.C. sec. 1402(a)(1), peti-
tioner ‘‘may not file his claim in a district court’’ and that his
‘‘only recourse is to prosecute his claim in the United States
Claims Court, which has concurrent jurisdiction over tax
refund actions.’’ Topsnik v. United States, No. 2:11–cv–
06958–JHN–MRW, 2012 WL 10637570, at *1 (C.D. Cal. Jan.
17, 2012), aff ’d, 554 Fed. Appx. 630 (9th Cir. 2014) (Topsnik
I). On that basis, the District Court granted defendant’s
motion to dismiss. Id. 10
  10 Following the District Court’s dismissal of petitioner’s suit due to im-
proper venue and while petitioner’s appeal of that ruling was pending be-
fore the Court of Appeals for the Ninth Circuit, petitioner brought suit for
refund in the Court of Federal Claims. The defendant United States moved
(240)                  TOPSNIK v. COMMISSIONER                              247


Petitioner’s Ties to the United States
   On January 25, 1977, petitioner applied for and, on Feb-
ruary 3, 1977, was issued a Form I–551, ‘‘Resident Alien’’
card (green card), thereby becoming a ‘‘lawful permanent
resident’’ (LPR) of the United States and, hence, a resident
alien taxable on his worldwide taxable income. 11 Also, in
1977, petitioner moved from Calgary, Canada, to Honolulu,
Hawaii.
   On November 21, 2002, petitioner flew from Frankfurt,
Germany, to San Francisco International Airport where he
presented himself as a returning LPR. At that time he signed
and submitted to the Department of Justice Immigration and
Naturalization Service (INS) an affidavit stating, in part,
that (1) the purpose of his trip to the United States was to
return home to Honolulu where he had been residing since
1977, (2) he was a partner in GFI, and (3) he traveled every
six weeks on business in connection with a company that he
owned in Thailand and properties in Germany and Thailand.
At that time he also listed ‘‘U.S.A.’’ as his country of resi-
dence on a customs declaration.
   On March 3, 2003, petitioner renewed his LPR status by
filing a Form I–90, Application to Replace [Expiring] Perma-
nent Residence Card, on which he listed his status in the
United States as ‘‘Permanent Resident—(Not a Commuter)’’
and his U.S. mailing address as 2938 Pacific Heights Road
in Honolulu. His application for renewed LPR status through
March 1, 2014, was approved by the INS on March 1, 2004.
Petitioner retained his LPR status until November 20, 2010,
when he abandoned it by filing a U.S. Citizenship and
Immigration Services (USCIS) Form I–407, Abandonment of
Lawful Permanent Resident Status, on which he stated that
his ‘‘intended or actual permanent residence abroad’’ would
to continue a temporary stay of the case pending the outcome of peti-
tioner’s appeal of the District Court ruling. The Court of Federal Claims
denied the motion on the ground that there was no venue issue before it,
and that, whatever disposition the Court of Appeals were to make of peti-
tioner’s appeal, it would retain subject matter jurisdiction over petitioner’s
refund claim and, therefore, could proceed to address the merits of that
claim. See Topsnik v. United States, 114 Fed. Cl. 1 (2013) (Topsnik II).
   11 See sec. 7701(b)(1)(A)(i) (codifying the resident alien status of a lawful

permanent resident for taxable years beginning after 1984); sec. 1.1–
1(a)(1), (b), Income Tax Regs.
248           143 UNITED STATES TAX COURT REPORTS                       (240)


be in the Philippines, and he surrendered his green card to
the USCIS.
  Petitioner sold his Hawaiian residence in 2003, but the
new owner continued to let him list it as a home address
when registering at hotels, and he continued to receive mail
there, which the new owner forwarded to him.
Petitioner’s Ties to Germany
  Petitioner was born in Germany and has a German
driver’s license and a German passport. Beginning in 1964,
petitioner had access to a room in his brother’s house in Frei-
burg, Germany, where he stays and has in the past stayed
on frequent occasions. In 2002, petitioner purchased a small
inn in Oerlenbach, district of Rottershausen, Germany. One
of the rooms at the inn was always available to him, and he
stayed in that room, during the years in issue, whenever he
was there. The inn was some 400 kilometers from Freiburg.
Also, during all or a part of that period petitioner owned an
old farmhouse and farm; some industrial or commercial prop-
erties in the former East Germany, which remain undevel-
oped and are still held by petitioner for potential gain; and
a small ‘‘cafhouse’’ in Markelsheim, Germany. According to
petitioner’s own logbook entries for five of the six years in
issue, he was physically present in Germany for a total of 98
days in 2005, 92 days in 2006, 44 days in 2007, 40 days in
2008, and 14 days in 2009.
  In response to a request by the U.S. competent authority
to his German counterpart under article 26 of the U.S.-Ger-
many Treaty (article 26: ‘‘Exchange of Information and
Administrative Assistance’’), the latter, pursuant to a letter
dated May 4, 2011, furnished the following information
regarding petitioner’s contacts with Germany during the
years in issue, which he, in turn, had obtained from German
tax authority records:
  (1) Petitioner was not registered in the community of
Oerlenbach, the situs of the aforementioned inn. Therefore,
he failed to establish residency in that community. 12
  12 A member of the U.S. competent authority office in Frankfurt, Ger-
many, testified, without objection by petitioner’s counsel, that one registers
in a particular city or town in order to establish that that is the commu-
nity in which he intends to become a German resident.
(240)              TOPSNIK v. COMMISSIONER                  249


  (2) It is not clear whether petitioner had or has a domicile
or habitual residence in Germany.
  (3) Beginning with the 2002 assessment period, petitioner
has been registered with the German tax authority as a tax-
payer with limited liability, i.e., as a nonresident individual
generally chargeable only on German source income,
including income from German assets, a status equivalent to
the status, for U.S. tax purposes, of a nonresident alien.
  (4) For 2002–04, value added tax returns were submitted
with respect to rental income that petitioner collected from
customers of the Oerlenbach inn.
  (5) In cash basis accounting statements for 2002–04,
Oerlenbach inn rental revenues of Ö4,541.02 were declared
for 2002, Ö1,034.48 for 2003, and Ö1,879.92 for 2004. No cash
basis accounting statements were filed for 2005 and subse-
quent years.
  (6) Petitioner did not file the required tax returns for a
limited liability taxpayer despite the German tax authority’s
repeated requests that he do so. Therefore, the German tax
authority estimated the German income tax tax bases for the
2002–08 assessment periods and submitted SFRs on his
behalf.
  (7) Because the German tax authority did not consider
petitioner to be a German resident, it would not have consid-
ered the gain on petitioner’s installment sale of his GFI stock
to be income taxable in Germany, and, in fact, the German
tax authority had no record of his filing income tax returns
in Germany for 2004 and subsequent years.
Petitioner’s Ties to Thailand
   During the years in issue, petitioner operated a winery
business in Thailand called Gourmet Foods Thailand Co. Ltd.
During that period, he maintained a bank account in Thai-
land, spent significant time there visiting with his son, who
lived there, and ran his winery business.
Petitioner’s Ties to the Philippines
  During the years in issue, petitioner spent considerable
time in the Philippines. In January 2007, petitioner rented
premises in the Philippines as a residence for himself and his
family, and, on November 20, 2010, when he surrendered his
250        143 UNITED STATES TAX COURT REPORTS              (240)


green card, he listed those premises as his permanent resi-
dence. The lease is to run for 10 years, from February 1,
2007, until January 31, 2016.
Situs of Petitioner’s Physical Presence
  During the years in issue, petitioner traveled extensively
among, and had substantial physical presence in, the Phil-
ippines, Thailand, the United States, Canada, Germany, and
a number of other countries in Asia and Africa.

                           OPINION

I. Burden of Proof
   As discussed infra, the factual issue before us is whether,
during the years in issue, petitioner was a resident of either
or both the United States and Germany, as that term is
defined under the U.S.-Germany Treaty.
   In general, a taxpayer bears the burden of proof. Rule
142(a)(1). However, section 7491(a) shifts the burden of proof
to the Commissioner in certain situations if the taxpayer
raises the issue, introduces credible evidence with respect to
any factual issue relevant to ascertaining the proper tax
liability, and demonstrates compliance with the applicable
requirements of section 7491(a)(2).
   Because we base our decision regarding petitioner’s status
as a German resident during the years in issue upon a
preponderance of the evidence, it is not necessary that we
assign the burden of proof. See, e.g., Estate of Black v.
Commissioner, 133 T.C. 340, 359 (2009); Estate of Bon-
gard v. Commissioner, 124 T.C. 95, 111 (2005).
II. Whether Petitioner Is Subject to U.S. Taxation of His
    Installment Sale Gain
  A. Applicable Law
  1. Introduction
   As noted supra, petitioner’s sole claim is that he was a
resident of Germany and a nonresident alien vis-a-vis the
United States during the years in issue and, therefore, was
exempt, under the U.S.-Germany Treaty, from U.S. taxation
of his installment sale gain realized during those years.
(240)                 TOPSNIK v. COMMISSIONER                           251


  2. Applicable Provisions of the Internal Revenue Code
     and Regulations
  Pursuant to sections 61(a)(3) and 1001(a) and (c), a tax-
payer is taxable on gain (amount realized in excess of basis)
from the sale or exchange of property in the year of the sale
or exchange. The taxpayer may defer recognition of the gain
in the case of an installment sale of a capital asset. Such
sales are reported under the installment method whereby the
gain recognized during the taxable year is that portion of the
payment(s) received during the year that is determined by
applying thereto the ratio of the gross profit on the sale to
the total contract price. See sec. 453(c).
  As noted supra, a U.S. resident alien is taxable by the
United States on his worldwide taxable income. Sec. 1.1–
1(a)(1) and (b), Income Tax Regs. Section 7701(b)(1)(A)(i)
defines a resident alien, ‘‘with respect to any calendar year’’,
in pertinent part, as ‘‘[a]n alien individual’’ who is ‘‘[l]awfully
admitted for permanent residence * * * [and] is * * * [an
LPR] of the United States at any time during such calendar
year.’’ Section 301.7701(b)–1(b)(1), Proced. & Admin. Regs.,
defines an LPR as follows:
  Lawful permanent resident.—(1) Green card test.—An alien is a resident
  alien with respect to a calendar year if the individual is a lawful perma-
  nent resident at any time during the calendar year. A lawful permanent
  resident is an individual who has been lawfully granted the privilege of
  residing permanently in the United States as an immigrant in accord-
  ance with the immigration laws. Resident status is deemed to continue
  unless it is rescinded or administratively or judicially determined to
  have been abandoned.
  Section 7701(b)(6) also concerns the duration of an individ-
ual’s status as an LPR and provides as follows:
    (6) Lawful permanent resident.—For purposes of this subsection, an
  individual is a lawful permanent resident of the United States at any
  time if—
       (A) such individual has the status of having been lawfully accorded
    the privilege of residing permanently in the United States as an
    immigrant in accordance with the immigration laws, and
       (B) such status has not been revoked (and has not been administra-
    tively or judicially determined to have been abandoned).
  An individual shall cease to be treated as a lawful permanent resident
  of the United States if such individual commences to be treated as a
  resident of a foreign country under the provisions of a tax treaty
  between the United States and the foreign country, does not waive the
252          143 UNITED STATES TAX COURT REPORTS                       (240)


 benefits of such treaty applicable to residents of the foreign country, and
 notifies the Secretary of the commencement of such treatment.
   The definitions of resident alien and LPR set forth in sec-
tion 7701(b)(1)(A)(i) and (6) were enacted as part of the Def-
icit Reduction Act of 1984, Pub. L. No. 98–369, sec. 138, 98
Stat. at 672. The House Ways and Means Committee report
accompanying the House bill (adopted in conference with
modifications not pertinent herein), in describing the defini-
tion of an LPR set forth in those provisions, states as follows:
    The bill defines lawful permanent resident to mean an individual who
 has the status of having been lawfully accorded the privilege of residing
 permanently in the United States as an immigrant in accordance with
 the immigration laws, if such status has not been revoked or administra-
 tively or judicially determined to have been abandoned. Therefore, an
 alien who comes to the United States so infrequently that, on scrutiny,
 he or she is no longer legally entitled to permanent resident status, but
 who has not officially lost or abandoned that status, will be a resident
 for tax purposes. [H.R. Rept. No. 98–432 (Part 2), at 226 (1983), 1984
 U.S.C.C.A.N. 697, 1166.]

  Section 301.7701(b)–1(b)(3), Proced. & Admin. Regs., sets
forth the requirements for an administrative or judicial
determination of an alien’s abandonment of U.S. resident
status as follows:
    (3) Administrative or judicial determination of abandonment of resi-
 dent status.—An administrative or judicial determination of abandon-
 ment of resident status may be initiated by the alien individual, the
 Immigration and Naturalization Service (INS), or a consular officer. If
 the alien initiates this determination, resident status is considered to be
 abandoned when the individual’s application for abandonment (INS
 Form I–407) or a letter stating the alien’s intent to abandon his or her
 resident status, with the Alien Registration Receipt Card (INS Form
 I–151 or Form I–551) enclosed, is filed with the INS or a consular
 officer. If INS replaces any of the form numbers referred to in this para-
 graph or § 301.7701(b)–2(f), refer to the comparable INS replacement
 form number. For purposes of this paragraph, an alien individual shall
 be considered to have filed a letter stating the intent to abandon resi-
 dent status with the INS or a consular office if such letter is sent by cer-
 tified mail, return receipt requested (or a foreign country’s equivalent
 thereof ). A copy of the letter, along with proof that the letter was mailed
 and received, should be retained by the alien individual. If the INS or
 a consular officer initiates this determination, resident status will be
 considered to be abandoned upon the issuance of a final administrative
 order of abandonment. If an individual is granted an appeal to a federal
 court of competent jurisdiction, a final judicial order is required.
(240)                 TOPSNIK v. COMMISSIONER                            253


  3. Applicable Provisions of the U.S.-Germany Treaty
  The U.S.-Germany Treaty, as applicable to the years in
issue, consists of three documents: (1) the original treaty,
which was signed in 1989 but which entered into force in
1991, (2) the 1989 protocol executed in 1989 on the same day
the treaty was signed and which entered into force contem-
poraneously with the treaty, and (3) the 2006 protocol, which
entered into force on December 28, 2007, and is effective for
taxes other than withholding taxes (e.g., for income taxes) as
of January 1, 2008. Therefore, the treaty (sometimes, original
treaty) as amended by the 2006 protocol (sometimes, post-
2006 treaty) is applicable for petitioner’s 2008 and 2009 tax-
able years.
  Article 4 of the treaty defines the term ‘‘resident’’ for pur-
poses thereof. Before its amendment by the 2006 protocol,
article 4, paragraph 1, provided as follows:
  For the purposes of this Convention, the term ‘‘resident of a Contracting
  State’’ means any person who, under the laws of that State, is liable to
  tax therein by reason of his domicile, residence, place of management,
  place of incorporation, or any other criterion of a similar nature, pro-
  vided, however, that
    (a) this term does not include any person who is liable to tax in that
  State in respect only of income from sources in that State or capital situ-
  ated therein; and
    (b) in the case of income derived or paid by a partnership, estate, or
  trust, this term applies only to the extent that the income derived by
  such partnership, estate, or trust is subject to tax in that State as the
  income of a resident, either in its hands or in the hands of its partners
  or beneficiaries.

The 2006 protocol modified article 4, paragraph 1, to read as
follows:
  For the purposes of this Convention, the term ‘‘resident of a Contracting
  State’’ means any person who, under the laws of that State, is liable to
  tax therein by reason of his domicile, residence, place of management,
  place of incorporation, or any other criterion of a similar nature, and
  also includes that State and any political subdivision or local authority
  thereof. The term, however, does not include any person who is liable to
  tax in that State in respect only of income from sources in that State
  or of profits attributable to a permanent establishment in that State or
  capital situated therein. [Protocol Amending the Convention for the
  Avoidance of Double Taxation and the Prevention of Fiscal Evasion With
  Respect to Taxes on Income and Capital and to Certain Other Taxes
  Signed on 29th August 1989, U.S.-Ger., Jun. 1, 2006, 2504 U.N.T.S.
254           143 UNITED STATES TAX COURT REPORTS                        (240)


  90, available at https:// treaties.un.org / doc/ Publication / UNTS / Volume%
  202504/v2504.pdf.]
   Article 4, paragraph 1, of the original treaty, through
subparagraph (a) (as applicable to individuals) is identical, in
substance, to article 4, paragraph 1 of the post-2006 treaty.
Both define a ‘‘resident of a Contracting State’’ to include an
individual ‘‘liable to tax therein by reason of his * * *
[domicile or residence]’’, and both exclude from the definition
‘‘any person who is liable to tax in that State in respect only
of income from sources in that State * * * or capital situated
therein.’’ 13
   Article 13, paragraph 1 (the same in both the original and
post-2006 treaties), provides:
  Gains derived by a resident of a Contracting State from the alienation
  of immovable property * * * [i.e., real property] situated in the other
  Contracting State may be taxed in that other State.
  Article 13, paragraph 2 (also unchanged by the 2006 pro-
tocol), provides in pertinent part:
  For the purposes of this Article, the term ‘‘immovable’’ property situated
  in the other Contracting State shall include

                        *    *  *   *   *   *    *
    (b) shares * * * in a company that is * * * a resident of that other
  Contracting State, the assets of which company consist or consisted
  wholly or principally of immovable property situated in such other Con-
  tracting State * * *
  Article 13, paragraph 5, of both the original and post-2006
treaties provides, for relevant purposes, that gains from the
alienation of intangible property (other than the shares
referred to in article 13, paragraph 2(b)) ‘‘shall be taxable
only in the Contracting State of which the alienator is a resi-
dent.’’

   13 Article 4, paragraph 2, of the treaty sets forth tiebreaker rules where

‘‘by reason of the provisions of paragraph 1 an individual is a resident of
both Contracting States’’. Because, for the reasons stated infra, we find pe-
titioner to be a U.S., but not a German, resident for the years in issue,
paragraph 2 is not germane to this case. Moreover, even if we were to find
that petitioner was a dual resident taxpayer during the years in issue, he
failed to follow the required procedures for claiming German residency
under the tiebreaker rules of article 4, paragraph 2. See sec. 6114; sec.
301.7701(b)–7(b) and (c), Proced. & Admin. Regs.
(240)             TOPSNIK v. COMMISSIONER                   255


  B. Analysis
  1. Petitioner’s Status as a U.S. Resident
   Petitioner does not appear to dispute that he became a
U.S. LPR (resident alien) in 1977, when he applied for and
was issued a green card. Nor does he dispute that he periodi-
cally renewed his LPR-resident alien status and did not for-
mally renounce or abandon that status until November 10,
2010, when he filed a Form I–407 and surrendered his green
card to the USCIS consistent with the requirements of sec-
tion 301.7701(b)–1(b)(3), Proced. & Admin. Regs. Petitioner
argues, however, that he informally abandoned his U.S. resi-
dent status when he sold his Hawaiian residence in 2003 and
allegedly moved back to Germany. In support of his argu-
ment that one may informally abandon resident alien status,
petitioner cites United States v. Yakou, 428 F.3d 241 (D.C.
Cir. 2005).
   In Yakou, the Court of Appeals for the D.C. Circuit
affirmed a District Court decision dismissing an indictment
charging the defendant with engaging in brokering activities
in violation of the Arms Export Control Act and its imple-
menting regulations, the International Traffic in Arms Regu-
lations (ITAR). Among the errors alleged by the Government
to have been committed by the District Court was its ruling
that the defendant’s LPR status changed without formal
administrative action by immigration officials so that the
defendant was not a ‘‘U.S. person’’, as defined by the ITAR,
subject to prosecution for brokering activities. Id. at 243. The
defendant in that case, while under investigation by Federal
agents, left his home in California in 1993, lived in London
until 1998, and then returned to his native Baghdad where
he lived and worked thereafter, making occasional trips to
the United States of short duration to visit his family. He
never formally renounced his LPR status by filing Form
 I–407 with the immigration authorities, and the Board of
Immigration Appeals (BIA) had not adjudged that his LPR
status had changed. Id. at 244. After noting that the control-
ling statutes and the ITAR ‘‘are all silent regarding the
manner and the point at which LPR status changes’’, the
court looked to decisions of the BIA for guidance on the issue.
Id. at 247–248. It found that ‘‘[n]umerous BIA decisions
express in dicta the BIA’s view that LPR status can change
256         143 UNITED STATES TAX COURT REPORTS              (240)


outside the formal adjudicatory process associated with
removal.’’ Id. at 248. The court distinguished United States
v. Grimley, 137 U.S. 147, 151–152 (1890), in which the
Supreme Court rejected the argument that an individual who
had falsified his qualifications for enlistment in the U.S.
military could avoid a court-martial for desertion because he
was never a soldier subject to court-martial. The Court of
Appeals noted that ‘‘LPR status [in Yakou] turns on
immigration law, and the United States fails to show that
LPR status operates in a way comparable to the military
relationship at issue in Grimley.’’ Yakou, 428 F.3d at 249.
   Correspondingly, LPR status for Federal income tax pur-
poses turns on Federal income tax law and is only indirectly
determined by immigration law. Unlike the controlling stat-
utes and the ITAR considered in Yakou, the Internal Rev-
enue Code and the regulations are not ‘‘silent regarding the
manner and the point at which LPR status changes’’, and
they do circumscribe the means by which an LPR may
abandon that status for Federal income tax purposes. See
sec. 7701(b)(6)(B) (LPR continues until ‘‘revoked’’ or ‘‘admin-
istratively or judicially determined to have been abandoned’’);
sec. 301.7701(b)–1(b)(1), Proced. & Admin. Regs. (‘‘Resident
status is deemed to continue unless it is rescinded or
administratively or judicially determined to have been aban-
doned.’’); sec. 301.7701(b)–1(b)(3) (‘‘If the alien initiates this
determination, resident status is considered to be abandoned
when the individual’s application for abandonment (INS
Form I–407) or a letter stating the alien’s intent to abandon
his or her resident status * * * is filed with the INS or a
consular officer.’’). The immigration law itself (including the
ITAR), which governed the result in Yakou, contains no such
requirements for abandoning residency status. Therefore,
Yakou is not on point and does not furnish a basis for peti-
tioner’s contention that he abandoned his LPR status before
filing a Form I–407 with the immigration authorities on
November 20, 2010. For the same reason, the fact that the
immigration authorities may deport, or deny reentry to, an
LPR under certain circumstances, see Alaka v. Elwood, 225
F. Supp. 2d 547, 553 (E.D. Pa. 2002), cited by petitioner, is
of no relevance herein.
   Nor are the requirements set forth in section 7701(b)(6)(B)
and section 301.7701(b)–1(b)(1) and (3), Proced. & Admin.
(240)                 TOPSNIK v. COMMISSIONER                              257


Regs., for abandoning LPR status vitiated by petitioner’s
2003 sale of his Hawaiian residence or by his arguably infre-
quent visits to the United States thereafter. As is made clear
by the House Ways and Means Committee report accom-
panying the enactment of section 7701(b)(1)(A)(i) and (6), ‘‘an
alien who comes to the United States so infrequently that, on
scrutiny, he or she is no longer legally entitled to permanent
resident status, but who has not officially lost or abandoned
that status, will be a resident for tax purposes.’’ H.R. Rept.
No. 98–432 (Part 2), supra at 226, 1984 U.S.C.C.A.N. at
1166. 14
   Petitioner also alleges that, because respondent argued
before the District Court in Topsnik I that petitioner is a
German resident, and because the court dismissed the case
for improper venue on that basis, respondent is estopped,
under the doctrine of judicial estoppel, from asserting a con-
trary position in this case.
   Judicial estoppel is an equitable doctrine that prevents a
party in a judicial proceeding from asserting a position con-
trary to one that that party has successfully persuaded a
court to accept in a prior judicial proceeding. See New Hamp-
shire v. Maine, 532 U.S. 742, 749–750 (2001); see also
Huddleston v. Commissioner, 100 T.C. 17, 26 (1993).
   In Topsnik I, the Government’s motion for dismissal was
based, in part, on its claim that Mr. Topsnik was a German
resident in 2011, the year in which he filed his complaint. In
its opinion, the District Court stated: ‘‘It is undisputed that
Plaintiff [petitioner herein] is a resident of Germany’’, and,
on that basis, granted the Government’s motion to dismiss
  14 The House Ways and Means Committee explained its rationale for re-

quiring official loss or abandonment of U.S. residency status as follows:
    The committee believes that aliens who have entered the United
  States as permanent residents and who have not officially lost or surren-
  dered the right to permanent U.S. residence should be taxable as U.S.
  residents. These persons have rights that are similar to those afforded
  [U.S.] citizens (including the right to enter the United States at will); eq-
  uity demands that they contribute to the cost of running the government
  as much as citizens. [H.R. Rept. No. 98–432 (Part 2), at 223 (1983), 1984
  U.S.C.C.A.N. 697, 1163.]
   Clearly, petitioner, as one who retained (and exercised) the right to enter
the United States at will throughout the years in issue, is among the class
of individuals targeted by the 1984 legislation.
258           143 UNITED STATES TAX COURT REPORTS                        (240)


the complaint for improper venue. In a subsequent pro-
ceeding before the District Court for the District of Columbia,
Topsnik v. United States, 12 F. Supp. 3d 1 (D.D.C. 2013)
(Topsnik III), the court determined that ‘‘the most that the
Central District of California held was that the plaintiff was
a resident of Germany in 2011 when he filed his complaint
in that court or alternatively when the court issued its ruling
on January 17, 2012.’’ Id. at 7. We agree with that deter-
mination. 15 In Topsnik I, Mr. Topsnik’s status as a German
resident during the years in issue herein (2004–09) was not
addressed by the parties and was not in issue. Therefore,
respondent is not judicially estopped from arguing that peti-
tioner was not a German resident during those years. 16 For
the same reason, respondent is not barred by the doctrines
of res judicata and collateral estoppel from asserting peti-
tioner’s U.S. residency during the years in issue, both of
which doctrines petitioner briefly invokes for support.
   We find that petitioner was an LPR of the United States
(i.e., a resident alien subject to U.S. taxation of his world-
wide income) during the years in issue and, therefore a ‘‘resi-
dent’’ of the United States as defined by article 4, paragraph
1, of the U.S.-Germany Treaty.
  2. Petitioner’s Status as a German Resident
  Having found that petitioner was an LPR of the United
States during the years in issue, we must sustain respond-
  15 We   do not reject petitioner’s argument on the basis of collateral estop-
pel because the court, in Topsnik v. United States, 12 F. Supp. 3d 1 (D.D.C.
2013) (Topsnik III), made clear that its determination that the court in
Topsnik v. United States, No. 2:11–cv–06958–JHN–MRW, 2012 WL
10637570 (C.D. Cal. Jan. 17, 2012), aff ’d, 554 Fed. Appx. 630 (9th Cir.
2014) (Topsnik I), found only that petitioner ‘‘currently resides in Ger-
many’’ was not essential to its decision. See Topsnik III, 12 F. Supp. 3d
at 7. Thus, the court’s decision in Topsnik III lacks one of the required fac-
tors for applying collateral estoppel. See Peck v. Commissioner, 90 T.C.
162, 166–167 (1988), aff ’d, 904 F.2d 525 (9th Cir. 1990).
   16 Petitioner also attempts to support his judicial estoppel argument by

referring to exhibits attached to respondent’s motion to dismiss in Topsnik
I. Those exhibits, for the most part, supply background information, and
one (a series of IRS transcripts relating to petitioner) is, at best, ambig-
uous regarding the IRS’ position with respect to petitioner’s residency dur-
ing the years in issue. In any event, those exhibits cannot be said to alter
or expand respondent’s actual argument, adopted by the court in Topsnik
I, that petitioner was a German resident in 2011.
(240)             TOPSNIK v. COMMISSIONER                   259


ent’s adjustments for those years unless we find that peti-
tioner is exempt from U.S. tax under the U.S.-Germany
Treaty. That will be the result if we find that petitioner was
also a German resident under article 4, paragraph 1 of the
treaty and, pursuant to the tiebreaker rules of article 4,
paragraph 2 of the treaty, he is to be considered a German
resident.
   Aside from his estoppel arguments, which we have
rejected, petitioner’s claim of German residency rests on his
contacts with Germany during the years in issue. Those con-
tacts include a room at his inn in Oerlenbach, a room at his
brother’s house in Freiburg, his ownership and operation of
the Oerlenbach inn, his ownership of a farmhouse, farm,
property used for ‘‘industrial and various purposes’’, and a
small ‘‘cafhouse’’. Petitioner also alleges that he ‘‘views Ger-
many as his center of vital interest, and where he has his
country of closer connection and did so for * * * [the years
in issue,] [a]ll of which is underscored by petitioner’s obliga-
tory and necessary personal German driver’s license.’’
   As noted supra, with respect to individuals, both the
original U.S.-Germany Treaty and the post-2006 treaty limit
the definition of a ‘‘ ‘resident of a Contracting State’ ’’ to
individuals ‘‘liable to tax therein by reason of * * * [domicile
or residence]’’, and both exclude from the definition ‘‘any per-
son who is liable to tax in that State in respect only of
income from sources in that State * * * or capital situated
therein.’’ Thus, the treaty test for residence in a contracting
State is the individual’s liability to pay tax to the State as
a resident, which, in the case of Germany, means that the
individual must be taxable on his or her worldwide income.
See Staff of J. Comm. on Taxation, Explanation of Proposed
Protocol to the Income Tax Treaty Between the United
States and Germany, at 9 (J. Comm. Print 2007) (‘‘Individ-
uals resident in Germany are subject to tax on their world-
wide income.’’); Tax Treaties (CCH) para. 3229, p. 77,181.
That that is the test for residency under the U.S.-Germany
Treaty is confirmed by the commentary with respect to
article 4 of the Organization for Economic Cooperation and
Development (OECD) Model Double Tax Convention on
Income and Capital (1977) (OECD Model Treaty), article 4,
paragraph 1 of which is, in all pertinent respects, identical
to article 4, paragraph 1, of the original and post-2006
260           143 UNITED STATES TAX COURT REPORTS                     (240)


U.S.-Germany treaties. 17 The commentary to article 4 para-
graph 1 states, in pertinent part: ‘‘As far as individuals are
concerned, the definition aims at covering the various forms
of personal attachment to a State which, in the domestic tax-
ation laws, form the basis of a comprehensive taxation (full
liability to tax).’’ OECD Committee on Fiscal Affairs, Model
Tax Convention on Income and on Capital, at C(4–9)
(1997). 18
   Thus, petitioner’s recitation of his contacts with Germany
during the years in issue is not relevant to his status as a
German resident during those years except insofar as they
served to subject him to German taxation of his worldwide
income. Petitioner does not allege that he is subject to Ger-
man taxation on his worldwide income, and the evidence in
the record is uniformly to the contrary.
   As noted supra, the information obtained by the German
competent authority from the German tax authority reveals
that (1) beginning in 2002, petitioner was registered with the
German tax authority as a taxpayer with limited liability,
taxable only on German source income, (2) petitioner failed
to file even the tax returns required of a limited liability tax-
payer despite the tax authority’s repeated requests that he
do so, (3) the German tax authority had no record of his
filing income tax returns in Germany for 2004 and subse-
quent years, and (4) because there was no evidence to
indicate that petitioner has or had a domicile or habitual
residence in Germany, the German tax authority would not
have considered him to be a German resident and, therefore,
would not have considered the gain on his installment sale
of GFI stock to be income taxable in Germany. There is no
  17 Where   the parties to a bilateral tax treaty were both OECD members
when the model treaty and commentary were drafted (which is the case
herein) and the bilateral treaty language is substantially the same as the
model treaty language (also the case herein), we have used the model trea-
ty commentary to interpret provisions of the bilateral tax treaty. See Podd
v. Commissioner, T.C. Memo. 1998–418, 1998 WL 800961, at *4 (and the
cases cited thereat).
  18 Subsequent updates of the OECD Model Treaty left unchanged, in all

pertinent respects, the article 4, paragraph 1, definition of resident con-
tained in the 1977 OECD Model Treaty as it pertains to individuals.
Therefore, the above-quoted commentary with respect to that definition ap-
plies to all of the OECD Model Treaties published since 1977. See, e.g., Tax
Treaties (CCH) paras. 200.04, 200A.04.
(240)                 TOPSNIK v. COMMISSIONER                             261


evidence in the record to refute the information obtained by
the German competent authority. Therefore, we find that
petitioner was not a ‘‘resident’’ of Germany as defined by
article 4, paragraph 1, of the U.S.-Germany Treaty.
  C. Conclusion
   Both parties appear to assume that the right of the United
States to tax petitioner’s gain on his 2004 sale of GFI stock
is governed by article 13, paragraph 5, of the treaty, which
grants the country of residence the right to tax gains from
the sale of intangible personal property. That assumption
implies the parties’ agreement that GFI’s assets did not con-
sist ‘‘wholly or principally of immovable property [i.e., real
property] situated in [the United States]’’, in which event
petitioner’s gain from his sale of his GFI stock would be tax-
able in the United States under article 13, paragraphs 1 and
2(b) of the U.S.-Germany Treaty, regardless of petitioner’s
residence. There is no evidence in the record indicating the
extent to which GFI’s assets consisted of ‘‘immovable prop-
erty’’. In the absence of such evidence and because
respondent has not argued for the application of article 13,
paragraph 2(b), we decide petitioner’s taxability on the basis
of his residence during the years in issue. We find that peti-
tioner was a U.S. and not a German resident during that
period. Therefore, pursuant to article 13, paragraph 5 of the
U.S.-Germany Treaty, petitioner is taxable by the United
States on his gain recognized during the years in issue from
the 2004 installment sale of his GFI stock. 19
  19 In his opening brief, respondent supports his argument that petitioner
may not be considered a German resident during the years in issue, in
part, by noting that petitioner spent little actual time in Germany and a
great deal of time in other countries, in particular, in Thailand, where he
operated a winery business and visited with his son, and the Philippines,
where, in 2007, he rented a house under a 10-year lease for the ostensible
purpose of providing a home for himself and his family. In petitioner’s
amended opening brief, filed more than a month after respondent’s open-
ing brief, petitioner characterizes respondent’s references to his travels and
activities during the years in issue as an argument that petitioner was a
resident of either Thailand or the Philippines during those years, and he
concludes that, therefore, he is entitled to the benefits provided by the in-
come tax treaties between the United States and one or the other of those
countries. Respondent argues in his reply brief that he has not had an op-
                                                 Continued
262           143 UNITED STATES TAX COURT REPORTS                        (240)


III. Additions to Tax
  A. Introduction
   Respondent determined that petitioner is liable for addi-
tions to tax pursuant to sections 6651(a)(1) and (2) and 6654.
Respondent has the burden of production with respect to
those additions to tax. See sec. 7491(c). To meet that burden,
respondent must produce evidence showing that the addi-
tions to tax are appropriate. See id.; Higbee v. Commissioner,
116 T.C. 438, 446 (2001). Once respondent satisfies that bur-
den, petitioner has the burden of proof with respect to excul-
patory factors such as reasonable cause. See Higbee v.
Commissioner, 116 T.C. at 446–447.


portunity to consider petitioner’s argument or whether petitioner’s contacts
with either Thailand or the Philippines were sufficient to make him a resi-
dent of either for any or all of the years in issue. Therefore, he requests
that we ‘‘not further consider this new issue as it will greatly prejudice re-
spondent.’’ Without addressing respondent’s argument regarding timeli-
ness and prejudice, we note that petitioner has failed to prove that his ties
to either Thailand or the Philippines were sufficient to make him a ‘‘resi-
dent’’ of either country as that term is defined by the United States’ tax
treaties with those two countries. See, e.g., Convention With Respect to
Taxes on Income, U.S.-Phil., art. 3, para. 1(a)(ii), (2) (definition of ‘‘resi-
dent’’), art. 14, para. 2 (treatment of gains), Oct. 1, 1976, 34 U.S.T. 1277,
available at http://www.irs.gov/pub/irs-trty/philip.pdf; Convention for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion With
Respect to Taxes on Income, U.S.-Thai., art. 4, para.1, Nov. 26, 1996, S.
Treaty Doc. No. 105–2 (1997), available at http://www.gpo.gov/fdsys/pkg/
CDOC–105tdoc2/pdf/CDOC–105tdoc2.pdf. For example, although petitioner
has shown that he rented premises in the Philippines in 2007, ostensibly
to be used as a residence for himself and his family, he has not shown the
number of days in 2007–09 that he actually treated those premises as his
residence; and, aside from frequent business trips, during which he stayed
in a hotel, he has not shown significant ties to the Philippines before 2007.
Nor has petitioner analyzed either treaty to show that residence therein,
even if established, would necessarily negate the United States’ right to
tax petitioner’s gain on the sale of his GFI stock. See, e.g., the U.S.-Thai.
treaty, art. 13, para. 1, which provides, with exceptions not relevant here-
in, that ‘‘each Contracting State may tax gains from the alienation of prop-
erty in accordance with the provisions of its domestic law.’’ Therefore, we
reject petitioner’s suggestion that respondent is barred from taxing that
gain pursuant to the United States’ tax treaties with either Thailand or
the Philippines.
(240)             TOPSNIK v. COMMISSIONER                    263


  B. Respondent’s Section 6651(a)(1) and (2) and 6654 Deter-
    minations
  1. Analysis
   Section 6651(a)(1) provides for an addition to tax in the
event a taxpayer fails to file a timely return (determined
with regard to any extension of time for filing), unless it is
shown that such failure is due to reasonable cause and not
due to willful neglect. The amount of the addition is equal to
5% of the amount required to be shown as tax on the delin-
quent return for each month or fraction thereof during which
the return remains delinquent, up to a maximum addition of
25% for returns more than four months delinquent.
   Section 6651(a)(2) provides for an addition to tax for
failure to timely pay the amount of tax shown on a return,
unless the taxpayer establishes that the failure was due to
reasonable cause and not willful neglect. The addition is cal-
culated as 0.5% of the amount shown as tax on the return
but not paid, with an additional 0.5% for each month or frac-
tion thereof during which the failure to pay continues, up to
a maximum of 25%. Id. The amount of the addition to tax
under section 6651(a)(2) reduces the addition to tax under
section 6651(a)(1) for any month for which both additions to
tax apply. See sec. 6651(c)(1). Pursuant to section 6651(g)(2),
SFRs prepared by the Commissioner under section 6020(b)
are treated as taxpayer returns for purposes of determining
the addition to tax under section 6651(a)(2).
   Section 6654(a) and (b) provides for an addition to tax in
the event of an underpayment of a required installment of
individual estimated tax. Each required installment of esti-
mated tax is equal to 25% of the ‘‘required annual payment’’,
which in turn is equal to the lesser of (1) ‘‘90 percent of the
tax shown on the return for the taxable year (or, if no return
is filed, 90 percent of the tax for such year)’’, or (2) if the
individual filed a return for the immediately preceding year,
100% of the tax shown on that return. Sec. 6654(d)(1)(A) and
(B). Except in very limited circumstances not applicable
herein, see sec. 6654(e)(3)(B), section 6654 provides no excep-
tion for reasonable cause or lack of willful neglect.
   It is undisputed that petitioner’s (1) late filing of his 2004
and 2005 returns and failure to file returns for 2006–09, (2)
untimely payment of the amount of tax shown on his 2004
264        143 UNITED STATES TAX COURT REPORTS             (240)


return, (3) nonpayment of his tax liabilities as reflected on
the SFRs filed for 2006–09, and (4) failure (made clear on the
face of his 2005 return) to pay any estimated tax for 2005
demonstrate that respondent has satisfied his burden of
production, under section 7491(c), with respect to his imposi-
tion of additions to tax under sections 6651(a)(1) and (2) and
6654.
   With respect to the additions to tax, petitioner’s only argu-
ment against respondent’s imposition thereof is that he
‘‘acted due to reasonable cause and not due to willful
neglect.’’ Specifically, he states: ‘‘[A]ny amount of additional
tax arising from a miscalculation of installment capital gain
amounts brought about by the tax return preparer is not to
be attributable to petitioner’’, and further ‘‘that nonresident
alien filings are a product of instructions from counsel for
petitioner, and asserted penalties in this regard are not
attributed to petitioner.’’ Petitioner’s arguments are
unpersuasive. The additions to tax do not relate to the mis-
calculations of petitioner’s capital gain for 2004 and 2005.
Nor do they relate to any ‘‘nonresident alien filings’’ (presum-
ably, the zero tax liability Forms 1040NR that petitioner
late-filed for 2006–09) by petitioner. If petitioner is
attempting to escape the section 6651(a)(1) late-filing penalty
by arguing that any and all of his late filings (and nonfilings)
were the product of instructions from counsel, and, therefore,
not attributable to him, that argument must be rejected as
well under the authority of United States v. Boyle, 469 U.S.
241, 252 (1985) (‘‘The failure to make a timely filing of a tax
return is not excused by the taxpayer’s reliance on an agent,
and such reliance is not ‘reasonable cause’ for a late filing
under § 6651(a)(1).’’).
   We note, however, that respondent appears to be over-
reaching in his imposition of the section 6651(a)(2) addition
to tax for 2004. The Form 5278, Statement—Income Tax
Changes, attached to the notice computes a $49,358 addition
to tax for 2004 under section 6651(a)(2), which is 25% of the
$197,433 total amount due for that year. Moreover, in
respondent’s discussion of petitioner’s liability for that addi-
tion to tax, respondent states that ‘‘petitioner failed to pay
the tax due for the 2004, and 2006 through 2009 taxable
years by the due dates of the returns.’’ While it is proper to
base the section 6651(a)(2) addition to tax on the amounts
(240)             TOPSNIK v. COMMISSIONER                  265


due for 2006–09, which are the amounts shown on the SFRs
for those years, it is not proper to base it on the amount due
for 2004 because petitioner filed a return for that year and
‘‘the amount shown as tax’’ on that return (the late payment
of which is the basis for the addition to tax under section
6651(a)(2)) is $62,117, which petitioner paid in two install-
ments: $10,990 on June 4, 2007, with his late-filed 2004
return, and $51,127 on July 5, 2007. Therefore, we direct
that, in connection with the Rule 155 computation,
respondent compute the section 6651(a)(2) addition to tax for
2004 on the basis of (1) petitioner’s late payment of the
$62,117 shown on his 2004 return, and (2) the number of
months between the due date of that return and the dates
of payment.
  2. Conclusion
  We sustain respondent’s imposition of additions to tax,
with the foregoing caveat regarding his imposition of an
addition to tax under section 6651(a)(2) for 2004.
                     Decision will be entered under Rule 155.

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