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International taxation: a guide for academics abroad.

I. INTRODUCTION

The United States Internal Revenue Service (IRS) and Department of the Treasury have fueled the forces of globalization since the early twentieth century. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Often considerations of international tax law focus on business "tax havens" or U.S. tax policy for American entities and their employees abroad. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) American tax policies also affect individuals residing abroad, including those in academia. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Academics are one group who consistently travel to other nations, and their tax burden is relatively heavy. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Once preparation for an academic career is complete, however, academics abroad can take advantage of one very important tax benefit: income exclusion for U.S. tax purposes. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Further, academics are not required to pay foreign taxes while residing abroad under many bilateral tax treaties negotiated by the Department of Treasury. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Thus, academics may receive one particular benefit that others, even business people, may not. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The IRS has not welcomed the idea of academics working abroad, tax-free, because the purpose of this statutory exclusion in section 911 of the tax code was to assist American businesses competing abroad. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Despite the resistance from the IRS, however, public policy and equity are good grounds for continued academic tax exclusion, and the Department of Treasury's tax treaties support exclusion. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

This Note will explain some of the tax consequences of academic sabbaticals abroad. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Specifically, Part II of this Note will provide a history of the applicable tax law, both congressional and administrative. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Part III will consider various hypothetical academic situations, and Part IV will demonstrate how academics may benefit from tax laws. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Finally, Part V will summarize the benefits and burdens of specific travel decisions. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

II. HISTORY

The IRS generally considers any accretion to the wealth of an American residing anywhere to be taxable. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Despite this universal claim, Congress also has excluded the income of Americans living abroad for almost as long as the tax system itself has existed. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The Department of the Treasury has strengthened this tax exclusion by negotiating a series of tax treaties around the world that specifically exempt academics from paying foreign taxes when abroad. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Corporate tax strategists embraced congressional exclusion as soon as it was available. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Academics taking sabbaticals should embrace these exclusions as well, by learning whether their sabbaticals conform to the requirements of section 911 and the applicable tax treaties. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

A. Congressional Tax Law

Unlike most other nations in the world, the United States taxes its citizens' income from any source. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) A glance at the congressional history of American taxation, however, demonstrates that this worldwide system of taxation has been a problem for lawmakers since its inception. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The perception of unfairness in exempting income from taxation has rankled some Americans, particularly if no foreign taxes are paid, but American businesses continue to exploit this exception. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Academics should also take advantage of this exception. NOTEREF _Ref80684203 \h \* MERGEFORMAT

The original purpose of Congress's income tax exemption for Americans abroad was "in the interest of foreign trade, to induce Americans to accept employment abroad and put American business on an equality with foreign competitors." (NOTEREF _Ref80684203 \h \* MERGEFORMAT) That narrow purpose was "broadened by 1951 to making all citizens residing and earning income outside the United States competitive, taxwise." (NOTEREF _Ref80684203 \h \* MERGEFORMAT) More specifically, taxpayers who found themselves "earning their foreign source income as teachers, come within the legislative purpose" of Section 911. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The congressional decision to exempt income originally was motivated by a sense of fairness and a concern that Americans would otherwise be tempted to renounce their citizenship. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) As the Fifth Circuit intimated in dicta, encouraging teachers and professors to travel abroad can and should be an equally compelling reason. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

Two U.S. statutory provisions limit double taxation of American citizens earning income abroad. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The first provision, the foreign tax credit, matches foreign taxes paid, dollar for dollar. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The second provision excludes income earned abroad up to $87,000, adjusted for inflation. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The latter exclusion is the focus of this Note: U.S. taxpayers are taxed on their income from outside the United States, but when an individual qualifies, she may elect to exclude from gross income more than $87,000 of foreign earned income. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

1. What Constitutes Foreign Earned Income

A taxpayer's "foreign earned income" is her earned income attributable to services she performed during a qualifying period abroad. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The source of a taxpayer's income, whether American or foreign, is immaterial unless that source is the U.S. government; income from the government may never be excluded under section 911. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Even taxpayers who are paid indirectly by an agency of the U.S. government are unable to take advantage of the exemption. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

To exclude foreign earned income, however, the taxpayer must meet certain time requirements in her stay abroad. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The ceiling for the section 911 exclusion is $87,600 in 2008, and it is adjusted annually for inflation based on the Consumer Price Index. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) To exclude foreign earned income, however, the taxpayer must meet certain time requirements in her stay abroad, discussed below. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

2. Bona Fide Resident for Twelve Months or Physically Present For At Least 330 Full Days

The taxpayer must meet at least one of two possible time requirement tests to qualify as a taxpayer abroad who may exclude income. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) These tests are the Foreign Residence Test and the Foreign Presence Test. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

For the Foreign Residence Test, an American citizen must be a bona fide resident of one or more foreign countries for an uninterrupted period that encompasses an entire tax year. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) This is the more definitive of the two tests, meaning the taxpayer stayed abroad for an entire year, not less than 365 consecutive days. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

The Foreign Presence Test requires that an American citizen or resident alien be physically present in one or more foreign countries for any twelve consecutive months. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Brief trips to the United States do not cancel physical presence. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Presence ceases, however, if the time abroad is suddenly interrupted by a long-term return to the United States. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

3. "Abode Factor"

To meet the qualifications of section 911 under either the Foreign Residence Test or the Foreign Presence Test, the taxpayer's "tax home" must be in the foreign country. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) She cannot have an abode in the United States. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) If the taxpayer is temporarily present in the United States, or if she maintains a dwelling in the United States, her tax home is not necessarily in the United States, though it makes it more difficult for her to claim a foreign one. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) In short, the taxpayer must actually live abroad for either 330 or 365 days with intent to stay there in order to claim income exclusion. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

The only requirement necessary to satisfy section 911 is an intention to reside abroad for that length of time, and evidence of the steps taken demonstrating that intention. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Even if the taxpayer remains away for more than one year, she may be precluded from claiming a foreign tax home, if she keeps her economic, familial, and personal connections with her previous address in the United States. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) A taxpayer cannot have a tax home outside of the United States if her "abode" is the United States. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) If the taxpayer's foreign position lasts for one year or more, it is arguably of indefinite duration, and so the new, foreign place of employment can become the tax home, although this is where the IRS may object, making litigation necessary. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

The taxpayer, however, need not permanently avoid returning to the United States. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Judge Learned Hand classified the physical presence of a taxpayer in differing degrees, ranging from 'domicil' [sic]," which is most permanent, to "'residence,' habitancy,' 'sojourning,' and 'transience.'" (NOTEREF _Ref80684203 \h \* MERGEFORMAT) In contrast to residence, domicile does not change as long as there is an intention to someday return home to the United States. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Residence can move to a foreign country even if the taxpayer's work requires that she move constantly while abroad, as an oil prospector must while working for an American firm in Colombia. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Making a home in a foreign country does not necessarily entail "buying a house" or changing domicile. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

Last, taxpayers should be cognizant of the Alternative Minimum Tax (AMT), which is calculated differently from regular income tax. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The AMT originally targeted taxpayers with very large incomes who were avoiding tax liability entirely, through exclusions, deductions, and credits. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) It is paid only if, and to the extent it exceeds, the taxpayer's regular tax. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The AMT may forestall an academic from using foreign income exemptions, or the AMT may make the tax paperwork significantly more complex. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

B. Treasury International Tax Law

The Department of the Treasury maintains a global perspective. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Worldwide movements of people and trade are key concerns. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Instead of fierce criticism from U.S. business groups, the Treasury usually receives commendations. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

Treasury tax treaties are cohesive documents, with purposes and provisions aimed toward furthering the same goal. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) While treaty negotiators are aware of this cohesiveness, however, the private lawyers and government officials who interpret its provisions may not be. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The Treasury Department attempts to remedy this situation by providing a technical explanation of each treaty, based upon the notes of that treaty's negotiators. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The Treasury Department also provides a U.S. Model Treaty on taxation based upon a hypothetical convention. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

The purpose of these tax treaties signed by the United States is "for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income." (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Beyond double taxation, the U.S. Model Income Tax Convention is also a starting point in bilateral treaty negotiations with other countries. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Note that most of these treaties contain the traditional "savings" clause, whereby each signatory country reserves the right to tax its nationals as if the Convention had no effect. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) This is where I.R.C. section 911 becomes important. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The United States has entered into treaties with several countries that exempt academics from taxation by a foreign government while working in the foreign nation. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

In general, older tax treaties lacked specifics, making it unclear whether researchers were exempt from local taxes or whether the exemption applied to teachers only or to teachers and professors. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) In the 1970s, the exemption usually was for "teachers" only. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) In the 1980s and 1990s, other specific provisions were more common, limiting the length of time allowable and stopping overlaps, such as student to teacher exemptions. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) During this period, some treaties specifically exempted medical residents and researchers from taxation, while others did not. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Almost all treaties considered here prohibited exemptions for non-academic research, "for the benefit of a specific person or persons." (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

In the more recent treaty considered here, between the United States and Belgium, there is a broad exemption for "teaching or carrying on research" for up two years. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) While the exemption does not apply to income from research done for "the private benefit of a specific person or persons," the description is remarkably broad, indicating perhaps a Treasury policy designed to encourage researching and teaching abroad. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The period allowable, however, is a short two years, and student and teacher exemptions together form the period; they are not separate. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

Several countries have tax treaties with the United States that do not include an exemption for academics, including Canada, Ireland, Mexico, New Zealand, South Africa, and the United Kingdom. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Academics therefore may rely on the U.S. tax credit for foreign taxes paid in these countries. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

C. Exemption from Foreign Tax and U.S. Tax

May an academic work in a country with a tax treaty exempting academics from taxation and avoid paying U.S. taxes as well? Yes, they can, according to one case, Scott v. United States. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) In Scott, the U.S. Court of Claims considered a case in which an academic working abroad had not paid foreign taxes. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Despite the history of section 911 for businesses, the court found that the exemption applied equally well to academics. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

A warning: avoiding taxation altogether is not for the faint of heart but for the truly litigious. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The Savings Clause in tax treaties is a consideration here, as is the general claim of the United States government that it can tax the income of its citizens anywhere. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Section 911 is a matter of "legislative grace" that can be construed strictly against the taxpayer. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) A further warning: high-earning individuals who clearly are using the exemption as loophole will be examined closely. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Honesty, clarity, and good record keeping are important. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Also, a taxpayer cannot just travel in order to avoid taxation. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) One court noted approvingly that a taxpayer "did not live in Colombia to evade taxes or for any bad purpose, but only to do the work he was sent to do." (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Thus, an academic who chooses to travel for work may reap benefits of tax exemption as a secondary matter. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

III. FACTS

Many universities and colleges offer a full-year sabbatical after six years of teaching. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Some private and public high schools offer sabbaticals as well. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Not only does academia embrace sabbaticals, but many outside professions do, too. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) When academics contemplate a sabbatical abroad, however, they primarily consider issues of language, courses to take or teach, and lifestyle. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) They should also consider their tax liabilities, because the tax consequences of researching or teaching abroad can be profound. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Some situations cannot be controlled: one's home institution may organize a sabbatical, or the taxpayer may make the arrangements. NOTEREF _Ref80684203 \h \* MERGEFORMAT) In planning a stay abroad, the following points must be considered for taxation: source of income; length of stay; travel expenses; housing costs while abroad; and the Alternative Minimum Tax. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The most legally significant of these issues are considered below. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

A. Length of Stay

Academic sabbaticals in a foreign country can last for varying lengths of time, but the most common period is for one semester or for one academic year. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The point of such adventures is to deepen scholarship or to learn a new research technique. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Some academics travel for a year to write papers, books, or grants--obtaining up to a year's reprieve from teaching and administrative work. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Shorter trips, such as study-abroad opportunities during a school break, are also possible. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

Settled academics, such as professors with an appointment at an American institution, seem to take shorter sabbaticals, lasting one year or even one semester. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) They also plan to return to the United States after their time abroad. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Less established academics, moving from one temporary appointment to another, may hope to stay for longer periods, if they can obtain an appointment. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Further, until the newer academic obtains her next appointment, she has no idea whether she will remain longer. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

B. Source of Income

A professor's home institution will sometimes pay an academic salary while abroad on sabbatical. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Alternatively, a grant may cover expenses. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Sometimes, however, the United States government will provide some sort of funding, and an important example of government-funded travel abroad is the Fulbright Scholar Program, which sends 800 faculty and professionals abroad per year. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The U.S. Department of State sponsors the program. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The U.S. government can fund programs in unexpected ways as well. NOTEREF _Ref80684203 \h \* MERGEFORMAT For example, one taxpayer was employed by Raytheon Engineers & Constructors, Inc. on Johnston Island through 1997. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The taxpayer attempted to exclude his income under Section 911, because he believed that he lived outside of the United States. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Unfortunately for him, the court held that a "taxpayer who resides in Johnston Island does not qualify for the section 911 exclusion because Johnston Island is a U.S. possession and not a foreign country." (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

C. Temporary or Indefinite Abode

Perhaps an unconsidered tax factor in sabbaticals abroad is whether they are of a temporary or indefinite nature. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The plight of one Professor of Civil Engineering at the Massachusetts Institute of Technology is instructive in this regard. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Often, if the IRS challenges tax exemption, the question is whether the taxpayer's tax home had left the United States. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The intention to travel to many countries and then return to one's American home at the end of a year means that this tax home remains the United States. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) In the case involving the Professor of Civil Engineering, the taxpayer's home did not leave the United States because there was no intention to remain anywhere else permanently. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

IV. ANALYSIS

Since the United States taxes its citizens' income from whatever source derived, income from a foreign university or income from an American university while teaching abroad falls under this all-inclusive standard. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) If a professor is better off economically, she has gross income. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Whether this income is exempt from taxation, however, depends on several factors, which are considered below. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

A. Length of Stay

Academics remain on foreign sabbaticals for varying lengths of time, and this is where many academics will fail to meet the requirements of Section 911. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) A semester or less will not qualify an academic under either of the two IRS residency tests. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

If an academic remains a resident of a foreign country for an uninterrupted sabbatical that encompasses an entire, twelve-month year, she qualifies as a "bona fide resident," and her income is exempt under Section 911. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Alternatively, an academic on sabbatical may qualify under the "Foreign Presence Test" if she is present in the foreign country for at least 330 full days during any consecutive twelve months. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Thus, even year-long academic sabbaticals must include the summer months in order to qualify for exemption under Section 911. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) A one-semester sabbatical will not qualify for tax exemption under Section 911. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

Let us consider the young academic who has traveled to India in July of one year and who left in June of the next year. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) She has not resided in India for the entire, taxable, twelve-month year and thus does not qualify for exemption under Foreign Residence Test. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) She was present in a foreign country an aggregate of 330 full days during each of the following twelve-month periods, however: June 21, 2007 through June 20, 2008; and July 25, 2007 through July 24, 2008. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Thus, she qualifies for foreign income exclusion under Section 911 under the Foreign Presence Test for up to $86,000 for the year. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) If she had remained for a period shorter than 330 days, she would not have qualified for the exclusion under Section 911. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

The next consideration for an academic in India is whether she must pay Indian taxes. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) An academic in India does not need to pay Indian taxes. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The Tax Convention between the United States and India is clear: professors, teachers, and research scholars are exempt from Indian taxation for up to two years. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Thus, a 330-day sabbatical in India allows this academic complete freedom from any American or Indian taxation for up to two years. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

What if this academic had traveled to Canada, or Ireland, or the United Kingdom? (NOTEREF _Ref80684203 \h \* MERGEFORMAT) She would not enjoy the automatic privilege of exemption from foreign taxes, because tax treaties with these countries do not provide a specific exemption for academics. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Further, a university researcher may have to argue for her qualification under the treaty, because some tax treaties call for an exemption for "teachers," rather than for professors or academics generally. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

B. Source of Income

Does it matter which institution, domestic or foreign, pays for an academic sabbatical abroad? (NOTEREF _Ref80684203 \h \* MERGEFORMAT )The source of income is generally not important, although a presumption of return to the U.S. institution may affect whether there was an intention to truly reside abroad. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) There is, however, a complete prohibition against U.S. government funded sabbaticals being exempt from taxation. (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Recipients of prestigious awards like the Fulbright are more likely to run afoul of this prohibition, because the Fulbright is directly funded by the U.S. government. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

What if the foreign institution also provides housing? (NOTEREF _Ref80684203 \h \* MERGEFORMAT) Is that amount taxable or may the taxpayer exclude the housing payment under Section 911 as well? (NOTEREF _Ref80684203 \h \* MERGEFORMAT) The taxpayer may exclude the housing costs from American taxation as well, enjoying additional tax relief. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) The academic who pays for housing on her own, however, no matter how expensive, is not able to enjoy similar tax relief. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

C. Temporary or Indefinite Abode

If an academic retains her home in the United States, she must contend with the IRS, which explains the location of one's tax home as depending upon the permanence of the absence from the United States. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) If that taxpayer expects her employment abroad to last 330 days or less, and it does, the IRS will view it as temporary and not as establishing an abode under section 911. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) If she expects her employment to last longer, however, and it does, she has moved her abode abroad, even if her spouse and children remain in her American dwelling while she is away. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

The IRS would argue that the Americans, as discussed above, who visit another country for less than one year and intend to return to the United States keep their tax homes, the "abode factor," in the United States. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) But an academic who is away from home for longer than one year, even with the intention to return at some future point, can shift her tax home to a new, foreign address by arguing her intention was to keep an appointment for so long as she could. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

Additionally, even if the source of income is not the U.S. government, as discussed above, the place of residence may be under U.S. control. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) The place of new residence must be a "foreign country" to qualify for the section 911 exemption. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) A more established professor would likely remain tied to her American tax home--paying the mortgage and planning a return that would defeat a foreign tax home claim. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) Conversely, the newer academic who travels from appointment to appointment seeking full-time posts would have no real expectations about where her next tax home is. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) Thus, her tax home likely would move abroad when she did, while the established academic's tax home would not. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

Also significant is the academic who travels extensively while on sabbatical. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) Too much travel translates into no foreign tax home, and thus no exemption under Section 911. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) The more likely aspirant to recreational travel would be the well-compensated, established academic, rather than the new one, but that person may not claim exemption because her abode did not move. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) Working on sabbatical for a semester, but stretching it out for a year by traveling around the world, also will not work. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) An academic can reside in more than one foreign country, however, if she is intending to reside in one country, and then another, which is a circumstance in which newer academics find themselves. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

The Savings Clause in treaties, and the fact that the United States can tax the income of its citizens anywhere, means that section 911 is a matter of "legislative grace," that can be construed strictly against the taxpayer. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) High-earning academics that use the exemption as a loophole will be examined most closely. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) Honesty, clarity, and good record keeping are important, but less affluent academics moving from position to position, hoping for permanent employment are the candidates most likely to succeed in exempting their foreign-earned income. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) Arguably the goal of Treasury tax treaties is to encourage academics to go abroad by putting specific provisions in tax treaties just for them. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) The IRS may not like it, but at least one court has held the statutory language of section 911 does not preclude an academic from enjoying the benefit of both Section 911 and foreign tax exemption under treaty provisions. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) International tax treaties and section 911 present opportunities for newer, less-established academics on sabbatical to enjoy a tax reprieve after years spent preparing for their academic careers. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

V. CONCLUSION

American citizens earning an income abroad potentially could be taxed twice--once by the United States and once by the country in which income was earned. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) As early as 1918, however, Congress enacted an exemption from taxes for American business taxpayers abroad. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) Academics may use the exemption, too, despite the possible hostility of the IRS. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) Coupled with the Department of Treasury's tax treaties, a less-established academic who moves from post to post may qualify under both the section 911 exemption and a tax treaty, effectively exempting all of her income over $80,000 for two years. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) Thus, academics traveling to treaty countries really do have an opportunity to have their cake and eat it too. (NOTEREF _ Ref80684203 \h \* MERGEFORMAT) If challenged by the IRS, having a specific clause in the treaty exempting academic income is preferable, particularly when a teacher also has the Scott case where a court held that section 911 and a treaty exemption could be combined. (NOTEREF _Ref80684203 \h \* MERGEFORMAT)

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Parts III.A and III.B (recounting measures taken that encourage globalization).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Lance B. Gordon & E. Daniel Leightman, Tax Planning for United States Citizens and Resident Aliens Working Abroad, 15 SW. U. L. REV. 1, 4 (1984) (considering business tax decisions).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See generally infra Part IV (applying tax exemption rules to academics abroad).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See JAMES J. FREELAND, DANIEL J. LATHROPE, STEPHEN A. LIND & RICHARD B. STEPHENS, FUNDAMENTALS OF FEDERAL INCOME TAXATION: CASES AND MATERIALS 225-32 (14th ed. 2006) (considering educational tax liabilities). The Hope Scholarship and Lifetime Learning Credits assist academics by providing a dollar-for-dollar reduction of tax liability. Id. at 226. While the credits initially sound generous, the Hope Scholarship Credit allows a maximum $1,500 credit for the first two years of a student's postsecondary education. I.R.C. [section] 25A(b)(1) (2006). The Lifetime Learning Credit allows 20% of qualified tuition and expenses, up to $10,000. I.R.C. [section] 25A(c)(1) (2006). However, the total credit begins to phase out when the taxpayer reaches $40,000 of income, and phases out entirely at $50,000 of income for a single taxpayer. I.R.C. [section] 25A(d)(2) (2006). All of the years in school preparing for a career in academia are taxable, with almost no deductions allowed by the U.S. Tax Code. See Loretta Collins Argrett, Tax Treatment of Higher Education Expenditures: An Unfair Investment Disincentive, 41 SYRACUSE L. REV. 621 (1990) (arguing investments in higher education are treated less favorably than other investments). Unlike the mortgage interest deduction, for example, the interest deduction for educational loans is paltry. See FREELAND ET AL., supra, at 492. "Qualified residence interest is deductible even though it is a personal expense." FREELAND ET AL., supra, at 492.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) . I.R.C. [section] 911 (2006). See generally I.R.S. Publ'n 54 (2008), Tax Guide for U.S. Citizens and Resident Aliens Abroad, available at http://www.irs.gov/publications/p54/index.html (explaining how to file for [section] 911 exemption) [hereinafter I.R.S. Pub. 54]. This is a fascinating exclusion, considering the reach of the American global system of taxation. See infra Part II (delineating history of exclusion).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See I.R.S. Publ'n 901 at 1 (June 2007), available at http://www.irs.gov/publications/p901/ar02.html#d0e167 (listing tax exemptions under headings "Personal Service Income," "Professors, Teachers, and Researchers," "Students and Apprentices," and "Wages and Pensions Paid by a Foreign Government"(emphasis added)). Note that if an academic travels to a country without specific provisions for professors and teachers, that academic may still qualify, if a tax treaty with the United States exists, under a "Personal Service Income" heading. Id. at 3. However, each treaty treats personal service income differently. Id. But see Filler v. Comm'r, 74 T.C. 406, 410-11 (1980) (noting "savings clause" put in U.S. tax treaties, reserving right of U.S. government to tax income covered by any treaty).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part IV (discussing how academics may benefit from tax laws). But see supra note 6 and accompanying text (discussing "Personal Service Income").

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Gelhar v. Comm'r, 63 T.C.M. (CCH) 2466 (1992) (arguing sabbatical abroad not qualified for [section] 911 exclusion); infra Part II.A (regarding purpose of [section] 911). (NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part V (advocating continuation of academic exclusion).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part III (detailing specific tax exclusion situations).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part II (tracing development of American foreign tax credit, considering international tax treaties and foreign tax systems).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part III-IV.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part V (summarizing important tax considerations for traveling academics).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Comm'r v. Glenshaw Glass Co., 348 U.S. 426 (1955) (holding exemplary damages for fraud and punitive two-thirds portion of treble damages were gross income); see also 26 C.F.R. [section] 1.1-1(b) (2006); Cook v. Tait, 265 U.S. 47 (1924) (holding U.S. citizen working and residing in Mexico may be taxed by United States).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Michael S. Kirsch, Taxing Citizens in a Global Economy, 82 N.Y.U. L. REV. 443, 454 (2007); Michael E. Zeller & Eric D. Gazin, The Long Arm of the IRS: U.S. Tax Treatment of Foreign-Source Income, 7 GEN. PRAC. SOLO & SMALL FIRM LAW 34, 34 (1999). An income tax that has applied to "every citizen of the United States, whether residing at home or abroad" has been in effect in the United States since 1913, after the ratification of the Sixteenth Amendment. Kirsch, supra, at 454 (citing legislative language in 1913 taxation act). The history of income taxation is fraught with conflict in part because it required a constitutional amendment. See U.S. CONST. amend. XVI. "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration." Id. Prior to ratification, taxes were "apportioned among the several states," with no "direct" tax allowed, "unless in proportion to the census . . . ." U.S. CONST. art. I, [section] 2, cl. 3; U.S. CONST. art. I, [section] 9, cl. 4. Congress passed the first permanent and constitutional act to tax income in October 1913. United States Revenue Act, ch. 16, 38 Stat. 114 (1913); see also Eisner v. Macomber, 252 U.S. 189 (1920) (upholding congressional power to tax income of stockholder without apportionment).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part II.B (considering various tax treaties).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Diane Ring, International Tax Relations: Theory and Implications, 60 TAX L. REV. 83, 83-84 (2007) (considering business applications); see Adam H. Rosenzweig, Harnessing the Costs of International Tax Arbitrage, 26 VA. TAX REV. 555, 560 (2007) (discussing decision by U.S. to avoid double taxation resulting in double non-taxation situations). See generally Richard D. Teigen, International Taxation: A Guide for U.S. Corporations, 18 WM. MITCHELL L. REV. 291 (Spring 1992) (offering advice for businesses).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part IV (examining tax consequences of sabbaticals and employment abroad).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .HUGH J. AULT & BRIAN J. ARNOLD, COMPARATIVE INCOME TAXATION: A STRUCTURAL ANALYSIS 155 (1997) (explaining international tax regimes). The modern Internal Revenue Code defines gross income for Americans as: "[G]ross income means all income from whatever source derived." I.R.C. [section] 61 (2006). Any accretion to wealth is taxable income under this standard. See Cook v. Tait, 265 U.S. at 56 (establishing once and for all American citizenship entails reciprocal tax responsibilities).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See, e.g., Foreman v. United States, 60 F.3d 1559, 1563-64 (D.C. Cir. 1995) (finding relocation expenses of Arabian American Oil Company not entirely excludable because of recent changes to [section] 911); Hills v. Comm'r, 72 T.C. 958, 965 (1980) (deciding relocation expenses of Arabian American Oil Company excludable under "grandfather clause," later overturned); Swenson v. Thomas, 164 F.2d 783, 783-84 (5th Cir. 1947) (finding Congressional intent to strengthen requirement of bona fide residence abroad in changes of 1942). According to one author, "It would be hard to think of a more contentious area of international tax policy than the treatment of United States citizens and residents living overseas." 1 PHILIP F. POSTLEWAITE, INTERNATIONAL TAXATION: CORPORATE AND INDIVIDUAL [section] 3.01 (3d ed. 1999); see also supra note 15 and accompanying text (considering history of [section] 911 and its use in assisting U.S. businesses abroad); cf. Ring, supra note 17, at 88 (suggesting application of international relations theory to improve tax codes in light of more international transactions).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Kerry R. Weinger, Implications of Recent Changes to Internal Revenue Code Section 911 for Multinational Employers, 34 CORP. TAX'N 39, 39 (2007) (noting numerous efforts to eliminate [section] 911 have failed and only recently has [section] 911 been eliminated).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part II (examining development of American foreign tax credit).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Swenson, 164 F.2d at 783 (explaining history of predecessor to [section] 911); see also Brewster v. Comm'r, 473 F.2d 160, 163 (D.C. Cir. 1972) (explaining basic purpose of [section] 911). The original purpose was "to permit American business men to compete abroad with foreign entrepreneurs, without being subject to double taxation possibilities." Id. (citing Comm'r v. Wolfe, 361 F.2d 62, 66 (D.C. Cir. 1966)). As early as the 1920s, organizations such as the National Foreign Trade Council were lobbying Congress to go beyond a Foreign Tax Credit, whereby foreign taxes would be credited to an American tax bill, to foreign income exclusion. Kirsch, supra note 15, at 530 n.58. Representatives of industry, commerce, transportation, and finance founded the National Foreign Trade Council (NFTC) in 1914 to coordinate American foreign trade "in an aggressive and systematic extension of American oversea [sic] commerce." Taking Steps to Aid Export Trade, N.Y. TIMES, July 13, 1914 at A11; see also Glenn Kurlander, The Foreign Earned Income Exclusion: Redefining the Exception for Amounts Paid by the United States Under I.R.C. [section] 911, 68 CORNELL L. REV. 592, 594-95 (1983) (studying history of creation of I.R.C. [section] 911). Kurlander observed that a rationale for Section 911 in 1926 was "'one further step toward increasing our foreign trade.'" Kurlander, supra at 594 (quoting H.R. Rep. No. 1, 69th Cong. 1st Sess. 7 (1926)); see also Jill Meyer, 2006 Amendments to the Foreign Earned Income Exclusion: Effects, Reactions, and Suggestions for Change, 60 SMU L. REV. 1667, 1667-68 (2007) (considering effects of 2006 amendments of I.R.C. [section] 911 on Americans abroad and their employers); Renee Judith Sobel, United States Taxation of Its Citizens Abroad: Incentive or Equity, 38 VAND. L. REV. 101, 119 (1985) (providing history of foreign income exclusions). The cost of sending an executive abroad could cost a company up to three times that executive's annual salary, so concern was warranted. Gordon & Leightman, supra note 2, at 3-4.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Groves v. United States, 533 F.2d 1376, 1383 (5th Cir. 1976) (holding teachers within purpose of statute but not exempt because their income comes from U.S. government).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. (finding [section] 911 generally applicable to teachers abroad).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Kirsch, supra note 15, at 455-56; see also To Become British Because of Tax: Two Seligmans and Others May Change Citizens Owing to Income Impost, Called Double Taxation, N.Y. TIMES, Mar. 7, 1914, at 4 (reporting Americans in Great Britain contemplated renouncing their citizenship for tax relief).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Groves, 533 F.2d at 1383 (holding teachers within purpose of statute); see infra Part IV.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .I.R.C. [section][section] 901, 911 (2006); see Glenn W. White, U.S. Taxation of U.S. Citizens Living in Canada and Canadians Subject to U.S. Taxes, 16 CAN.-U.S. L. J. 217, 217 (1990) (explaining two options).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .I.R.C. [section] 901 (2006); Treas. Reg. [section] 1.901-1(a) (2006). The taxpayer may also choose to deduct those taxes for U.S. tax purposes, instead of electing to take the credit. I.R.C. [section] 27 (2006); I.R.C. [section] 164 (2008). The Internal Revenue Service will not allow foreign tax credits for abusive tax-motivated transactions, however, if the credits yield little economic benefit. FED. TAX HANDBOOK (RIA), 2373 (2007 ed.). The foreign tax counts as such for U.S. tax purposes only if (a) it is a tax, and (b) its predominant character is similar to a U.S. income tax. Treas. Reg. [section] 1.901-2(a)(1). Taxes on wages, dividends, interest and royalties normally qualify for the credit. Treas. Reg. [section] 1.901- 2(a).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .I.R.C. [section] 911 (2006); see also Revenue Act of 1926, ch. 27, [section] 213(b)(14), 44 Stat. 9, 24-26 (excluding foreign earned income).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Treas. Reg. [section] 1.1-1(b) (2006); I.R.C. [section] 911(a), (b)(2) (2006). The relevant language is: "In general, all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States." Treas. Reg. [section] 1.1-1(b). The taxpayer may also exclude her housing costs. I.R.C. [section] 911(c). "Individuals employed in hightax countries generally get no benefit from the exclusion; if they reported their foreign earned income and claimed credit for the foreign tax paid, the credit would fully offset their U.S. tax on the income." FED. TAX HANDBOOK (RIA), 4612 (2007 ed.). This is true unless they travel to a tax treaty country that has an exclusion for academics. See infra Part II.C.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .I.R.C. [section] 911(b)(1)(A); Weinger, supra note 21, at 39 (defining "foreign earned income"). Earned income is wages and other compensation for personal services actually rendered; it is not a distribution of profits. Weinger, supra note 21, at 39; I.R.C. [section] 911(d)(2)(A) (2006). The relevant statutory language is:
   The term 'earned income' means wages, salaries, or professional
   fees, and other amounts received as compensation for personal
   services actually rendered, but does not include that part of the
   compensation derived by the taxpayer for personal services rendered
   by him to a corporation which represents a distribution of earnings
   or profits rather than a reasonable allowance as compensation for
   the personal services actually rendered.


I.R.C. [section] 911(d)(2)(A) (2006). The foreign earned income exclusion cannot exceed a taxpayer's foreign earned income.

I.R.C. [section] 911(b)(2)(A). Obviously, taxpayers are not allowed a double deduction either. I.R.C. [section] 911(d)(6).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Comm'r v. Mooneyhan, 404 F.2d 522, 527 (6th Cir. 1968) (holding taxpayer's salary from work in Iran was paid by U.S. government and thus not exempt under [section] 911); Council for International Exchange of Scholars, Fulbright U.S. Scholars Program: What a Difference a Fulbright Makes 6, available at http://www.cies.org/stories/ Traditional_Stories.htm (last visited Apr. 13, 2009) (explaining length of sabbatical opportunities as six months to one year, virtually same as other funding sources). Fulbright recipients are governed by the same rules that govern other Americans living abroad at government expense, such as diplomats and other consular officials, even though their experiences are otherwise indistinguishable from other academics' experiences abroad. Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Groves v. United States, 533 F.2d 1376, 1383-86 (5th Cir. 1976).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part II.A.2 (describing foreign residence test and foreign presence test).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .I.R.C. [section] 911(b)(2)(D); FED. TAX HANDBOOK (RIA), 4613 (2007 ed.). For spouses, the exclusion and ceiling are computed separately, based on each spouse's income. Treas. Reg. [section] 1.911-5(a)(2). If an employer provides housing, the housing is income under the U.S. tax code. Id. [section] 1.911(5)(b). The taxpayer abroad, however, may also exclude housing cost income as part of her income exclusion. I.R.C. [section] 911(a)(2). A taxpayer abroad may be able to deduct--although not exclude--housing expenses that are not provided by the employer. Id. [section] 911(c)(3)(A). The deduction is limited to foreign earned income that is not otherwise excluded under [section] 911. Id. [section] 911(c)(3)(B). An unused deduction may be carried over to the next tax year. Id. [section] 911(c)(4)(C). The total of the foreign earned income exclusion and foreign housing costs exclusion or deduction cannot exceed foreign earned income for the year. Id. [section] 911(d) (7). If a taxpayer elects both the foreign income exclusion and the housing costs exclusion, her foreign earned income exclusion is the lesser of either (a) $80,000, multiplied by the number of days she qualified, and divided by the number of days in the year, or (b) her foreign earned income minus the foreign housing costs exclusion for the year. Treas. Reg. [section][section] 1.911-3(d)(2), 1.911-4(d).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part II.A.2 (listing bona fide resident requirements for exclusion of foreign earned income).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .I.R.C. [section] 911(d)(1).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. [section] 911(d)(1)(A) (providing foreign residence test).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. [section] 911(d)(1)(B) (providing foreign presence test).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Branch v. Comm'r, 67 T.C.M. (CCH) 2822, 1994 WL 151307, *2-3 (1994).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .I.R.C. [section] 911(d)(1)(B). Note that of the two tests, this is the only one that mentions resident alien in addition to citizen. Compare [section] 911 (d)(1)(A) (foreign residence test) with [section] 911 (d)(1)(B) (foreign presence test).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .I.R.C. [section] 911(d)(3); Harrington v. Comm'r, 93 T.C. 297 (1989) (holding tax home requirement must be met under either test); POSTLEWAITE, supra note 20, at [section] 3.03. Foreign means more than simply not being in a U.S. territory. See Arnett v. Comm'r, 473 F.3d 790 (7th Cir. 2007) (defining "foreign country" as territory held by another state, so Antarctica does not qualify).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Coker v. Comm'r, 67 T.C.M. (CCH) 2515, at *2 (1994); Myron C. Hulen, William J. Kenny, and Anne L. Christensen, Tax Planning for Professorial Sabbaticals, 3 J. LEGAL TAX RES. 1, 11 (2005).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Hulen et al., supra note 46, at 12. If the Service decides that a tax home is in the United States, however, deductions for business travel become a possibility under section 162. Id. Interestingly, the "tax home" concept used under section 911 is the same one used under section 162 of the Code: the "away from home" requirement applied to business and travel expenses. I.R.C. [section] 911(d)(3) (2006); POSTLEWAITE, supra note 20, at [section] 3.03. Note that a taxpayer who does not qualify for the section 911 tax exemption likely could deduct travel and work expenses related to being abroad. See I.R.C. [section] 162 (2006). Keeping a house in the United States for a spouse or children may be allowed, but keeping a house in the United States for oneself is problematic, particularly if the taxpayer is trying to meet the 330 days of the foreign presence test. Hulen et al., supra note 46, at 11. The exact statutory language is: "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." I.R.C. [section] 911(d)(3). This is the "abode factor" and is made in reference to the taxpayer's principal place of business. Hulen et al., supra note 46, at 12.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Treas. Reg. [section] 1.911(2)(b) (2006). Otherwise the taxpayer lives at home and is able to claim business and travel expenses. I.R.C. [section] 162 (2006). Postlewaite suggests that Congress's concern lay with Americans who lived in border towns, living in the United States, and working "abroad" in Canada and Mexico. POSTLEWAITE, supra note 20, at [section] 3.03. However, the requirement of 330 days means full 24 hour days, so their concern seems misplaced. Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Sochurek v. Comm'r, 300 F.2d 34, 39 (7th Cir. 1962) (explaining rental of residence in Singapore as proof of residence, even though correspondent moved around East).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Coker v. Comm'r, 67 T.C.M. (CCH) 2515, 1994 WL 100619, at *2 (1994); Hulen et al., supra note 47, at 12.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Coker v. Comm'r, 67 T.C.M. (CCH) 2515, 1994 WL 100619, at *2 (1994).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .I.R.S. Pub. 54, supra note 5 at 13. A more complex situation occurs when those who expect to remain in a foreign country one year or less, stay for more than one year due to changed circumstances. Id. In that situation, the foreign residence is still temporary until expectations change. Id. If a taxpayer establishes a foreign residence and then leaves to vacation in the United States, the residency in the foreign country ends when leaving the foreign country, not at the end of the vacation. Seeley v. Comm'r, 186 F.2d 541, 544-45 (2d Cir. 1951) (holding taxpayer's leaving England for U.S. vacation prior to employment in United States ended foreign residency). Vacations that constitute an interruption of a continuous stay, however, do not end foreign residence because they are not being used to extend a foreign residence beyond the day the taxpayer leaves that foreign residence. Id. at 545 (citing Neuberger v. United States, 13 F.2d 541 (2d Cir. 1926) (holding German national maintained residence in United States despite spending several years away) and White v. Hofferbert, 88 F. Supp. 457, 460 (D. Md. 1950) (finding U.S. trips made with intention to return to foreign country "as soon as . . . business . . . permitted.")).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Seeley, 186 F.2d at 543 (considering status of General Motors employee whose employment abroad interrupted by World War II). (NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Swenson v. Thomas, 164 F.2d 783, 784 (5th Cir. 1947) (holding earnings exempt when residing abroad for four years, intending to return home once assignment complete).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. at 784-85.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. at 785. "It means not more than living there temporarily," though the taxpayer may have to "move from place to place." Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See I.R.C. [section] 904 (2006) (outlining Alternative Minimum Tax applicability and calculation).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .DEP'T OF THE TREASURY OFF. OF PUB. AFFAIRS, FACT SHEET: THE TOLL OF TWO TAXES, THE REGULAR INCOME TAX AND THE AMT (2005), available at http://www.ustreas.gov/offices/tax-policy/fact-sheet/ [hereinafter THE TOLL OF TWO TAXES].

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .I.R.C. [section] 55(a) (2006). Today the AMT "reaches into the ranks of the middle class," denying them deductions, credits, and lower tax rates under regular income taxes. THE TOLL OF TWO TAXES, supra note 59. The 111th Congress, however, has proposed to amend I.R.C. section 55, eliminating the AMT for many taxpayers. Taxpayer Choice Act of 2009, H.R. 782, 111th Congress (2009) (as referred to H. Comm. on Ways and Means). Since the AMT foreign tax credit is different from the regular foreign tax credit, a taxpayer must separately apply Internal Revenue Code Section 904 on the amount of the credit, to reflect the differences between regular taxable income and alternative minimum taxable income. I.R.C. [section] 59(a)(1). In fact, if a taxpayer elects, the foreign tax credit limitation can be figured in a simplified way, based on the proportion of the taxpayer's regular taxable income from sources outside the U.S. I.R.C. [section] 59(a)(3)(A); I.R.C. [section] 59(a)(3)(B)(i). Once made, this election applies to all tax years and can be revoked only with I.R.S. consent. I.R.C. [section] 59(a)(3)(B)(ii).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See I.R.C. [section] 59(a)(1) (laying out section 59's complex relation to other I.R.C. sections). The AMT equals the taxable excess, if any, of the tentative minimum tax for the tax year, over the regular tax for the tax year. I.R.C. [section] 55(a). "Taxable excess" means the excess of alternative minimum taxable income for the tax year over the "exemption amount." I.R.C. [section] 55(b)(1)(A)(ii). For the average academic taxpayer, the tentative minimum tax for the tax year is equal to 26 percent of the "taxable excess" that does not exceed $175,000, plus 28 percent of the taxable excess above $175,000, reduced by the AMT foreign tax credit for the tax year. I.R.C. [section] 55(b)(1)(A)(i).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See DAVID L. BRUMBAUGH, MAJOR TAX ISSUES IN THE 109TH CONGRESS 3 (Cong. Res. Serv. 2005) (listing major congressional tax legislation from 2001 to 2004 as solely domestic in nature); U.S. DEP'T OF THE TREAS., INTERNATIONAL, http://www.treas.gov/ offices/international-affairs/ (last visited Apr. 2, 2009) [hereinafter OFFICE OF INTERNATIONAL-AFFAIRS] (covering wealth of international topics). One need only consider the Treasury's web pages, which include a prominent "International" section. Id. There, topics include the "U.S.-China Strategic Economic Dialogue" and the "Importance of Open Investment and Free Trade." Id. The pictures speak even more clearly: one at the top of the page includes eighteen dark-suited gentlemen with the caption: "Finance Ministers and Central bank Governors from the G7 countries pose on the Treasury steps in April of 2007 for the traditional 'family' photo." U.S. DEP'T OF TREAS. INTERNATIONAL, MULTILATERAL DEVELOPMENT BANKS, http://www/treas.gov/topics/international/multilateral-banks.shtml. A second picture includes Secretary Henry M. Paulson, Jr. speaking to students at the Pontificia Universidad Catolica Del Peru "about efforts to ensure that more people share in the benefits" of growth and trade. Id. Perhaps more indicative still is Treasury's Tax Treaties considered below. See infra notes 76-95 and accompanying text (examining specific treaty provisions).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .OFFICE OF INTERNATIONAL AFFAIRS, supra note 62. The Office of International Affairs "protects and supports economic prosperity at home by encouraging financial stability and sound economic policies abroad." Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Tax Executives Institute, U.S. Model Income Tax Treaty, Jan. 1, 1993, available at http://findarticles.com/p/articles/mi_m6552/is_n1_45/ai_13503360. To learn more about the Tax Executives Institute, see their web page at http://www.tei.org (last visited Apr. 2, 2009).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .CHARLES I. KINGSON, INTERNATIONAL TAXATION 693 (1998). There are two schools of thought regarding treaty interpretation. VALERIE EPPS, INTERNATIONAL LAW 59 (3d ed. 2005). One focuses on the meaning of the text, with the assumption that the treaty was drafted by intelligent people who eliminated ambiguities, which allows courts to be strict in not considering extrinsic evidence. Id. The second school focused on the intention of the parties, drawing upon a broad array of evidence to prove that intention. Id. When it comes to interpreting treaties, the United States relies on the second school of thought, the intention of the parties. See United States v. Stuart, 489 U.S. 353 (1989) (interpreting tax treaty).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .KINGSON, supra note 65, at 693-94.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. at 694.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .U.S. Model Income Tax Convention Between the Gov't of the United States of Am. & the Gov't of--for the Avoidance of Double Taxation & the Prevention of Fiscal Evasion with Respect to Taxes on Income (Nov. 15, 2006), reprinted in 6 RHOADES & LANGER, U.S. INT'L TAX'N & TAX TREATIES, Appendix B, Model Treaties, [section] 1.00. Professor Kingson noted that the 1996 version was the third model treaty issued by the United States while no other country had developed even its first. KINGSON, supra note 65, at 694 n.4. "If taxation were an international course, the United States would be class grind. (But all the other countries would want to sit next to the United States on the test.)" Id. The Treasury Department also released a Model Technical Explanation for the Model Treaty of 2006. U.S. DEP'T OF TREAS., TAX TREATY DOCUMENTS (2006), http://www.treas.gov/offices/tax-policy/library/TEMod006.pdf. But see Ring, supra note 17, at 85-86 (arguing international relations theory must be applied to better understand today's greater transactional volume).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .RHOADES & LANGER, supra note 68, appendix B.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Press Release, U.S. Dep't of Treas., Treasury Issues New Versions of the U.S. Model Income Tax Convention and Model Technical Explanation (Nov. 15, 2006), available at http://www.treas.gov/ press/releases/hp168.htm. The Model Technical Explanation provides the basis for technical explanations of bilateral tax treaties based on the 2006 U.S. Model Income Tax Convention. Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Treasury Dep't Technical Explanation of the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, U.S.-Austl., Aug. 6, 1982, available at http://www.irs.gov/pub/irs-trty/austtech.pdf (explaining savings clause).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part IV (containing overview of [section] 911 exemption).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See, e.g., Convention with Respect to Taxes on Income, U.S.-Phil., art. 21(1), Oct. 1, 1976, 34 U.S.T. 1277, available at http:// www.irs.gov/pub/irs-trty/philip.pdf [hereinafter U.S.-Phil. Treaty]; Convention with Respect to Taxes on Income, U.S.-Isr., art. 23, Nov. 20, 1975, KAV 971, available at http://www.irs.gov/pub/ irs-trty/israel.pdf [hereinafter U.S.-Israel Treaty]; Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income, U.S.-Greece, Feb. 20, 1950, 146 U.N.T.S. 269, available at http://www.irs.gov/pub/irs-trty/greece.pdf [hereinafter U.S.-Greece Tax Treaty]. The United States and Greece negotiated a treaty that will supersede this older one, but the author could not review the updated version before this Note went to press. See Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income, U.S.- Greece, Apr. 9, 2009, 5 U.S.T. 47.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See U.S.-Phil. Treaty, supra note 73, art. 21(1). This treaty has an exemption for "teachers," which allows income tax exemption for someone who could be a teacher or professor because the description includes research, teaching, or both. Id. art. 21(1). The 1975 tax convention with the State of Israel includes a section titled "Teachers" that also exempts income earned by American nationals living in Israel up to two years if they are there "for the purpose of teaching" but also for "engaging in research, or both, at a university or other recognized educational institution" if the person came for that reason. U.S.-Israel Treaty, supra note 73, art 23. An early example is the Greek tax convention, signed by the United States and Greece in Athens in 1950. U.S.-Greece Treaty, supra note 73, art. XXIV. Article XII concerns "Professors and Teachers." Id. at art. XII. The text of Article XII includes "teaching" for a maximum of three years, but there is no mention of research. Id. The full text clarifies:
   A professor or teacher who is a resident of one of the Contracting
   States and who is temporarily present within the other Contracting
   State for the purpose of teaching, for a maximum period of three
   years, in a university, college or other educational institution
   within the other Contracting State, shall be exempt from taxation
   by such other Contracting State on his remuneration for such
   teaching for such period.


Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 74 and accompanying text (discussing treaties with Philippines and Israel).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See 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, U.S.-F.R.G., art. 20, Jan. 1, 1990, 1708 U.N.T.S. 3, available at http:// www.irs.gov/pub/irs-trty/germany.pdf [hereinafter U.S.-Germany Treaty] (explaining remuneration requirements for teachers from contracting states working abroad). This treaty is specific indeed. Id. It exempts income of a professor or teacher who is "carrying out advanced research" or is "teaching at an accredited university, college, school, or other educational institution, or a public research institution." Id. art. 20(1). Academics will not be exempt, however, if they previously enjoyed exemption as a student, or if they enjoyed exemption while receiving "a grant, allowance, or award from a non-profit religious, charitable, scientific, literary, or educational private organization." Id. art. 20(1), (3). Additionally, an academic may not take the exemption if she previously took an exemption for "technical, professional, or business experience" or training. Id. art. 20(1), (5). But see Income Tax Convention, U.S.-P.R.C., art. 19, Apr. 30, 1984, T.I.A.S. 12065, available at http:// www.irs.gov/pub/irs-trty/china.pdf (defining tax liability for teachers from contracting states working as teachers in China). The 1984 tax convention between the United States and the People's Republic of China contains one paragraph on the exemption for "Teachers, Professors and Researchers," for a period not exceeding three years. Id. The text in its entirety is:
   An individual who is, or immediately before visiting a Contracting
   State was, a resident of the other Contracting State and is
   temporarily present in the first-mentioned Contracting State for
   the primary purpose of teaching, giving lectures or conducting
   research at a university, college, school or other accredited
   educational institution or scientific research institution in the
   first mentioned Contracting State shall be exempt from tax in the
   first mentioned Contracting State for a period not exceeding three
   years in the aggregate in respect of remuneration for such
   teaching, lectures or research.


Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Convention for the Avoidance of Double Taxation with Respect to Taxes on Income and the Prevention of Fraud or Fiscal Evasion, U.S.-Italy, art. 20, Apr. 17, 1984, T.I.A.S. 11064, available at http://www.irs.gov/ pub/irs-trty/italy.pdf [hereinafter U.S.-Italy Treaty] (defining tax liability of foreigners working in Italy). A temporary visitor to Italy who comes to teach or conduct research at an educational institution "or at a medical facility primarily funded from government sources" is exempt from Italian taxation for up to two years. Id. art. 20(1). See also Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, U.S.-India, art. 22(1), Sept. 12, 1989, T.I.A.S. 11771, available at http://www.irs.gov/businesses/international/article/0,,id=169600,00.html [hereinafter U.S.-India Tax Treaty] (outlining foreign teacher's tax liability when working in India). The text of Article 22(1) of the U.S.-India Tax Treaty is straightforward in what it allows (and what it thereby excludes):
   An individual who visits a Contracting State for a period not
   exceeding two years for the purpose of teaching or engaging in
   research at a university, college or other recognized educational
   institution in that State, and who was immediately before that
   visit a resident of the other Contracting State, shall be exempted
   from tax by the first-mentioned Contracting State on any
   remuneration for such teaching or research for a period not
   exceeding two years from the date he first visits that State for
   such purpose.


Id. Professors, Teachers, and Research Scholars are exempted from Indian taxation for a stay that does not exceed two years. Id. Any other income that is not expressly covered by the treaty will be taxed. Id. art. 23. Even a resident learning to be an anesthesiologist at a teaching hospital does not count as a teacher or researcher if not specifically exempted, according to one tax court decision. Langroudi v. Comm'r, No. 9489-06S (T.C. filed Sept. 5, 2007).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See, e.g., Tax Convention, US-Egypt, art. 22(2), Aug. 24, 1980, 33 U.S.T. 1809 available at http:// www.irs.gov/pub/irs-trty/egypt.pdf (explaining system of taxation for foreigners working in Egypt); Convention for the Avoidance of Double Taxation with Respect to Taxes on Income and the Prevention of Fraud or Fiscal Evasion with Respect to Taxes on Income and Capital, U.S.-Fr., art. 20(2), Aug. 31, 1994, 1963 U.N.T.S. 67, available at http://www.irs.gov/pub/ irs-trty/france.pdf (explaining system of taxation for foreigners working in France); U.S.-Italy Treaty, art. 20(2); Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, U.S.-Belg., art. 19(2), Nov. 27, 2006, available at http://www.irs.gov/pub/irs-trty/belgiumtt06.pdf [hereinafter U.S.-Belgium Treaty] (containing similar provisions).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .U.S.-Belgium Treaty, supra note 78, art. 19(2). Of course, like all treaties considered here, these provisions apply to Belgian academics working in the United States as well. Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .U.S.-Belgium Tax Treaty, supra note 78, art. 19(2).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Convention with Respect to Taxes on Income and on Capital, U.S.-Can., Sept. 26, 1980, T.I.A.S. 11087, available at http://www.irs.gov/pub/irs-trty; Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, U.S.-Ir., July 28, 1997, 2141 U.N.T.S. 167, available at http://www.irs.gov/pub/irs-trty/ireland.pdf; Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, U.S- Mex., Sep. 18, 1992, available at http://www.irs.gov/pub/irs-trty/ mexico.pdf; Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, U.S.-N.Z., July 23, 1982, 35 U.S.T. 1949, available at http://www.irs.gov/pub/irs-trty; Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, U.S.-S. Afr., Feb. 17, 1997, available at http://www.irs.gov/pub/irstrty/ safrica.pdf; Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, U.S.-U.K., Mar. 31, 2003, 2224 U.N.T.S. 247. Oddly, beyond Egypt and South Africa, the United States has signed no tax conventions with any African nations. See I.R.S., U.S. Income Tax Treaties--A to Z, http://www.irs.gov/businesses/ international/article/0,,id=96739,00.html (last visited Apr. 3, 2009).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 29 and accompanying text (explaining foreign tax credits).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .432 F.2d 1388 (Ct. Cl. 1970) (holding professor who had not disavowed Argentinean residency nor paid Argentinean taxes exempt from American taxes). Other cases have contemplated the interplay of the U.S. tax code and treaties with foreign nations, but those cases did not specifically consider Section 911. See Payne v. United States, 778 F. Supp. 804, 807 n.3 (D. Vt. 1991) (holding section 911 did not apply to earnings in Panama because salary paid by U.S. government); Coplin v. United States, 761 F.2d 688 (Fed. Cir. 1985) (holding Panama treaty exempted American workers from Panamanian tax).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Scott, 432 F.2d at 433.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. This one case is the precedent upon which an academic may choose to rely when seeking exemption from foreign and American taxes. Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 84 and accompanying text (explaining interplay of U.S. tax policies).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 19 (explaining U.S. tax policy for universal taxation); see supra Part III.B (tracing history of this claim).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Comm'r v. Swent, 155 F.2d 513, 516 (4th Cir. 1946) (holding couple was in United States too long to be residents of Mexico for purposes of statute):
   We point out that there is no question as to the power of the
   United States to tax the income earned by Swent in Mexico. The
   exemption statute is thus a pure matter of legislative grace and
   such statutes should be construed strictly against the taxpayer
   claiming the statutory exemption. And such exemption statutes must
   be construed in the light of the objects and purposes which they
   were designed to subserve.


Id. at 517 (citations omitted).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Ladd v. Riddell, 309 F.2d 51, 58 (9th Cir. 1962) (holding, as of 1951, limitation on exemption amount applied to movie star). Alan Ladd, "a well-known actor," worked for eleven weeks in England and was paid $200,000 in 1952. Id. at 52. Ladd excluded $3,178.08 of this money, but three years later applied for a refund, asserting that he should have excluded $73,998.97. Id. In 1953, however, Congress amended the predecessor of [section] 911 to limit the amount excludable. Id. at 53. Ladd claimed that he earned the money prior to the change, but Ladd did not receive the money until 1954. Id. The court held that the change "was designed to put an immediate end to the use of [the predecessor of [section] 911] by high salaried Americans, particularly motion picture actors and actresses, as a device to avoid payment of federal income taxes," and so the exemption was denied. Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See White v. Hofferbert, 88 F. Sup. 457, 463 (D. Md. 1950) (finding taxpayer did not interrupt foreign residency with trips home). In White, the court upheld taxpayer's argument that returning to the United States did not end foreign residency requirements. Id. at 460. The court also noted approvingly that the taxpayer did not attempt to exempt from income business matters that he handled while in the United States. Id. The judge commended White: "I found him a highly credible and well informed witness, and have no difficulty in finding his expression of intentions with regard to his foreign residence were in entire good faith." Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Swenson v. Thomas, 164 F.2d 783, 784 (5th Cir. 1947) (finding no bad faith on part of taxpayer).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part IV (discussing factors in which academics exempt from U.S. income taxes).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See generally Mary Beckman, Sabbaticals: The Seven-Year Itch, CHRONICLE OF HIGHER EDUCATION, Sept. 17, 2002, available at http://chronicle.com/jobs/2002/09/2002091701c.htm (listing benefits of academic sabbaticals).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .John Christian Hoyle, Don't Take Our Sabbaticals Away, CHRISTIAN SCIENCE MONITOR, Mar. 16, 1999, at 16 (examining policies on sabbaticals at private and public high schools).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Marilyn Gardner, Bosses See Benefit in Giving Sabbaticals to Workers, CHRISTIAN SCIENCE MONITOR, Sept. 24, 2007, at 13 (reporting business management beginning to see benefits of employee sabbaticals); Hillary Chura, Sabbaticals Aren't Just for Academics Anymore, N.Y. TIMES, Apr. 22, 2006, at C6 (detailing adoption of sabbatical policies at Intel, government departments, and law firms); see also Pamela Paul, Time Out--More Employees Jump at Chance to Take a Sabbatical, AM. DEMOGRAPHICS, June 1, 2002, available at http://www.thesabbaticalcoach.com/html/american_demographics.html (examining sabbatical policies of Accenture and Cisco Systems); Leslie A. Gordon, Off Track, A.B.A. J. 58-63 (Feb. 2009) (exploring sabbatical experience of attorneys).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See JEAN HANNAH, COPING WITH ENGLAND (1987) (providing accommodation, travel, and general advice for American visitors to England).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Michael P. Lewis, Comment, Addressing Inequities in the Collection of Social Security Taxes for U.S. Citizens Working Abroad, 37 SAN DIEGO L. REV. 853, 857-58 (Summer 2000) (discussing U.S. citizens abroad not paying social security taxes).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Sabbatical Homes U.K., http://www.sabbaticalhomes.co.uk (assisting academics on sabbatical in England find homes); Home Exchange, http://www.homeexchange.com (providing general housing exchange assistance).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See generally, Hulen et al., supra note 46 (providing good general overview of tax options).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Parts III.A and III.B (explaining length of stay and source of income as important factors considered for taxation).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .An academic year may last from September until June or for twelve months. An academic semester may be from August through December or from January through June. See Tamara L. Gillis, It's a Different Type of Semester Abroad Experience, ECLARION: THE PROFESSIONAL DEVELOPMENT NEWSLETTER OF ELIZABETHTOWN COLLEGE, vol. 5, no. 3, April 2002, available at http://users.etown.edu/w/wunderjt/eclarion/ECLARIANs02.htm (recounting semester abroad experience on ship).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See An Anthology of German Letters: Prof. Thomas Edits a Scholarly and Much-Needed Volume Containing Choice Selections, N.Y. TIMES, June 22, 1907, at BR404 (reviewing fruits of professor's trip to Germany); Beckman, supra note 95 (listing variety of reasons for sabbaticals). A good example is Richard T. Robertson, a scientist, who began a sabbatical to Switzerland to learn how to better culture neurons in a Petri dish. Beckman, supra note 95.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Beckman, supra note 95 (reviewing reasons for sabbaticals).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Wayne A. Selcher, Spring Break Study Trips to the Ecuadorian Andes, ECLARION: THE PROFESSIONAL DEVELOPMENT NEWSLETTER OF ELIZABETHTOWN COLLEGE, vol. 5, no. 3, Apr. 2002, available at http://users.etown.edu/w/wunderjt/eclarion/ ECLARIANs02.htm (discussing increasing enrollment by foreign students at Elizabethtown College).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Beckman, supra note 95 (describing sabbatical length).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Beckman, supra note 95 (noting some academics resume previous work after sabbatical).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Deutsche Kultur International, Information for Academics from Abroad, http://www.deutsche-kultur-international.de/ en/category/academic/information-for-academics- from-abroad.html (last visited Apr. 13, 2009). "Deutsche Kultur International presents an overview for foreign graduates, post-docs and scientists of funding schemes run by the Federal Republic of Germany." Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Treas. Reg. [section] 1.911-2(d)(3), Example 1 (1985) (hypothesizing U.S. citizen arrives in Venezuela for a twelve-month period). We can imagine a situation based loosely on this Example: an American academic with a one-year appointment at an Indian institution arrives in India on July 24, 2007, a month or two before her teaching duties begin. See id. She remains in India until June 21, 2008, when she learns her appointment has not been renewed and returns to the United States. See id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Beckman, supra note 95 (explaining university payment methods for sabbatical); Faculty International Development and Curriculum Internationalization, St. Cloud State University, http://bulletin.stcloudstate.edu/ugb/intstudy.asp (last visited Apr. 3, 2009) (encouraging students and faculty alike to travel). "Currently, SCSU offers opportunities for faculty to teach in many countries. [In addition,] faculty are encouraged to enhance their international experience and expertise through sabbatical abroad, Fulbright teaching or research, and/or teaching abroad through self-sufficient and incentive-based intersession/short-term programs." Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Beckman, supra note 95 (noting usage of grants to pay for sabbaticals).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Traditional Fulbright Scholar Program, Overview, http://www.cies.org/us_scholars/us_awards/ (last visited Apr. 3, 2009) (providing overview of Fulbright Scholar Program and its source of funding).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Jones v. Comm'r, 85 T.C.M. (CCH) 767, *1 (2003) (holding Johnston Island not foreign but U.S. possession).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. (interpreting statute overturning regulation).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. at *3; see U.S. Fish & Wildlife Service, Welcome to Johnston Island National Island Refuge, available at http://www.fws.gov/johnstonisland (providing background on Johnston Island) (last visited Mar. 8, 2009). In 1971 and 1972, two teachers, husband and wife, traveled to Micronesia and received salaries by the Government of the Trust Territory of the Pacific Islands. Groves v. United States, 533 F.2d 1376, 1383 (5th Cir. 1976). While the government of these islands is sovereign and taxes its citizens, the United States provided over ninety percent of its revenues. Id. at 1380. The question then became, is a sovereign nation that is 90 percent funded by the United States government a foreign country or a U.S. agency? Id. at 1386. The Fifth Circuit held it was the latter. Id. The teachers' pay was from the U.S. government and therefore ineligible for the section 911 exemption. Id. But see McCormish v. Comm'r, 580 F.2d 1323 (9th Cir. 1978) (holding Trust Territory of Pacific Islands not "agency" of United States).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See Part II.A.2 (considering requirements for length of stay). But see S. Roels, Acting Dean of Research and Scholarship, Calvin College, Planning for Your Sabbatical: Some Tax Considerations, May 30, 2003, available at http://www.calvin.edu/admin/ provost/scholars/documents/tax_considerations.pdf (advising prospective takers of sabbaticals to consider requirements of temporary jobs abroad).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Gelhar v. Comm'r, I.R.S. Tech. Mem. 1992-162 (Mar. 23, 1992), 63 TCM 2466 (1992) (holding too much travel means no new tax home).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. Professor Gelhar and his wife rented out their primary residence in Concord, Massachusetts from June 1, 1986 until June 1, 1987. Id. at *1. The Gelhars left the United States, visiting Belgium, Sweden, Switzerland, and France during the summer and fall of 1986. Id. In January of 1987, they arrived in Australia, and Prof. Gelhar performed sabbatical work in Australia and New Zealand until May 1987. Id. The Gelhars also visited Greece and Singapore during that time. Id.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .Id. (holding traveling extensively did not change tax home to any of countries visited). Another example: an academic, not yet established at any university, accepts successive one-year appointments: at the University of Washington, the Naval War College, and the University of Tubingen, Germany. See I.R.S. Pub. 54, supra note 5. In each case, she hauls her belongings to yet another rented residence and calls it home, hoping that the appointment may turn into a permanent position. Id. This difficult situation may lead to better tax results, as we shall consider below. See infra Part IV (finding less-established academics better positioned to enjoy income tax exclusion by going abroad).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 15 and accompanying text (considering history of U.S. taxation).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 23 and accompanying text (explaining basic tenet of American taxation).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See infra Part III.A, III.B, and III.C (considering length of stay, source of income, and temporary or indefinite abode).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 95-98 and accompanying text (considering sabbaticals ranging from one semester to one year); supra notes 45-48 (defining guidelines for tax home and abode factor).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 40-44 and accompanying text (describing two residency tests to qualify for exemption); supra note 103 and accompanying text (discussing options for sabbatical length). If the academic does not qualify for exclusion under section 911, however, the academic may at least recoup some travel expenses. See supra note 48 and accompanying text (reviewing section 162 and its benefits).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 40 and accompanying text (explaining foreign residence test).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 42 and accompanying text (explaining foreign presence test).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 40 and accompanying text (explaining foreign residence test); supra note 42 and accompanying text (explaining foreign presence test); supra note 95 and accompanying text (explaining options for semesters).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 40-42 and accompanying text (detailing possible time periods qualifying for exemption).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 110 (describing hypothetical situation of academic in India).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 110 and accompanying text (describing academic stay in India); see supra note 40 and accompanying text (explaining foreign residence test).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 110 (describing hypothetical situation of academic in India).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 110 and accompanying text (positing hypothetical of academic in India); supra note 42 and accompanying text (explaining foreign presence test); supra note 30 and accompanying text (providing upper range of exemption).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 40-42 and accompanying text (detailing possible time periods for exemption).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 77 and accompanying text (detailing United States-India tax treaty).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 77 and accompanying text (detailing United States and India tax treaty).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 77 and accompanying text (providing exemptions for academics).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 40-42 and accompanying text (detailing possible time periods for exemption); see supra note 77 and accompanying text (considering tax implications of tax treaty with India).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 82 and accompanying text (noting tax treaties without specific provisions for academics).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 82 and accompanying text (reviewing tax treaties without these specific exemptions).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 74-75 and accompanying text (covering older treaties that only mentioned "teachers"); supra Part III.A (discussing hypothetical situations).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 111 and accompanying text (discussing situation where home institution pays).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 32-34 and accompanying text (considering sources of income); see supra notes 45-61 and accompanying text (considering tax home).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 113-14 and accompanying text (detailing Fulbright program).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 113 and accompanying text (reviewing prohibition).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 31 and accompanying text (explaining housing cost exemption under section 911).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 31 (stating foreign housing exemption).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 31; supra note 36 (explaining how to compute housing exemption under section 911).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 31 and accompanying text (explaining housing cost deductions); compare supra note 36 (detailing what deductions may be possible).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 28-31 and accompanying text (explaining congressional rules under section 911).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 103 and accompanying text (discussing length of sabbaticals); supra note 47 and accompanying text (explaining abode factor rules).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 47-48 and accompanying text (detailing differences between moving abroad and keeping U.S. abode).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 47 and accompanying text (discussing IRS determination of tax home).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 47 and accompanying text (stating when residence changes); supra note 89 (examining history of abode factor rules). If the academic is married to another person who is also traveling to work abroad, they both may be eligible for the section 911 exemption. See supra note 36 (discussing legal possibility of both spouses taking exemption).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 118 and accompanying text (discussing case involving Micronesia).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 118 and accompanying text (stating nation funded by U.S. government is U.S. agency). A foreign country constitutes any territory under the sovereignty of a government other than that of the United States. See generally supra Part IV.C.

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 47-48 and accompanying text (detailing differences between moving abroad and keeping U.S. abode).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 110 and accompanying text (discussing options of newer academic).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 110 and accompanying text (discussing newer academics); supra note 122 and accompanying text (discussing more established academics); supra note 47-48 and accompanying text (discussing abode factor rule).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 120-23 and accompanying text (detailing hypotheticals); see supra note 120 and accompanying text (citing case where extensive travel negated foreign tax home).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 120-23 and accompanying text (stating extensive travel abroad does not establish foreign tax home).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 120-23 and accompanying text (listing hypotheticals); supra note 47 and accompanying text (covering abode factor rules).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 120 and accompanying text (citing case of professor traveling world).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 49 and accompanying text (citing case of exemption despite moving); supra note 110 and accompanying text (covering options for newer academics).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 89 and accompanying text (explaining congressional powers).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 90 and accompanying text (containing admonition against high-earning taxpayers). They also must figure their taxes under the AMT as well, which may negate any section 911 benefit. See supra notes 58-61 and accompanying text (explaining AMT).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 91 and accompanying text (discussing virtues of honesty in claiming tax exemptions); supra notes 49-57 and accompanying text (discussing how domicile or abode moves abroad).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra notes 74-83 and accompanying text (discussing tax treaties generally). A fallback position may be to use the personal services provision of any tax treaty. See supra note 32 and accompanying text (explaining personal services provisions).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 84 and accompanying text (explaining Scott decision where teachers were allowed to take both section 911 exemption and avoid paying foreign taxes under treaty).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra note 49 and accompanying text (citing case of exemption despite moving); supra note 110 and accompanying text (covering options for newer academics); supra note 84 and accompanying text (explaining decision holding teachers are allowed to take both section 911 exemption and avoid paying foreign taxes).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra Part I (describing broad tax situation).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra Part I (examining history of section 911).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra Part II.C (outlining statutory tax rules); supra Part IV.C (considering differences of abode).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra Part II.C ; supra III.C (providing example of professor who traveled).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra Parts II and III (covering hypothetical employment situations and the relevant tax law for exclusion). The country chosen does matter. See supra Part II.B (covering treaty provisions).

(NOTEREF _Ref80684203 \h \* MERGEFORMAT) .See supra Part II.B (covering treaty law and specific provisions); supra note 84 and accompanying text (explaining decision allowing both section 911 exemption and exemption from paying foreign taxes).
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Author:Dhanda, Michelle
Publication:Suffolk Transnational Law Review
Date:Sep 22, 2009
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