Opinion
26792-21
12-06-2022
SIDNEY OKAGU, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Diana L. Leyden Special Trial Judge
By notice of deficiency dated March 5, 2021, respondent determined a deficiency of $9,634 and an I.R.C. § 6662(a) penalty of $1,926.80 in relation to petitioner's Federal income tax for 2017. On July 23, 2021, petitioner timely filed a Petition for redetermination of that deficiency.
On July 5, 2022, respondent filed a Motion for Partial Summary Judgment (motion) under Rule 121. Respondent seeks summary judgment that petitioner is not entitled to the I.R.C. § 911 foreign earned income exclusion with respect to wages he earned while working in Germany under a personal services agreement (PSA) for the U.S. Department of State.
By order served August 23, 2022, the motion was assigned to the undersigned for disposition. By order served September 22, 2022, the Court directed petitioner to file a response to respondent's motion by October 24, 2022. Petitioner did not file a response. Because petitioner did not respond to the motion the Court could enter a decision against him for that reason alone. See Rule 121(d). Nevertheless, the Court will consider the motion on its merits.
Background
The following facts are derived from the petition and the motion and attachments thereto.
During 2017 petitioner, a U.S. citizen, worked for the U.S. Department of State at the U.S. consulate in Frankfort, Germany. He was hired in November 2013. Pursuant to a letter from the U.S. Mission Germany Human Resources Office petitioner was considered a "local hire civilian employee" pursuant to a PSA. As a "local hire civilian employee" he "may be required to pay German taxes as applicable" and the PSA states that FICA contribution, U.S. Federal income tax, and state tax withholdings shall be deducted "in accordance with regulations and ruling of the Social Security administration and the U.S. Internal Revenue Service".
For 2017 petitioner's wages of $65,587 were reported on Forms W-2, Wage and Tax Statement, issued by the U.S. Department of State. Petitioner filed a Federal individual income tax return on Form 1040, U.S. Individual Income Tax Return, for 2017. Petitioner attached to his return Form 2555, Foreign Earned Income, on which he claimed, pursuant to I.R.C. § 911 an exclusion of $65,587.
Discussion
A. Summary Judgment Standard
The Court may grant a motion for summary judgment where there is not any genuine dispute as to any material fact and a decision may be rendered as a matter of law. See Sunstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd 17 F.3d 965 (7th Cir. 1994). Partial summary adjudication is appropriate if some but not all issues in a case can be disposed of summarily. See Rule 121(b); Turner Broad Sys., Inc. v. Commissioner, 111 T.C. 315, 323-324 (1998). A party moving for summary judgment bears the burden of showing that there is not any genuine dispute as to any material fact, and factual inferences will be viewed most favorably to the nonmoving party. See Rauenhorst v. Commissioner, 119 T.C. 157, 162 (2002). A party opposing summary judgment must set forth specific facts showing that there is a genuine issue for trial in order to rebut the moving party's assertions of fact. See Rule 121(d); see also, Celotex Corp. v. Commissioner, 477 U.S. 317, 322-323 (1986).
I.R.C. § 61(a) provides that gross income means "all income from whatever source derived." Citizens of the United States are taxed on their worldwide income unless a specific exclusion applies. Specking v. Commissioner, 117 T.C. 95, 101-102 (2001), aff'd sub nom Haessly v. Commissioner, 68 Fed.Appx. 44 (9th Cir. 2003), and aff'd sub. nom, Umbach v. Commissioner, 357 F.3d 1108 (10th Cir. 2003). Exclusions from gross income are construed narrowly, and a taxpayer must clearly establish his entitlement to any such exclusion. Id.
I.R.C. § 911(a)(1) provides that a "qualified individual" may elect to exclude from gross income, subject to limitations set forth in subsection (b)(2), his or her "foreign income". Pursuant to I.R.C. § 911(b)(1)(B)(ii), foreign earned income does not include amounts "paid by the United States or an agency thereof to an employee of the United States or an agency thereof."
Respondent asserts that petitioner's wages are not foreign earned income for purposes of I.R.C. § 911 because the U.S. Department of State paid those wages to petitioner as an employee.
Petitioner in his petition appears to contend that he was not a U.S. government employee during 2017. Petitioner made the same assertion with respect to 2014 and 2015 in docket no. 3835-18. The Court considered the same argument and concluded that petitioner was not entitled to exclude his wages for those years as foreign earned income and granted respondent's motion for partial summary judgment. O'kagu v. Commissioner, 151 T.C. 73 (2018).
As the Court concluded in the prior case, and based on the record of the motion, the Court again concludes that petitioner is considered an employee of the U.S. government for income tax purposes and the wages he received from the U.S. Department of State do not constitute foreign earned income within the meaning of I.R.C. § 911(b)(1). Therefore, he is not entitled to the foreign earned income exclusion.
Upon due consideration, it is ORDERED that respondent's Motion for Partial Summary Judgment is granted.