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Rogers v. Commissioner of Internal Revenue Service

United States Court of Appeals, District of Columbia Circuit

April 17, 2015

WILLIAM D. ROGERS AND YEN-LING K. ROGERS, APPELLANTS
v.
COMMISSIONER OF INTERNAL REVENUE SERVICE, APPELLEE

 Argued October 17, 2014

Page 321

On Appeal from the Order and Decision of the United States Tax Court.

Yen-Ling K. Rogers, Pro se, argued the cause for appellants. With her on the briefs was William D. Rogers, Pro se.

Damon W. Taaffe, Attorney, U.S. Department of Justice, argued the cause for appellee. With him on the brief was Richard Farber, Attorney. Bethany B. Hauser, Attorney, entered an appearance.

Before: BROWN, Circuit Judge, MILLETT, Circuit Judge, and EDWARDS, Senior Circuit Judge.

OPINION

Page 322

Edwards, Senior Circuit Judge

This case involves an appeal by Yen-Ling Rogers (" Rogers" ) and her husband William Rogers (together, " Appellants" ) challenging a decision of the Tax Court denying their request to redetermine their tax liability for 2007 and imposing a 20% penalty for negligently failing to follow the tax rules.

The United States income tax system reaches all U.S. citizens' income no matter where in the world it is earned, " unless it is expressly excepted by another provision in the Tax Code." See Commissioner v. Schleier, 515 U.S. 323, 328, 115 S.Ct. 2159, 132 L.Ed.2d 294 (1995); see also 26 U.S.C. § 61(a) (defining " gross income" as " all income from whatever source derived," except as otherwise provided). There are many exceptions under the Tax Code, however. Relevant to this case, qualified Americans who live abroad can exclude from their taxable income " foreign earned income," which is defined as earned income " from sources within a foreign country or countries." 26 U.S.C. § 911(a)(1), (b)(1)(A). Internal Revenue Service (" IRS" ) regulations provide that income is only " from sources within a foreign country" if it is " attributable to services performed by an individual in a foreign country or countries." 26 C.F.R. § 1.911-3(a) (emphasis added). As a result, according to the IRS, qualified Americans who live abroad cannot use Section 911 to exclude any income from work performed in or over the United States or international waters. Only income for work performed in or over foreign countries can be counted as foreign earned income.

In 2007, Rogers, who is a U.S. citizen, lived in Hong Kong and worked as an international flight attendant for United Airlines (" United" ). She flew and worked in and over foreign countries and also in and over the United States and over international waters. Nonetheless, she and her husband filed a tax return reporting all of her flight attendant earnings as " foreign earned income." The Commissioner of the IRS, however, determined that Appellants owed a tax deficiency of $3,428.30 on the portion of Rogers's earnings attributable to her work outside foreign countries, as well as a 20% penalty.

Appellants petitioned the Tax Court to redetermine their income tax liability, arguing that the language of Section 911 authorized them to exclude all of Rogers's flight attendant earnings as " foreign earned income," and that they should not be charged the negligence penalty. The Tax Court disagreed. Citing the language of Section 911, its prior holdings, and IRS regulations, the court found that Appellants could only exclude the portion of Rogers's earnings that were related to her time spent working in or over foreign countries. Rogers v. Comm'r, T.C. Memo 2013-77, 105 T.C.M. (CCH) 1478, 1479-80 (2013). The Tax Court also upheld the negligence penalty. Id. at 1480. Rogers and her husband then filed a timely appeal with this court.

Appellants argue that the Tax Court incorrectly applied Section 911. They contend that the language of Section 911 authorizes them to exclude all of Rogers's flight attendant income as " foreign earned income" because it was received " from sources within a foreign country or countries" -- namely, Rogers's Hong Kong-based job. See 26 U.S.C. § 911. They also challenge the imposition of the negligence penalty, and ask this court to award costs and fees.

Page 323

We agree with the Tax Court that the language of Section 911 and the IRS's regulations support the Commissioner's determination against Appellants. Rogers has failed to show that the Tax Court erred, or that the IRS's regulations interpreting Section 911 are unreasonable. We remand only for the Tax Court to ...


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