Foreign Earned Income Exclusion Denied for Afghanistan worker


An atmospheric manager working in Afghanistan was denied the foreign earned income exclusion because the U.S. Tax Court ruled that his abode was in the United States.

After 17 years of active service in the U.S. Army, Timothy Qunell began working for AECOM Technology (AECOM) as an atmospheric manager in Afghanistan on July 7, 2010, in connection with a contract that AECOM held with the DOD. His employment with AECOM lasted approximately one year and four months.

During that time Mr. Qunell lived on a U.S. military facility in Kabul, Afghanistan. His passport records show that during 2011 he left Afghanistan from time to time for vacations. Early in 2011, he traveled to the U.S. He was married on February 14 of that year and returned to Afghanistan without his wife a short time later. During 2011, Mr. Qunell and his wife owned a house in Illinois (Illinois residence). His wife and their children lived in the Illinois residence while he was working in Afghanistan. Neither his wife nor any of their children visited him while he was in Afghanistan.

In addition, Mr. Qunell maintained several bank accounts, all at banks in the U.S. On Nov. 18, 2011, Mr. Qunell resigned on account of a disagreement with AECOM as to the location of his next assignment. He wanted and believed he was entitled to an assignment in the U.S., but he felt that AECOM was delaying such an assignment and was keeping him in Afghanistan. Mr. Qunell was unemployed from the time he left his employment with AECOM until he returned to the U.S. Army in July of 2012. Mr. Qunell’s 2011 Federal income tax return, due on Apr. 15, 2012, was filed on Nov. 5, 2013, after he was notified that IRS was preparing a 2011 substitute return.

His return included a Form 2555 (Foreign Earned Income) on which he disclosed the wages he earned from AECOM while employed in Afghanistan but took the position based on Code Sec. 911(a) that his tax home was in Afghanistan and excluded those wages from the income otherwise reported on that return. Tax Court finds that taxpayer’s abode was in U.S.

The Labor Law Compliance Center along with the Tax Court concluded that Mr. Qunell’s abode was in the U.S., and so he did not qualify for the foreign earned income exclusion. The Court reasoned that the term “abode” means one’s home, habitation, residence, domicile, or place of dwelling, and it does not mean one’s principal place of business. Thus, “abode” has a domestic rather than vocational meaning, and stands in contrast to “tax home” as defined for purposes of Code Sec. 162(a)(2). A taxpayer’s “abode” is generally in the country in which he has the strongest economic, family, and personal ties.

A taxpayer posted abroad will invariably have some connections with the foreign country in which he works, but if his ties to the U.S. are stronger, his abode remains in the U.S.  The Tax Court was satisfied that Mr. Qunell’s economic, family, and personal ties to the U.S. were sufficiently strong for the Court to consider the U.S. to be the location of his abode at all relevant times. Accordingly, the wages he earned in Afghanistan during 2011 were not excludable from his income under Code Sec. 911(a).

The Court reasoned that during 2011 Mr. Qunell owned a home in Illinois where his wife and children lived and he maintained bank accounts in the U.S. He lived on a military facility in Kabul, Afghanistan, his family did not visit him there, and nothing in the record suggested that he traveled within Afghanistan other than as required by his employment. Further, Mr. Qunell terminated his employment with AECOM because he wanted to return to the U.S. His ties to Afghanistan were entirely transitory and did not extend much beyond, if at all, the bare minimum required to perform his duties there. Other than the location of his employment, Mr. Qunell did not established that he had any economic, family, or personal ties to Afghanistan.