In Uncategorized on 08/26/2014 at 18:46

At Least Until He Goes

That’s the moral Judge Cohen has for Zhengnan Shi in 2014 T. C. Memo. 173, filed 8/26/14.

Zhengnan, a Chinese (PRC) national, is fighting over the interest on his tax refund. I’ll spare you all but one of his losing arguments, but the one I want may be of use to the battle-weary practitioner.

Zhengnan claims the US-PRC tax treaty taxes Chinese resident nationals at 10% of their US-source income, and IRS wants 30%. And he claims he gets the treaty rate. Except he doesn’t.

OK, says Judge Cohen. But “Article 4 indicates that to be a resident of China for purposes of the China treaty, petitioner must show that under Chinese tax statutes and laws he was liable for taxation in [the year at issue] because he resided (or was domiciled or something to that effect) in China.” 2014 T. C. Memo. 173, at p. 11.

Zhengnan didn’t introduce any Chinese law or proof he was back in the PRC.

Anyway, five years before the year at issue, Zhengnan stated he was substantially present in the US, both in his return and his amended return, which he filed as resident alien.

And Reg. Section 1.871-5 says “Loss of residence by an alien.–An alien who has acquired residence in the United States retains his status as a resident until he abandons the same and actually departs from the United States. An intention to change his residence does not change his status as a resident alien to that of a nonresident alien. Thus, an alien who has acquired a residence in the United States is taxable as a resident for the remainder of his stay in the United States.” 2014 T. C. Memo. 173, at p. 16.

Zhengnan admittedly didn’t leave the US for another three years after the year at issue.

So he’s here because he’s here. And taxable accordingly.


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