He’s not famous, and he’s not wealthy. But Jesse Linde is a retired Army helicopter pilot who, after struggling to find work in the US where competition among younger pilots is fierce, landed a job with a government contractor in Iraq.
While in country, Linde lived among the general population: eating at local restaurants, befriending native interpreters, and spending his free time outside secure areas. And since he made Iraq his home, he used the foreign earned income exclusion under Section 911, excluding his income from federal taxation.
But since Linde had an unusual work schedule—he worked 60 days straight followed by 30 days off—Linde also made it back to the US on a frequent basis. As a result, the IRS issued an assessment for each year he used the foreign income exclusion, rejecting his qualifications for the credit.
Taxpayers typically use the physical presence test because it provides a bright line safe harbor for those who work abroad for most of the year. But there is an alternative qualification if you can establish that you are a bona fide resident of a foreign country, and that’s exactly what Linde did.
Ultimately, the Tax Court decided that even though Linde returned to the US frequently and did not meet the physical presence test, he made Iraq his tax home. As a result, he owed no income taxes for the years in question.