Rev. Rul. 80-51

1980-1 C.B. 333, 1980-8 I.R.B. 23.

                       Internal Revenue Service
                                 Revenue Ruling

                            FRANCE; RESEARCH FELLOW

                          Published: February 25, 1980

UNITED STATES-FRANCE INCOME TAX CONVENTION, 1968-2 C.B. 691

  France; research fellow. A French resident appointed as a research fellow to the faculty of an accredited university's medical school in the U.S. conducts basic research in the public interest under the school's direction and control in a laboratory located in a hospital associated with the school. The individual's compensation, although paid through the hospital under grants awarded by the National Institutes of Health, is exempt from federal income tax under Article 17 of the U.S.-France Income Tax Convention for a period not exceeding two years from the date of the individual's arrival in the U.S.

ISSUE

  Does Article 17 of the United States-France Income Tax Convention exempt the compensation received by a French resident from federal income tax under the circumstances described below?

FACTS

  The taxpayer, a resident of France, is in the United States at the invitation of an accredited university's medical school to engage in scientific research. The taxpayer received an appointment to the faculty of the university's medical school as a Research Fellow in Medicine.  The compensation to the taxpayer, who has a Ph.D. degree in a scientific field rather than an M.D., is paid through the university's hospital under grants awarded to the principal researchers by the National Institutes of Health.

  The laboratory in which the taxpayer works is located in the hospital associated with the university's medical school.  The work of the laboratory is entirely basic research in the public interest with no clinical activities or responsibilities.  The university's medical school and not the university's hospital directs and controls the taxpayer's research activities.

LAW AND ANALYSIS

  Article 17 of the United States-France Income Tax Convention provides that an individual who is a resident of France and who visits the United States at the invitation of the United States Government or of a university or other accredited educational institution for the primary purpose of teaching or engaging in research or both, at a university or other accredited institution, shall be exempt from United States taxation on income from personal services for teaching or research at such educational institution for a period not exceeding 2 years from the date of arrival in the United States.  Article 17 shall not apply to income from research not undertaken in the public interest.

  In determining whether an individual is engaged in research at a university or other accredited educational institution for purposes of Article 17 of the Convention, it is necessary to determine by whom such individual is employed, the university or the hospital, because the hospital may not be an accredited educational institution.  See Rev. Rul. 77-175, 1977-1 C.B. 415.  Whether the research fellow in the subject case is determined to be an employee of the university or an employee of the hospital depends upon an examination of all the facts and circumstances pertaining to the relationship among the parties. An important factor is the right to control and direct an individual in the performance of the individual's work.

  In the present situation, the hospital does not exercise control over the laboratory research performed by the taxpayer even though the laboratory is located in the university's hospital and the taxpayer's compensation is paid through the hospital from a grant from the National Institutes of Health. The taxpayer is performing research for, and is subject to the direction and control of the university medical school, an accredited educational institution.

HOLDING

  Under Article 17 of the United States-France Income Tax Convention, the compensation received by the taxpayer for research services performed at the laboratory is exempt from United States income taxation for a period not exceeding 2 years from the date of the taxpayer's arrival in the United States.

Rev. Rul. 80-51, 1980-1 C.B. 333, 1980-8 I.R.B. 23.