Rev. Rul. 89-5

1989-1 C.B. 353, 1989-2 I.R.B. 9.

                       Internal Revenue Service

                                 Revenue Ruling

                              TEACHERS-RESEARCHERS

                           Published: January 9, 1989

  Teachers-Researchers. The first day of the period of exemption is the day of the individuals last entry into the U.S. before beginning the teaching or research services.

  During 1986, an individual was a citizen and resident of the United Kingdom as defined in Article 20(1) of the United States- United Kingdom Income Tax Convention, 1980-1 C.B. 394. On August 1, 1986, the individual arrived in the United States on a personal vacation. On August 25, 1986, the individual left for another country. On August 31, 1986, the individual returned to the United States, where he assumed a teaching assignment at a recognized educational institution.

  During the period from August 1, 1986, through August 31, 1986, the individual derived no income from a United States source. The individual was not a United States resident for U.S. tax purposes at any time during 1986. Furthermore, the individual did not claim any benefit under the Convention prior to August 31, 1986.

  ISSUE. At issue is the first day of the period of tax exemption under Article 20(1) of the Convention.

  HOLDING. The Service has held that the first day of the period of tax exemption under Article 20(1) of the Convention is August 31, 1986, when the individual entered the United States to begin teaching.

  ANALYSIS. The Service concluded that the individual's visit to the United States earlier in August 1986 was not relevant for determining eligibility for tax-exempt status under the treaty, adding that the individual did not attempt to claim the treaty's benefits. The Service indicated that the exemption is triggered by an individual's entering the United States for a teaching position, coupled with a claim to the treaty benefits.

  The Service stated that treaties with the following countries contain provisions similar to Article 20(1) for purposes of the instant ruling: Austria (Article XII); Belgium (Article 20); Denmark (Article XIV); Egypt (Article 22); Federal Republic of Germany (Article XII); Finland (Article 20); France (Article 17); Greece (Article XII); Hungary (Article 17); Iceland (Article 21); Ireland (Article XVIII); Italy (Article 20); Jamaica (Article 22); Japan (Article 19); Korea (Article 20); Luxembourg (Article XIII); The Netherlands (Article XVII); Norway (Article 15); Pakistan (Article XII); The Philippines (Article 21); Poland (Article 17); Romania (Article 19); Sweden (Article XII); Switzerland (Article XII); Trinidad and Tobago (Article 18); and the Union of Soviet Socialist Republics (Article VI).

ISSUE

  What is the first day of a period of tax exemption under Article 20(l) of the United States-United Kingdom Income Tax Convention, 1980-1 C.B. 394 (the 'Convention'), under the circumstances described below?

FACTS

  A, an individual, is a citizen of the United Kingdom. During all of 1986, A was a resident of the United Kingdom as defined in Article 4 of the Convention. On August 1, 1986, A arrived in the United States for the purpose of taking a personal vacation. On August 25, 1986, A left the United States and entered a foreign country. On August 31, 1986, A entered the United States for the purpose of teaching at a recognized educational institution within the United States. A began teaching on September 1, 1986. During the period from August 1, 1986, through August 31, 1986, A derived no income from any source within the United States. A was not a resident of the United States for United States tax purposes at any time during 1986. Before August 31, 1986. A had not claimed any benefit under the Convention.

LAW AND ANALYSIS

  Article 20(l) of the Convention provides a two-year period of tax exemption for certain income earned by an individual who visits the United States for two years or less for the purpose of teaching or engaging in research at a recognized educational institution, if the individual was a United Kingdom resident immediately before the visit. The period of exemption begins on the date the individual first visits the United States for the purpose of teaching or engaging in research. For A, that date was August 31, 1986, and A's period of exemption begins on that date if A is otherwise qualified to claim the treaty benefit. The period of exemption is not affected by earlier visits to the United States for other purposes, such as personal vacations, during which no treaty benefits were claimed.

HOLDING

  For an individual otherwise eligible for exemption under Article 20(l) of the Convention, the first day of the period of exemption is the date of the individual's last entry into the United States before beginning the teaching or research services, provided that the individual had claimed no benefits under the Convention before that date.

  Tax treaties with the following countries contain provisions that for purposes of this revenue ruling are similar to Article 20(l) of the Convention: Austria (Article XII); Belgium (Article 20); Denmark (Article XIV); Egypt (Article 22); Federal Republic of Germany (Article XII); Finland (Article 20); France (Article 17); Greece (Article XII); Hungary (Article 17); Iceland (Article 21); Ireland (Article XVIII); Italy (Article 20); Jamaica (Article 22); Japan (Article 19); Korea (Article 20); Luxembourg (Article XIII); Netherlands (Article XVII); Norway (Article 15); Pakistan (Article XII); Philippines (Article 21); Poland (Article 17); Romania (Article 19); Sweden (Article XII); Switzerland (Article XII); Trinidad and Tobago (Article 18); and the Union of Soviet Socialist Republics (Article VI). The holding of this revenue ruling applies to individuals claiming a teacher's or researcher's exemption under these treaties.

Rev. Rul. 89-5, 1989-1 C.B. 353, 1989-2 I.R.B. 9.