[Auris]

Hello Everyone,

I came to US on L1B visa in 2005.

• Arrived (to US) on 20/10/2005.
• Left (US) on 23/12/2005.

• Arrived on 01/01/2006.
• Left on 01/07/2006
• Arrived on 06/08/2006
• Left on 23/11/2006.
• Planning to arrive on 01/03/2007.

In 2005 I met 'first-year choise' conditions (65 days of presence in US in the period from October 20 through December 31 equals 89%). So I filled my tax return as resident and got refund without any issues.

Q1) What is my status for 2006? Am I resident alien (290 days of presence in US)?
I do not have close connection with my native country (Lithuania).

In 2006 I got married. Before marriage fiancée was visiting me on visitor visa. After marriage she was staying in Lithuania. In other words she is non resident alien.

Q2) Can we make a joint return for 2006? Is it possible to treat my nonresident spouse as a resident?

Thanks.

[AtlantaTaxExpert]

In my opinion, in 2005, you were a non-resident alien.

You failed to meet the Substantial Presence Test for 2005, so you could not file as a dual-status alien for 2005.

In 2006, you were in country for 168 days. If you factor in the 2005 days (counting 1 day for every three in country in 2005), you do meet the Substantial Presence Test for 2006. That requires you to file as a dual-status alien for 2006.

You cannot file as a resident alien for either year.

[Auris]

Atlanta, could you review your answer one more time? Thanks.

In 2006 I was in country for:
* From 01/01/2006 to 01/07/2006 - 182 days
* From 06/08/2006 to 23/11/2006 - 110 days.

So total is 292 days. According to numbers I meet the Substantial Presence Test for 2006. What is your opinion, Atlanta?

Thanks

[AtlantaTaxExpert]

Okay, you used the EUROPEAN style of dating!

I read 1/7/2006 is 7 January 2006, not 1 July 2006.

Okay, you DID meet the SPT for 2006. However, because you were NOT in country for all of 2006, and because you did not END the year of 2006 as a resident (you left on 23 Nov 06), you still can only file as a dual-status alien.

To file jointly with your wife, you must BEGIN 2006 as a non-resident alien and END 2006 as a resident alien. You did neither.

[Auris]

Thanks for quick answer. Please review my additional arguments.

I. Dual-status alien for 2005. Arguments below.

Excerpt from: Publication 519, chapter 1, section Dual-Status Aliens.

"First-Year Choice
If you do not meet either the green card test or the substantial presence test for 2004 or 2005 and you did not choose to be treated as a resident for part of 2004, but you meet the substantial presence test for 2006, you can choose to be treated as a U.S. resident for part of 2005. To make this choice, you must:

1. Be present in the United States for at least 31 days in a row in 2005, and

2. Be present in the United States for at least 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of 2005. For purposes of this 75% requirement, you can treat up to 5 days of absence from the United States as days of presence in the United States."

Lets examine my situation:

1. The substantial presence test for 2006 is met.
2. The first condition is met, because in 2005 I was in US from October 20 to December 23 - 65 days. It is more than 31 days.
3. The second condition is met. We have 73 days for the period: October 20 - December 31, therefore 65 days is 89%. It is more than 75%.

II. Resident alien for 2006. Arguments below.

a) I am resident alien from January 1, 2006, because one of the following conditions are met:

1. Excerpt from: Publication 519, chapter 1, section Dual-Status Aliens.
   
   "Residency during the preceding year.If you were a U.S. resident during any part of the preceding calendar year and you are a U.S. resident for any part of the current year, you will be considered a U.S. resident at the beginning of the current year."
   
   In 2005 I was resident alien from October 20 and met the substantial presence test for 2006. Therefore I am resident alien from January 1, 2006.
   
   
2. Excerpt from: Publication 519, chapter 1, section Dual-Status Aliens.
   
   "Residency starting date under substantial presence test. If you meet the substantial presence test for a calendar year, your residency starting date is generally the first day you are present in the United States during that calendar year."
   
   I arrived on January 1, 2006 and met the substantial presence test for 2006. Therefore I am resident alien from 1 January, 2006.

b) I am resident alien till December 31, 2006, because the following conditions are met:

1. Tax home was US for 2006.
2. I had closer connection with US for 2006.
3. The first two conditions remained the same after November 23, 2006.
4. Excerpt from: Publication 519, chapter 1, section Dual-Status Aliens.
   
   Last Year of Residency
   If you were a U.S. resident in 2005 but are not a U.S. resident during any part of 2006, you cease to be a U.S. resident on your residency termination date. Your residency termination date is December 31, 2005, unless you qualify for an earlier date as discussed next.
   
   Earlier residency termination date. You may qualify for a residency termination date that is earlier than December 31. This date is:
   * The last day in 2005 that you are physically present in the United States, if you met the substantial presence test,
   * The first day in 2005 that you are no longer a lawful permanent resident of the United States, if you met the green card test, or
   * The later of (1) or (2), if you met both tests.
   
   You can use this date only if, for the remainder of 2005, your tax home was in a foreign country and you had a closer connection to that foreign country. See Closer Connection to a Foreign Country, earlier.
   
   Termination of residency after June 3, 2004. If you terminate your residency after June 3, 2004, you will still be considered a U.S. resident for tax purposes until you notify the Secretary of State or the Secretary of Homeland Security and file Form 8854, Initial and Annual Expatriation Information Statement.

I cannot use "Earlier residency termination date" because my tax home for 2006 is US and I have closer connection with US too.

Conclusion. I was resident for 2006 from January 1 till December 31. Therefore I should be able to file jointly.

Thanks for your time and answers.

[Auris]

1. Residency termination date explanation in resource1:

[F]"For the "residency termination date", the date that the individual's resident alien status terminates is the last day of the calendar year in which he/she ceases to be a U.S. resident for tax purposes. (E.g. if last day of residency is September 10, the residency termination date is December 31 of that year.) "

2. Residency termination date explanation in resource2:

[F]"If you left the U.S. to re-establish your residence in your home country after you met the substantial presence test, your residency termination date is generally December 31 of the year you leave. You are therefore considered a U.S. resident for the entire calendar year. However, you can claim to be a dual-status alien for the year you leave if you meet the following conditions:

* You are not a U.S. resident during any part of the following year, and
* You establish that, after you left the U.S., your tax home was a foreign country and you had a closer connection to that country.

If you meet these conditions, you have the option to determine your residency termination date as the last day in the calendar year that you were physically present in the United States, which means that you will be a dual-status alien for that year."

In my case I do not meet these two conditions. Therefore, I am resident till December 31, 2006.

Thanks again.

[taxsearcher]

Under US law you are a resident.

Your wife is a non-resident but may elect to file as a resident. This would require her to include her worldwide income.

[AtlantaTaxExpert]

I concede the point to TaxSearcher.

[Auris]

Thanks TaxSearcher and Atlanta for your time and answers.

Do you have sample form for statement, in which nonresident declares choice to be treated as resident? Thanks.

[AtlantaTaxExpert]

No I do not!