US International Taxation:
Ahmed Abbar is a citizen and resident of saudi arabia. He works as a full-time, high-ranking business executive for a large oil company in saudi arabia earning $900,000 a year in each of the relevant years. Four years ago (year 1), he bought a new york city condomimium apartment for $4,000,000. His work schedule made it impractical for him to lease the premises to others. While he enjoyed significant appreciation in its value during the first two years of ownership, the recession dramatically affected its value. Fearing that he might sustain an actual loss on his investment, after months of advertising, he finally sold the apartment for $4,500,000, which closed on new year’s eve, december 31, year 4.
In the first year of his ownership he utilized the apartment periodically and was present therein for 120 days. While there, he and his spouse and their child enjoyed the city’s cultural attractions, while also conducting business from his home, a ritual which he followed annuallly, in part hoping that his child would become bilingual. Given the child’s eight-month presence in Riyadh and education at one of the best private schools in all of saudi arabia, Abbar felt that the four-month immersion in American culture would better prepare his child for the future.
During years 1-4, Abbar followed his same pattern of living and working during his 120 day stay. However, while in saudi arabia on business in year 3, a client introduced him to the joys and near addiction of harness racing. Thus, in year 4, he began frequenting the Saratoga Springs, new york race track. He visited the Saratoga Springs race track every day that he was in the United States. During that time, he made a number of successful wagers, ending year 4 with total winnings of $430,000. Unfortunately, he has losses of $475,000 that exceeded his winnings by $45,000.
During year 4, he also received interest income of $27,000, capital gain income of $54,000 from sale of stock on the new york stock exchange, and dividend income of $19,000. The payor of the interest income was Motorola, Inc., a Delaware corporation; the stock sold was that of Google, Inc., a Delaware corporation and the payor of the dividend was General Motors Corporation, a Delaware corporation. Given saudi arabia’s territorial system of taxation, he paid saudi arabian federal income taxes of $360,000. What are Abbar’s tax obligations to the United States for year 4?