37 T.C. 399">*399 Respondent determined deficiencies in petitioners' income tax in the amounts of $ 863.11 in 1956 and1961 U.S. Tax Ct. LEXIS 18">*20 $ 801.86 in 1957.

The principal issue is whether payments made to petitioner Laurence P. Dowd as a Fulbright lecturer in 1956 and 1957 by the United 37 T.C. 399">*400 States Educational Commission in Japan were "amounts paid by the United States or an agency thereof" and therefore not excludible from gross income under section 911(a)(2) of the 1954 Code. If such payments are includible in gross income, an alternative question is whether petitioner while a Fulbright lecturer in Japan was "away from home" within the meaning of section 162(a)(2) of the 1954 Code and thereby entitled to deduct his "traveling expenses" while in Japan.

FINDINGS OF FACT.

The facts stipulated by the parties are incorporated herein by this reference.

Petitioners, husband and wife, filed joint income tax returns for the taxable year 1956 with the district director of internal revenue at Tacoma, Washington, and for the taxable year 1957 with the district director of internal revenue at Detroit, Michigan. Juliet R. Dowd is a petitioner herein only because joint returns were filed. Laurence P. Dowd will hereinafter be referred to as petitioner.

Prior to September 1955 petitioner was employed by the University of Washington1961 U.S. Tax Ct. LEXIS 18">*21 at Seattle, Washington, as an assistant professor of Marketing, Transportation and Foreign Trade. In September 1955 petitioner was promoted to the rank of associate professor. He was granted a sabbatical leave from the university for the academic year 1955-1956.

On March 5, 1955, petitioner was awarded a Fulbright grant for the purpose of lecturing in economics at Kobe University, Kobe, Japan, for a 10-month period beginning in October 1955. The notice which officially informed petitioner of the award was a Department of State form entitled a "United States Government Grant Authorization" with attached "Terms and Conditions of U.S. Government Grant." The grant authorization named the United States Educational Commission in Japan as the "administering U.S. educational foundation or commission" of the award. It provided a "maintenance allowance" for petitioner and four accompanying dependents amounting to 3,096,000 yen. During 1956 and 1957 the rate of exchange was 360 Japanese yen for 1 United States dollar.

Among the "Terms and Conditions of U.S. Government Grant" which petitioner agreed to in accepting the award were the following:

2. MEDIUM OF PAYMENT: * * * Since all funds1961 U.S. Tax Ct. LEXIS 18">*22 available under Public Law 584, 79th Congress (the Fulbright Act) are in foreign currencies, this grant and all payments thereunder are made only in the currency of the host country. These funds are to be used to meet the grantee's expenses abroad in carrying out his project. The foreign currency available under the program is not convertible into United States dollars.

* * * *

37 T.C. 399">*401 5. DURATION OF GRANT: * * *

The Foundation may in its discretion at the request of the grantee extend the grant for a period not to exceed three months at the pro rata monthly rate of the allowance in order to permit the grantee to complete his activity.

* * * *

10. ITEMS NOT INCLUDED: * * * Persons who participate as grantees under this program are not entitled to receive certain services which may be available to officers and employees of the United States Government (for instance, PX privileges). It is the intention of the program that recipients of awards will utilize the economy of the countries in which they are temporary residents to meet their local living requirements.

* * * *

13. CONTINGENCIES: Neither the Department of State, the Board of Foreign Scholarships, nor the Foundation assumes1961 U.S. Tax Ct. LEXIS 18">*23 responsibility for any injury, accident, illness, loss of personal property, or other contingency which may befall the grantee or his dependents during or in connection with his stay abroad under this grant. It is recommended that the grantee personally obtain adequate health, accident, and personal property insurance. The Department of State, the Board of Foreign Scholarships, and the Foundation shall not be liable for any claim or claims which may arise from the grantee's failure to enter upon or to complete his project as contemplated in this award, even where such failure is due to circumstances beyond the grantee's control.

* * * *

18. TERMINATION OF GRANT: The Board of Foreign Scholarships and the Department of State reserve the right to revoke or terminate this grant, in their discretion, and to withhold payment of such allowances as have not been paid on the date of termination, as well as return transportation to the United States, should non-compliance with the provisions of the award warrant such action. Grounds upon which the Board of Foreign Scholarships and the Department of State may revoke this grant include, but are not limited to, the following: violation of the1961 U.S. Tax Ct. LEXIS 18">*24 laws of the United States or of the host country, including currency exchange regulations; misconduct; failure to maintain satisfactory scholastic standing; failure to complete the grant because of voluntary termination, including premature departure from the institution of affiliation or the host country; physical or mental incapacitation; engaging in political or unauthorized income-producing activities.

19. RESPONSIBILITIES: An American citizen who accepts a grant under the United States Educational Exchange Program is not by virtue of such an official of the Department of State, of any other agency of the U.S. Government or of a foreign government agency. As far as the Department of State and the U.S. government are concerned, the grantee's status is that of a private citizen with the same professional freedom he enjoys as a representative of his profession in the United States. Nevertheless, the grantee should remember that his home institution and his country may be judged by his actions and utterances whether public or private. He should also be aware that critical or idle comments regarding foreign governments, institutions or customs may offend the people whose guest he1961 U.S. Tax Ct. LEXIS 18">*25 is. He should avoid giving the impression that he is an official spokesman of the United States Government.

The so-called Fulbright Act (Pub. L. 584, 79th Cong., 2d Sess., 60 Stat. 754) is an amendment to the Surplus Property Act of 1944 and provides in part that in carrying out the provisions of the latter statute the Secretary of State is authorized to enter into executive 37 T.C. 399">*402 agreements with any foreign government "for the use of currencies, or credits for currencies, of such government acquired as a result of such surplus property disposals," for the purpose of providing, by the formation of foundations or otherwise, for financing studies, research, instruction, and other education activities of or for American citizens in schools or institutions of higher learning located in such foreign country or of citizens of such foreign country in American schools and institutions of higher learning.

Pursuant to the provisions of the foregoing legislation, the United States Educational Commission in Japan was established by an agreement between the United States and Japan on August 28, 1951. This agreement provided in part as follows:

SECTION 1

There shall be established a Commission1961 U.S. Tax Ct. LEXIS 18">*26 to be known as the United States Educational Commission in Japan (hereinafter designated "the Commission"), which shall be recognized by the Government of the United States of America and the Government of Japan as an organization created and established to facilitate the administration of an educational program financed by funds to be made available by the Government of Japan on account of obligations incurred by the Government of Japan for surplus property sold to it by the Government of the United States of America. Except as provided herein the Commission shall be exempt from the domestic and local laws of the United States of America as they relate to the use and expenditure of currencies and credits for currencies for the purpose set forth herein. The funds and property shall be regarded in Japan as property of a foreign government.

* * * *

SECTION 2

In furtherance of the aforementioned purposes, the Commission may, subject to the provisions of the present memorandum exercise all powers necessary to the carrying out of the purpose of this memorandum including the following:

* * * *

(4) Authorize the Treasurer of the Commission or such other person as the Commission may designate1961 U.S. Tax Ct. LEXIS 18">*27 to receive funds to be deposited in bank accounts in the name of the Treasurer of the Commission or such other person as may be designated. The appointment of the Treasurer or such designee shall be approved by the Secretary of State and he shall deposit funds received in a depository or depositories designated by the Secretary of State of the United States of America.

* * * *

(6) Provide for periodic audits of the accounts of the Treasurer of the Commission as directed by auditors selected by the Secretary of State of the United States of America;

* * * *

SECTION 3

All commitments, obligations and expenditures authorized by the Commission shall be made pursuant to an annual budget to be approved by the Secretary of 37 T.C. 399">*403 State of the United States of America pursuant to such regulations as he may prescribe.

SECTION 4

The Commission shall consist of eight members, four of whom shall be citizens of the United States of America and four of whom shall be citizens of Japan. In addition, the principal officer in charge of the Diplomatic Mission of the United States of America to Japan (hereinafter designated "Chief of Mission") shall be Honorary Chairman of the Commission. He shall1961 U.S. Tax Ct. LEXIS 18">*28 cast the deciding vote in the event of a tie vote by the Commission and shall appoint the Chairman of the Commission. The Chairman as a regular member of the Commission shall have the right to vote. The Chief of Mission shall have the power to appoint and remove the citizens of the United States of America on the Commission. The Japanese members shall be appointed by the Government of Japan from a list of nominees concurred in by the Chief of Mission and may be removed by the Government of Japan.

* * * *

SECTION 8

The Government of Japan, as and when requested by the Government of the United States of America for purposes of this memorandum, shall make available for deposit in an account of the Treasurer of the United States of America in Japan currency of the Government of Japan not to exceed the equivalent of One Million Dollars ($ 1,000,000) (United States currency) annually for a period of five (5) years, except that in the initial year of the operation of the Commission the amount to be made available in the currency of the Government of Japan shall not exceed the equivalent of Seven Hundred Fifty Thousand Dollars ($ 750,000) (United States currency). It is understood that1961 U.S. Tax Ct. LEXIS 18">*29 any funds not requested in accordance with the provisions of the preceding sentence shall be made available at such times, subsequent to the aforementioned five year period, as may be requested by the Government of the United States of America.

* * * *

The Secretary of State of the United States of America will make available for expenditure as authorized by the Commission currency of the Government of Japan in such amounts as may be required for the purposes of this memorandum but in no event in excess of the budgetary limitations established pursuant to Section 3 of the present memorandum.

SECTION 9

The Government of Japan shall, as far as possible, find ways and means of relieving United States grantees, on the basis of reciprocity, from Japanese taxation and other financial burdens affecting the grants made from funds available to the Commission in accordance with this memorandum. Details of the exemption may hereafter be arranged between competent authorities of the two governments.

On September 22, 1955, petitioners together with their three minor children departed the United States for Kobe, Japan. From October 1955 until July 1957, a period of 21 months, petitioner and his1961 U.S. Tax Ct. LEXIS 18">*30 family rented a house at Kobe, Japan. During this period, petitioner lectured at Kobe University.

Petitioners owned their home at 3826 46th Avenue NE., Seattle 5, Washington, from August 1951 to May 1958. While petitioners and 37 T.C. 399">*404 their family were in Japan and after their return to the United States in 1957, petitioners rented this home to others.

Petitioner resigned from the faculty of the University of Washington in March of 1956. His resignation was accepted by the board of regents of the university on March 3, 1956, effective June 15, 1956.

On May 3, 1956, petitioner was awarded a renewal of his Fulbright grant to cover a second year of lecturing at Kobe University for a 10-month period beginning in October 1956. Petitioner was officially notified of this renewal grant by receipt of a Department of State form entitled a "United States Government Grant Authorization."

On May 18, 1956, petitioner was informed by a letter from the executive secretary of the United States Educational Commission in Japan that he had been granted an extension of his initial Fulbright grant from August 5 to September 30, 1956, to provide summer maintenance between the termination of his initial1961 U.S. Tax Ct. LEXIS 18">*31 award and the commencement of his renewal award.

All funds paid to petitioner under his Fulbright grant, its extension and renewal, were paid by the United States Educational Commission in Japan in inconvertible Japanese currency. Petitioner received the equivalent of $ 10,320 in 1956 from the United States Educational Commission in Japan and the equivalent of $ 5,160 in 1957.

While petitioner was in Japan, he was offered an appointment to the faculty of the University of Michigan as lecturer for the academic year 1957-1958 on April 4, 1957. Petitioner accepted the appointment and commenced employment at the University of Michigan on October 1, 1957.

Petitioners departed Japan for the United States on July 8, 1957, and arrived at San Francisco on August 14, 1957.

The chairman of the United States Educational Commission in Japan wrote to petitioner on September 19, 1957, and enclosed a copy of some mimeographed materials distributed by the Commission to all Fulbright grantees concerning tax matters. A portion of these materials reads as follows:

The Department of State requested a ruling as to the tax treatment of grants received by American students, teachers, professors, and research1961 U.S. Tax Ct. LEXIS 18">*32 scholars as affected by Section 117 of the Internal Revenue Code of 1954. In a letter of January 10, 1957, the United States Treasury gave such a ruling, an exact copy of which follows:

"It is our position that the law and regulations do not permit teachers and professors who are teaching in foreign countries to exclude from their incomes, any grants which they receive under the Fulbright Act for such teaching. Those teachers who are employed in teaching in the United States and who are merely temporarily absent from their regular employment in this country for the purpose of teaching, or lecturing abroad, may deduct the actual cost of their travel, meals and lodging, incurred in connection with their foreign teaching or lecturing activities. This deduction applies, of course, only to the expenses to the individual 37 T.C. 399">*405 teacher or professor, and not to any expenses incurred on behalf of any other person who may accompany him.

Petitioner in 1959 wrote to the Department of State and requested information about the governmental status of Fulbright commissions and foundations. He was answered by John W. Keogh, Chief, Facilitative Services Branch, International Educational Exchange1961 U.S. Tax Ct. LEXIS 18">*33 Service, in a letter signed "for the Acting Secretary of State." This reply, dated April 22, 1959, read in part as follows:

The United States Educational Commissions and Foundations abroad, about which you inquire in your letter of April 1, 1959, are created by executive agreement between the United States and the country in which the Commission or Foundation is located. Each agreement provides that the Commission or Foundation, whichever it might be called, shall be recognized by the two governments as an organization created and established to facilitate the administration of the educational exchange program financed by funds made available to the Commission or Foundation by the United States from funds acquired by the United States from the other government.

The Department considers the Commissions and Foundations to be binational organizations. The Department does not consider that they have official status as agents of the United States Government as do other units such as the various branches of the Department of State or other government agencies operating abroad. The employees of the Commissions and Foundations are not considered to be employees of either the Foreign Service1961 U.S. Tax Ct. LEXIS 18">*34 or Civil Service for purposes of salary, leave, retirement, and other benefits normally accruing to government employees.

On their 1956 income tax return petitioners reported $ 6,720 of the $ 10,320 received from the United States Educational Commission in Japan as taxable income and claimed in an attachment to the return that the remaining $ 3,600 was excludible from taxation. On their 1957 income tax return petitioners omitted the entire $ 5,160 received from the United States Educational Commission in Japan and claimed in an attachment to the return that such amount was excludible under the provisions of section 911(a)(2) of the 1954 Internal Revenue Code. In the deficiency notice sent to petitioners respondent determined that the entire amounts received by petitioner from the United States Educational Commission in Japan in 1956 and 1957 "were amounts paid by the United States or an agency thereof and are not excludable from gross income under the provisions of Section 911 of the Internal Revenue Code of 1954." Respondent determined that such amounts were fully taxable to the petitioners in 1956 and 1957.

The amounts received by petitioner in 1956 and 1957 as a Fulbright lecturer1961 U.S. Tax Ct. LEXIS 18">*35 in Japan were paid by or on behalf of the United States or an agency thereof through the United States Educational Commission in Japan.

Petitioner's tax residence in 1956 and 1957 remained in the United States. As a Fulbright lecturer at Kobe University in Japan, petitioner 37 T.C. 399">*406 was temporarily away from home in the pursuit of his trade or profession of teaching.

The average traveling expenses applicable to petitioner while in Japan (including rent, utilities, food, maid service, and actual travel in Japan) were $ 400 a month. Petitioner incurred such expenses in the amounts of $ 4,800 in 1956 and $ 2,500 in 1957.

OPINION.

1. Petitioner's claim to exclusion from gross income rests solely upon section 911(a)(2) of the 1954 Code. ¹ There is no contention before us that the amounts received by petitioner were excludible under section 117 pertaining to "Scholarships and Fellowship Grants." See Rev. Rul. 61-65, 1961-1 C.B. 17. The grants to petitioner related to his activities as a lecturer, and he seeks favored tax treatment only under section 911(a)(2) dealing with income earned outside the United States where the taxpayer "during any1961 U.S. Tax Ct. LEXIS 18">*36 period of 18 consecutive months is present in a foreign country or countries during at least 510 full days in such period." Petitioner complied with the requirements of presence in a foreign country, and the only ground relied upon by the Commissioner to deny him the benefits of section 911(a)(2) is the parenthetical provision making section 911(a)(2) inapplicable in the case of "amounts paid by the United States or an agency thereof." The question before us therefore is whether the amounts received by petitioner as a Fulbright lecturer were "paid by the United States or an agency thereof."

1961 U.S. Tax Ct. LEXIS 18">*37 Petitioner makes an extended and persuasive argument that he was not an employee of the United States or any agency thereof. But that is not the true issue. Assuming that he was not such an employee there still remains the question whether the amounts were paid to him 37 T.C. 399">*407 by the United States or one of its agencies. If they were so paid then the statutory exclusion by its very terms is inapplicable.

To be sure, the payments received by petitioner as a Fulbright lecturer were not paid to him directly by the United States. They were paid in inconvertible Japanese yen by the United States Educational Commission in Japan, and the real question before us is therefore reduced to whether the Commission was in substance acting as a disbursing agent for the United States or an agency thereof in paying petitioner. Cf. Robert W. Teskey, 30 T.C. 456">30 T.C. 456.

In order to resolve this question it is necessary to examine the statutory basis of the Fulbright educational exchange program in general and the creation of the United States Educational Commission in Japan in particular. The Fulbright program was begun in 1947 by an amendment ² to the Surplus Property1961 U.S. Tax Ct. LEXIS 18">*38 Act of 1944 ³ which enabled the Secretary of State of the United States to enter into agreements with foreign countries whereby money owed to the United States for surplus property purchased by the foreign governments would be used to finance an educational exchange program between the United States and the foreign countries. ⁴ Pursuant to this enabling legislation on August 28, 1951, the United States and Japan entered into an agreement which established the United States Educational Commission in Japan to facilitate the administration of a program of educational exchange between the United States and Japan. Portions of this agreement are set forth in our findings. For present purposes, it should be noted that section 8 of this agreement provides that the funds for the program are to be paid by Japan in currency of the Government of Japan to "an account of the Treasurer of the United States" and that the Secretary of State of the United States then is to make available to the Commission such funds as are required to meet the budget of the program. Also noteworthy are the provisions in section 2 of the agreement that the treasurer of the Commission shall be appointed subject1961 U.S. Tax Ct. LEXIS 18">*39 to the approval of the Secretary of State of the United States, that the Commission's funds shall be deposited in a depository or depositories designated by the Secretary of State, that there shall be periodic audits of the Commission's accounts by auditors selected by the Secretary of State, and the provision in section 3 that the annual budget of the Commission is subject to the approval of the Secretary of State.

37 T.C. 399">*408 We think it plain from these provisions in the agreement between the United States and Japan that it is the intent of that agreement that the funds which are used to1961 U.S. Tax Ct. LEXIS 18">*40 finance the operations of the United States Educational Commission in Japan, although in Japanese currency, are funds owned and supplied by the Government of the United States which before transferring such funds to the Commission received them from the Government of Japan in payment for surplus property sold to Japan. The United States retained substantial control over the use of these funds, not only through various powers given the Secretary of State in the agreement with Japan, but also by selecting the persons from the United States, such as petitioner, who become eligible to receive the benefit of a portion of the funds. Thus, although the United States Educational Commission in Japan may technically be a binational organization in concept and organization, as contended by petitioner, and not, strictly speaking, an agency or instrumentality of the United States Government, we conclude that the Commission is financed by the United States and that funds which it disburses are funds of the United States. ⁵ It follows that funds paid to the petitioner by the United States Educational Commission in Japan were in terms of true ownership and control paid by or on behalf of the 1961 U.S. Tax Ct. LEXIS 18">*41 United States for purposes of section 911 of the 1954 Code, supra. Cf. Erlandson v. Commissioner, 277 F.2d 70 (C.A. 9), affirming a Memorandum Opinion of this Court; Robert W. Teskey, 30 T.C. 456">30 T.C. 456.

In this regard we think it significant that petitioner was notified of his selection as a Fulbright lecturer (and of the renewal of his award) on a State Department form entitled a "United States Government Grant Authorization" accompanied by separate "Terms and Conditions of United States Government Grant." Based1961 U.S. Tax Ct. LEXIS 18">*42 on all the evidence of record we are convinced that the Fulbright awards received by the petitioner were indeed grants from the United States Government which were in fact paid by the United States through the United States Educational Commission in Japan.

As previously noted, petitioner argues in the main that as a Fulbright lecturer he was not an employee of the United States and was not entitled to any of the benefits of Government employment. As a result he contends that the statutory exception for amounts paid by the United States or an agency thereof should not apply. However, as this Court pointed out in 30 T.C. 456">Robert W. Teskey, supra at 461-462, the statute does not require an employer-employee relationship. Cf. 37 T.C. 399">*409 Erlandson v. Commissioner, supra at 72; Leif J. Sverdrup, 14 T.C. 859">14 T.C. 859, 14 T.C. 859">865-866. All that is required is that petitioner be paid by the United States or an agency thereof. Since we hold petitioner was so paid, the question whether petitioner as a Fulbright lecturer was an employee of the United States becomes moot. ⁶

1961 U.S. Tax Ct. LEXIS 18">*43 Finally, we think that Krichbaum v. United States, 138 F. Supp. 515">138 F. Supp. 515 (E.D. Tenn.), cited by petitioners, is also distinguishable. In that case it was found that the funds used to pay the taxpayer had been borrowed by the Government of Ethiopia from the International Bank and that the United States Bureau of Public Roads paid the taxpayer for Ethiopia as paymaster and not payor. In the present case, if there is a paymaster involved, it is the United States Educational Commission in Japan; we have found that the United States is the payor.

2. We now turn to petitioner's alternative position. Petitioner argues that while a Fulbright lecturer he was traveling "away from home" in the pursuit of his trade or profession of teaching within the meaning of section 162(a)(2) of the 1954 Code ⁷ and, thus, that he is entitled to deduct his "traveling expenses (including the entire amount expended for meals and lodging)" while in Japan. Respondent's position is that the cited section is inapplicable because petitioner's work in Japan was of such duration and in such circumstances that Japan was his tax residence during 1956 and 1957.

1961 U.S. Tax Ct. LEXIS 18">*44 We think petitioner qualifies for the disputed deduction. Petitioner is an American college professor by trade or profession. He went to Japan in pursuit of this calling as a Fulbright lecturer. By its very nature, the Fulbright grant was temporary, since it was for a fixed period of 10 months. Although petitioner in fact received a renewal of that grant for 10 months of the succeeding academic year and also an extension of his original grant for a brief period so that there would be no gap, and thus remained in Japan some 21 months, there is no indication in the record that petitioner at any time intended to remain in Japan indefinitely or permanently. But for the facts that petitioner's family accompanied him to Japan and that petitioner changed the location of his teaching position back in the United States37 T.C. 399">*410 while in Japan, we think it doubtful that respondent would ever have contended that petitioner's tax home was other than in the United States. ⁸ We think the presence of petitioner's family in Japan with him in no way detracts from the temporary status of his Fulbright grant in Japan. Since this grant was payable only in inconvertible Japanese currency, petitioner1961 U.S. Tax Ct. LEXIS 18">*45 would have found it difficult if not impossible to support his family except in Japan. Also, the added fact that petitioners retained the ownership of their home in Seattle when they went to Japan is some evidence that they assumed that they would return to Seattle upon the completion of petitioner's temporary teaching assignment in Japan.

Respondent argues that even if petitioner is considered "away from home" when he began his Fulbright lectureship while on a sabbatical leave from the University of Washington, he should not be considered so after he resigned from the faculty of the University of Washington and thereby no longer had a permanent teaching position in the United States. However, we think petitioner's change in universities in the United States in no way changed the temporary nature of his presence in Japan as a Fulbright lecturer. While the record is not clear regarding petitioner's reasons for resigning from the University1961 U.S. Tax Ct. LEXIS 18">*46 of Washington, there is no indication that petitioner took this action with any intent to remain in Japan on a permanent or indefinite basis. We know petitioner was offered and accepted a teaching position at the University of Michigan while he was still in Japan and that he went to the University of Michigan after his return from Japan in 1957. We conclude, therefore, that petitioner's change in positions in the United States had no effect on his "away from home" status while in Japan, that he continued to be temporarily away from the United States as a Fulbright lecturer, that petitioner's tax residence remained in the United States in 1956 and 1957, and that during the entire time he was in Japan he incurred deductible "traveling expenses" under section 162(a)(2), supra.

There remains the question of the amount of the deduction to which petitioner is entitled in 1956 and 1957. The parties have stipulated the average monthly expenses incurred by petitioner and his family while in Japan. Although the problem of allocating to petitioner the amounts properly chargeable to him is by no means free from difficulty, we have nevertheless used our best judgment and have made findings1961 U.S. Tax Ct. LEXIS 18">*47 of fact based upon our evaluation of the stipulated facts in the light of testimony given at the trial. We have accordingly found that the deductible expenses incurred by petitioner were in the amount of $ 4,800 in 1956 and $ 2,500 in 1957.

Decision will be entered under Rule 50.