Medical resident’s wages not excludable under treaty

A citizen of Pakistan who participated in an internal medicine residency program in the U.S. was not entitled to exclude from income wages he received from the program under the U.S.-Pakistan Treaty. He was not a professor or teacher temporarily visiting the U.S. for the purpose of teaching nor was he present in the U.S. under an arrangement with a governmental agency for the purpose of training, study or orientation.

The individual’s duties during his residency and fellowship included treating patients on wards and in outpatient clinics under faculty supervision, conducting and presenting clinical research and supervising and training third- and fourth-year medical students. All of these duties, including supervising and training medical students, were part of the individual’s residency training. Therefore, while the individual supervised and trained medical students as a component of his own training, he was not in the U.S. “for the purpose of teaching;” rather, he came to the U.S. to be taught.

Moreover, neither his offer letter nor his agreement with the residency program referred to any obligation to teach medical students or suggested that his remuneration was for teaching. The agreement focused on the education the individual would receive and the patient care he would provide as a resident. In addition, the individual’s supervision and training of medical students was a component of his stated goal to receive U.S. medical training and become a fully licensed doctor. The overwhelming evidence showed that the individual did not enter the residency program to become a teacher, the university did not hire him to teach and he did not hold a faculty appointment.

Further, the individual failed to show that he was in the U.S. under the auspices of a governmental agency or program. The technical explanation of the treaty states that the government-sponsored exemption applies to “Pakistan personnel invited to the United States for training or study by our Government,” including “military and armed forces trainees, central bank employees studying budgetary and financial policies, and trainees under technical assistance programs.” (U. Bhutta, 145 TC–No. 14, Dec. 60,476.)

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