           IN THE COMMONWEALTH COURT OF PENNSYLVANIA

P&A Marketing and Allegheny                  :
Point Insurance,                             :
                      Petitioners            :
                                             :
              v.                             :    No. 1588 C.D. 2018
                                             :    Submitted: March 22, 2019
Workers’ Compensation Appeal                 :
Board (Spencer),                             :
                      Respondent             :

BEFORE: HONORABLE P. KEVIN BROBSON, Judge
        HONORABLE ANNE E. COVEY, Judge
        HONORABLE CHRISTINE FIZZANO CANNON, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE BROBSON                             FILED: August 12, 2019

              P&A Marketing and Allegheny Point Insurance (collectively,
Employer) petition for review of an order of the Workers’ Compensation Appeal
Board (Board), dated November 14, 2018. The Board modified, in part, and
affirmed, in part, the decision of a Workers’ Compensation Judge (WCJ), denying
Employer’s modification petition and granting, in part, the reinstatement petition
filed by Evelyn Spencer (Claimant).1 For the reasons set forth below, we affirm the
Board’s order.

       1
          The WCJ also denied Claimant’s penalty petition. Claimant’s penalty petition is not
relevant to this appeal, and, therefore, we do not address it in this opinion.
               On May 24, 2014, Claimant sustained a work-related injury in the
nature of a right shoulder rotator cuff tear, while working for Employer. Employer
accepted liability for Claimant’s work-related injury pursuant to a Notice of
Compensation Payable (NCP). Thereafter, on October 3, 2016, Employer filed a
modification petition, seeking a suspension of Claimant’s workers’ compensation
benefits.2 On that same date, Employer issued a Notice of Suspension, advising
Claimant that Employer had suspended Claimant’s workers’ compensation benefits
as of September 18, 2016, due to her failure to return Form LIBC-760, Employee
Verification of Employment, Self-Employment or Change in Physical Condition.
Subsequently, on November 30, 2016, Claimant filed a reinstatement petition,
seeking to have her workers’ compensation benefits reinstated subsequent to her
completion and return of Form LIBC-760 to Employer.
               Before the WCJ, Claimant testified that she has been the owner of
Chadds Ford Travel since 1990.                  (Reproduced Record (R.R.) at 154-55.)
Approximately 20 years ago, there were some changes in the travel agency business,
which caused Claimant to switch from a storefront operation to a home-based
operation by appointment only. (Id. at 155-56.) In 2008, however, the economy
declined, and Claimant had to look for additional work to help pay her bills.
(Id. at 156.) As a result, in December 2009, Claimant began working for Employer

       2
          Employer’s modification petition indicates that Employer is requesting a suspension of
Claimant’s benefits effective September 26, 2016. Based on our review of the record and the
parties’ briefs, however, it appears that this date is a typographical error and that the correct date
should be September 16, 2016, the date on which Employer offered Claimant the full-time
receptionist position. In addition, in its first hearing filing submitted to the WCJ, Employer
amended its modification petition, seeking a suspension of Claimant’s workers’ compensation
benefits effective February 14, 2016, the date on which Claimant returned to her preinjury position
in a modified-duty capacity and allegedly refused to accept caregiver/companion job assignments
that were within her restrictions.

                                                  2
as a caretaker/companion for elderly individuals. (Id. at 156-58, 160-61.) On both
her employment application and during her interview, Claimant made Employer
aware of her travel agency business. (Id. at 185-87.) Throughout her employment
with Employer, Claimant continued to operate her travel agency business on a
full-time basis by appointment and scheduled her travel agency appointments around
her caretaker/companion job assignments. (Id. at 156-58, 165.)
             Claimant also testified that on May 24, 2014, she was pulling up an
elderly individual in bed when she heard a pop and immediately experienced pain in
her right shoulder. (Id. at 166-67.) Claimant sought treatment for her injury, but she
continued to work for Employer in a limited capacity—i.e., she took less
caretaker/companion job assignments than she would have liked—due to her pain
and medications. (Id. at 168-69.) Eventually, Claimant came under the care of
Michael Pushkarewicz, M.D., who performed surgery on Claimant’s right shoulder
on April 8, 2015. (Id. at 168-70.) Following the surgery, Claimant was out of work
for approximately 4 months, but Dr. Pushkarewicz subsequently released Claimant
to return to work under restrictions of no raising her right arm above her head, no
lifting with her right arm, and no driving for longer than 15 minutes. (Id. at 170-72.)
             Claimant explained that, upon her return to work for Employer, she was
very careful to ensure that the tasks she would be required to perform for any new
clients were within her work restrictions. (Id. at 172.) Claimant indicated that she
had to reject certain caregiver/companion job assignments due to her right shoulder
symptoms and her work restrictions, including the driving restriction.
(Id. at 172-73.) Claimant explained that she had difficulty driving because she could
not move her right arm with the steering wheel in a clockwise or counterclockwise
direction, and she experienced a jabbing, throbbing pain in her right shoulder after

                                          3
driving for any length of time. (Id. at 173-74.) Claimant indicated that she also
rejected caregiver/companion job assignments if the client was a male, but that she
had previously advised Employer that she would not be comfortable providing
caretaker/companion services to male individuals. (Id. at 162-64, 178-79, 203, 219.)
Claimant admitted that she also might have declined other caregiver/companion job
assignments offered to her by Employer because the assignments started
before 10:00 a.m., she was singing in church on a Sunday, or she would be away
from home. (Id. at 218-22.) When asked whether she could recall declining a
caregiver/companion job assignment involving a recurring schedule from 10 a.m.
to 5 p.m., Claimant indicated that Dr. Pushkarewicz had placed time limitations on
her ability to work of not more than 4 hours at a time. (Id. at 222.) Claimant stated
further that, prior to the May 24, 2014 work-related injury, she often
worked 3 to 4 hours on weekday evenings or 9 a.m. to 5 p.m. on the weekends.
(Id. at 234-35.) She explained, however, that after the May 24, 2014 work-related
injury, she could no longer work evenings and weekends because the
caregiver/companion job assignments were often located in clients’ homes, where
she would not have had any assistance, and she did not believe that she was capable
of providing the necessary care. (Id. at 235, 237-38.) Claimant further indicated
that she did not have any problems with her right shoulder prior to the May 24, 2014
work-related injury. (Id. at 232.)
             Claimant testified that she has not worked for Employer since
September 2016.      (Id. at 187-88.)   She indicated that, in the beginning of
September 2016, Employer stopped offering her caregiver/companion job
assignments. (Id. at 177-78.) By letter dated September 16, 2016, Employer offered
Claimant a full-time receptionist position, Monday through Friday, 8:30 a.m.

                                         4
to 5 p.m., at Employer’s main office located in West Chester, Pennsylvania.
(Id. at 180-81.) Claimant explained that the drive from her home to Employer’s
main office would have taken her approximately 1 hour in traffic. (Id. at 181-84.)
Claimant explained further that she did not follow up with Employer on the job offer
or attempt to perform the full-time receptionist position because: (1) she continued
to experience problems with driving and remained under Dr. Pushkarewicz’s driving
restrictions, which she believed to be driving not more than 1 half hour at a time;
and (2) with a full-time schedule and the drive home from Employer’s main office,
she would not have had any time to devote to her travel agency business, which was
a full-time job. (Id. at 180-85, 230-31.)
             Claimant testified further that, following her April 8, 2015 surgery, she
continued    to   treat   with   Dr. Pushkarewicz     on     a   regular   basis—i.e.,
every 3 to 4 weeks. (Id. at 190-91.) During that time, Claimant underwent a course
of physical therapy, but her symptoms never really improved. (Id. at 207-08.)
Claimant explained that she eventually stopped treating with Dr. Pushkarewicz in
April 2017, because Dr. Pushkarewicz had informed her that there was nothing more
that he could do for her and that she was “as good as [she was] going to get.”
(Id. at 190, 192.) Claimant indicated, however, that she did not feel like her right
shoulder condition had resolved following the April 8, 2015 surgery, that she
believed that she should have been further along in her recovery, and that she
continued to experience pain and discomfort in her right shoulder, as well as
limitations with certain activities.   (Id. at 189-94.)    As a result, in June 2017,
Claimant began treating with Adrienne J. Towsen, M.D., who performed a shoulder
replacement surgery on Claimant’s right shoulder on August 11, 2017.
(Id. at 194-96.) As of the time of the September 6, 2017 hearing before the WCJ,

                                            5
Dr. Towsen had not yet released Claimant to return to work in any capacity.
(Id. at 196.)
                Claimant also presented the deposition testimony of Dr. Towsen, who
is board certified in orthopedic surgery and concentrates her practice on the
treatment of knees and shoulders. (Id. at 273, 275.) Dr. Towsen first treated
Claimant on June 5, 2017, for complaints of persistent right shoulder pain and
weakness relative to Claimant’s May 24, 2014 work-related injury. (Id. at 279-80.)
At that time, Claimant did not report that she had any problems with her right
shoulder or with performing her job as a caregiver/companion prior to
May 24, 2014. (Id. at 280.) Claimant also did not report that she had any additional
injuries to her right shoulder between May 24, 2014, and June 5, 2017. (Id.)
Dr. Towsen performed a physical examination of Claimant’s right shoulder, which
revealed significant deficits in active range of motion and strength, pain with both
active and passive range of motion, and pain with rotator cuff testing.
(Id. at 282-83.) Dr. Towsen also reviewed a September 9, 2014 MRI report of
Claimant’s right shoulder, which revealed a full thickness tear in the supraspinatus
tendon, degenerative changes in the acromioclavicular joint, and degeneration of the
biceps tendon, but no indication of arthritic change in the glenohumeral joint.
(Id. at 290-92.)    Dr. Towsen explained that, in light of the MRI results and
Claimant’s history, the rotator cuff tear in Claimant’s right shoulder was more acute
than chronic in nature and was a reasonable result of Claimant’s May 24, 2014
work-related incident.      (Id. at 292.)   Based on her evaluation of Claimant,
Dr. Towsen ultimately diagnosed Claimant with a right shoulder rotator cuff
tear/deficiency following a failed rotator cuff repair surgery. (Id. at 283-84, 286.)
While she was unsure whether she placed Claimant under any formal work

                                            6
restrictions, Dr. Towsen noted that Claimant was not capable of performing any type
of lifting, repetitive movements, or activity at shoulder height or above with her right
arm. (Id. at 284.)
             With respect to Claimant’s treatment history, Dr. Towsen testified that
Dr. Pushkarewicz performed an arthroscopic rotator cuff repair on Claimant’s right
shoulder on April 8, 2015. (Id. at 293.) Dr. Towsen indicated that Dr. Pushkarewicz
noted a large, mobile tear in his operative report, which suggested that the tear was
more acute in nature. (Id. at 293-94.) Dr. Towsen explained that, following the
surgery, Claimant consistently treated with Dr. Pushkarewicz and underwent a
standard rotator cuff rehabilitation protocol, which included physical therapy and
other nonsurgical options, but that Claimant continued to experience pain and did
not gain any strength or range of motion. (Id. at 286-90.) Dr. Towsen stated that
she did not see any indication that Claimant had ever fully recovered from her right
shoulder rotator cuff repair subsequent to the April 8, 2015 surgery. (Id. at 294.)
Dr. Towsen also believed that Dr. Pushkarewicz placed Claimant under permanent
restrictions of lifting not more than 20 pounds occasionally and not more
than 10 pounds frequently. (Id. at 300-01.) When asked whether Claimant would
have any problems with driving given the condition of her right shoulder,
Dr. Towsen stated that Claimant would likely have problems, particularly with
turning, because any movement that would bring Claimant’s right arm to shoulder
height would be difficult and, therefore, Claimant would have to rely on her other
arm for steering and turning. (Id. at 302-03.)
             Dr. Towsen also testified that, at the time of her initial evaluation of
Claimant on June 5, 2017, she ordered an MRI of Claimant’s right shoulder so that
she could better advise Claimant of her potential treatment options. (Id. at 286,

                                           7
297-98.) The MRI revealed a very large and retracted tear of the rotator cuff,
arthritic changes in the glenohumeral joint, and an abscess of the biceps tendon.
(Id. at 298-99.) Based on the results of the MRI, Dr. Towsen believed that the best
surgical option and most complete surgical fix that would give Claimant the greatest
possible shoulder function and control Claimant’s pain was a reverse shoulder
arthroplasty.     (Id. at 299-300.)   Dr. Towsen performed the reverse shoulder
replacement surgery on Claimant’s right shoulder on August 11, 2017. (Id. at 304.)
During the surgery, Dr. Towsen discovered, inter alia, that Claimant’s rotator cuff
repair had completely failed and that the tendon had fully torn away from the bone.
(Id. at 304-05.) Dr. Towsen indicated that Claimant was doing reasonably well
postoperatively, but that the typical recovery period following this type of surgery
is 9 to 12 months. (Id. at 305-06.) At the time of her August 31, 2017 deposition,
Dr. Towsen continued to treat Claimant on a regular basis and had not yet released
Claimant to return to work in any capacity. (Id. at 306-07.)
                Overall, Dr. Towsen opined within a reasonable degree of medical
certainty that Claimant’s current problems with her right shoulder and all of the care
that Claimant had received for her right shoulder since the time of the May 24, 2014
work-related incident, including the surgery that Dr. Towsen performed on
August 11, 2017, directly related to Claimant’s work-related right shoulder rotator
cuff tear. (Id. at 307-09, 313-14.) Dr. Towsen further opined that, based on
Claimant’s persistent pain with active motion and limited strength and the fact that
the subsequent MRI and surgery confirmed that Claimant’s rotator cuff had re-torn
or never fully healed, Claimant did not have a favorable result following the
April 8, 2015 surgery. (Id. at 308-09.) Dr. Towsen also opined that Claimant had

                                          8
not yet fully recovered from the May 24, 2014 work-related right shoulder rotator
cuff tear. (Id. at 310.)
             Dr. Towsen admitted that an intervening trauma is not necessary for
there to be a re-tear of the rotator cuff. (Id. at 315.) Dr. Towsen further admitted
that her opinions in this matter could possibly change if someone provided her with
information about a preexisting condition involving Claimant’s right shoulder.
(Id. at 315-17.) Dr. Towsen denied having any knowledge of Claimant’s complaint
to her primary care physician of right shoulder pain after shoveling snow on
December 22, 2009, but indicated that this fact did not change her opinions in this
matter. (Id. at 317, 342.) Dr. Towsen further indicated that a person can experience
shoulder soreness without having a rotator cuff tear and that the typical symptoms
for a rotator cuff tear are loss of active motion, weakness, and constant pain.
(Id. at 322.) Dr. Towsen also admitted that some patients present to her with rotator
cuff tears resulting from overuse injuries or age-related changes but denied that there
is a higher incidence of rotator cuff tears among individuals of Claimant’s age versus
the remainder of the general population. (Id. at 322-23.) Dr. Towsen explained:
             There is no question that some rotator cuff pathology and
             some arthritic change in joints -- in the shoulder joint,
             specifically, is related to age and degeneration. And some
             people have surgery because of that. Other people have
             surgery because of trauma.             And just because
             you’re 70 years old, doesn’t mean you can’t have trauma
             to your shoulder that causes problems that this woman has
             had otherwise.
(Id. at 339.) Dr. Towsen further conceded that there was no evidence in the operative
report that Dr. Pushkarewicz did not properly anchor the tendons or perform the
rotator cuff repair. (Id. at 323-24.) When asked how she could have then concluded
that Dr. Pushkarewicz’s rotator cuff repair surgery failed without ever discussing the

                                          9
procedure with him directly, Dr. Towsen explained that she was not being accusatory
toward Dr. Pushkarewicz but sometimes rotator cuff repairs just fail and, in this
situation, Claimant had a repair and now has a tear. (Id. at 340.) Dr. Towsen
admitted, however, that her opinion regarding the failed rotator cuff repair surgery
assumes that Claimant did not suffer any intervening trauma. (Id.)
             Employer presented the deposition testimony of David Rubenstein,
M.D., who is board certified in orthopedic surgery and specializes in the treatment
of knee and shoulder injuries. (Id. at 21.) Dr. Rubenstein performed an independent
medical examination of Claimant on April 19, 2016, which included reviewing
Claimant’s medical records, obtaining a history, and performing a physical
examination. (Id. at 25-32.) Based on his evaluation of Claimant, Dr. Rubenstein
opined that Claimant had sustained a work-related right shoulder rotator cuff tear on
May 24, 2014. (Id. at 32-33.) Dr. Rubenstein explained that, at the time of his
examination, which was a little over 1 year after she had undergone surgery,
Claimant had a good functional result with some deficits in her right shoulder,
including pain associated with rotator cuff strength testing, weakness, and decreased
range of motion, particularly in internal rotation. (Id. at 33-34.) Dr. Rubenstein
further opined that Claimant had reached maximum medical improvement and did
not require any further medical treatment. (Id. at 34, 36.) Dr. Rubenstein also
opined that Claimant was capable of returning to work in a light-duty capacity with
restrictions of driving up to 3 hours per day, but not more than 1 hour at a time,
occasional reaching under 90 degrees of elevation with the right arm, occasional
lifting up to 20 pounds, frequent lifting and carrying up to 10 pounds, and pushing
and pulling under 90 degrees elevation. (Id. at 34-35, 39-40.)

                                         10
            Employer also presented the deposition testimony of Stephanie Dolan,
Employer’s project manager, who is responsible for handling all of Employer’s
workers’ compensation claims.      (Id. at 92-93.)   Ms. Dolan testified that, on
February 14, 2016, Claimant returned to work as a caregiver in a modified-duty
capacity with restrictions of no lifting more than 20 pounds.       (Id. at 94, 96.)
Following her return to work on February 14, 2016, Employer offered Claimant
caregiver/companion job assignments that were within her restrictions when such
assignments were available. (Id. at 95-96.) Ms. Dolan explained that, between
February 16, 2016, and September 16, 2016, Claimant accepted some of the
caregiver/companion job assignments offered to her by Employer but declined or
did not respond to others. (Id. at 99-104.) Ms. Dolan further explained that none of
Claimant’s responses declining the caregiver/companion job assignments were
premised on Claimant’s inability to perform the assignments due to her work-related
injury. (Id. at 118.) Since September 16, 2016, Employer has not offered Claimant
any additional caregiver/companion job assignments even though Employer has had
caregiver/companion job assignments available that have been within Claimant’s
restrictions. (Id. at 116-17.) Ms. Dolan indicated that, on September 16, 2016,
Employer offered Claimant a full-time receptionist position, Monday through
Friday, 8:30 a.m. through 5 p.m., but that Claimant did not accept and never
responded to Employer about such position. (Id. at 105-08.) Ms. Dolan admitted
that she did not believe that Claimant was under a driving restriction and that
Employer did not consider any such driving restriction when it offered the
caregiver/companion job assignments or the full-time receptionist position to
Claimant. (Id. at 115-16.)

                                        11
             On December 15, 2017, the WCJ issued a decision, denying
Employer’s modification petition and granting, in part, Claimant’s reinstatement
petition. In so doing, the WCJ summarized the witnesses’ testimony and made the
following relevant findings of fact and credibility determinations:
             10. I have carefully reviewed Claimant’s testimony and
             make the credibility determinations, based in part on my
             personal observation of Claimant’s demeanor during
             testimony:
                   a.     I find Claimant’s testimony to be
                   credible regarding her injury, treatment, and
                   continuing        work-related        disability.
                   Claimant’s testimony in this regard is
                   consistent with her medical treatment, and
                   corroborated by objective medical evidence
                   establishing a rotator cuff tear.
                   b.     I find Claimant’s testimony to be
                   credible to the extent that it supports a finding
                   that she was partially disabled from
                   performing her pre-injury job for Employer
                   because of her work-related lifting and
                   driving restrictions. Claimant’s testimony is
                   credible in this regard because she continued
                   to accept job assignments that were within
                   her restrictions.      Although Ms. Dolan
                   identified certain job assignments that
                   Claimant rejected without reference to her
                   work injury, she agreed that Claimant could
                   have given her reasons by phone, and further
                   agreed that she did not consider Claimant’s
                   driving restrictions in making job
                   assignments.
                   c.     I find Claimant’s testimony to be
                   credible to the extent that it supports a finding
                   that she could not perform the full-time
                   receptionist position offered to her in
                   September, 2016.         I accept Claimant’s
                   testimony that the position required an hour
                   or longer driving and was thus beyond her

                                         12
       medical restrictions. I also accept Claimant’s
       testimony that she could not accept a
       full-time position because it would conflict
       with her full-time travel agent job, which she
       had continued since the date of the work
       injury.
       ....
11. I have carefully reviewed the testimony of
[Ms.] Dolan and find it to be credible regarding
Employer’s communications with Claimant about
available jobs, and Claimant’s refusal to accept the
receptionist position offered to her. However, to the extent
that Ms. Dolan’s testimony conflicts with Claimant’s
testimony accepted as credible above, Ms. Dolan’s
testimony is rejected as less credible.
12. I have carefully reviewed the medical evidence
presented in this matter and find that the testimony of
Dr. Towsen is more credible than the testimony of
Dr. Rubenstein. Dr. Towsen’s testimony is corroborated
by MRI studies which established a rotator cuff tear.
Dr. Towsen’s testimony that the original shoulder surgery
had failed, and that the August 11, 2017 surgery was
work-related, is credible given that Claimant never
recovered from her first surgery and had no history of
intervening injuries. Dr. Towsen’s testimony regarding
the 2017 MRI and surgery was unrebutted.
Dr. Rubenstein’s testimony is not credible, given that he
acknowledged Claimant’s ongoing disability yet opined
that Claimant did not need further treatment. In addition,
Dr. Rubenstein examined Claimant on April 19, 2016[,]
and did not review the June 14, 2017 MRI or the
August 11, 2017 surgery [report].
13. Regarding Claimant’s ability to return to work, I
find that Claimant continues to have limited use of her
right arm, a 20-pound lifting restriction and a driving
restriction of no more than one hour at a time. This finding
is based upon the testimony of Dr. Towsen and
Dr. Rubenstein, who agreed that Claimant continues to
have work restrictions. I find that Claimant worked within
her restrictions until September 16, 2016, at which time

                            13
               Employer no longer offered Claimant employment within
               her restrictions.
(WCJ’s Decision at 10-11.)
               Based on these findings of fact and credibility determinations, the WCJ
concluded that Employer failed to meet its burden of proving that Employer offered
Claimant available work that was within her physical capacity. The WCJ also
concluded that Claimant met her burden of proving that she was totally disabled as
a result of her May 24, 2014 work-related injury beginning on September 16, 2016,
the date on which Employer no longer offered Claimant available employment that
was within her work restrictions. Ultimately, the WCJ: (1) awarded Claimant partial
disability benefits from February 1, 2016, to September 15, 2016, based upon
Claimant’s earnings during that time period; (2) awarded Claimant total disability
benefits from September 16, 2016, to October 2, 2016; (3) suspended Claimant’s
total disability benefits from October 3, 2016, to November 8, 2016; and (4) awarded
Claimant total disability benefits from November 9, 2016, “through the present.”3
(WCJ’s Decision at 12 (emphasis added).) Employer and Claimant cross-appealed
to the Board, which modified the WCJ’s order to “award [Claimant] indemnity
benefits for total disability from November 9, 2016 and ongoing” thereafter and
affirmed the WCJ’s decision in all other respects.                    (Board’s Order dated
Nov. 14, 2018 (emphasis added).) Employer then petitioned this Court for review.

       3
         While it is not entirely clear to this Court why the WCJ suspended Claimant’s workers’
compensation benefits from October 3, 2016, to November 8, 2016, it appears that it may have
been related to Claimant’s receipt of age-related social security benefits and the credit to which
Employer was entitled as a result of Claimant’s receipt of such benefits.

                                               14
               On appeal,4 Employer argues: (1) the Board and the WCJ erred by
failing to suspend Claimant’s workers’ compensation benefits, because Claimant
returned to her time of injury job on February 14, 2016, and thereafter refused to
accept available caretaker/companion job assignments and a full-time receptionist
position offered to her by Employer in bad faith for reasons that were unrelated to
her work-related injury; (2) the WCJ committed an error of law by reinstating
Claimant’s total disability benefits as of November 9, 2016, because, in doing so,
the WCJ impermissibly expanded the description of Claimant’s work-related injury
to include a consequential condition,5 when Claimant did not file a review petition
seeking to amend the description of her injury set forth in the NCP and there was no
material mistake made at the time Employer issued the NCP; and (3) the Board
committed an error of law by substituting its own judgment for that of the WCJ and
modifying the WCJ’s order to award Claimant indemnity benefits for total disability
from November 9, 2016 and ongoing thereafter.
               First, we address Employer’s argument that the Board and the WCJ
erred by failing to suspend Claimant’s workers’ compensation benefits, because
Claimant returned to her time of injury job on February 14, 2016, and thereafter, in
bad faith and for reasons that were unrelated to her work-related injury, refused to
accept available caretaker/companion job assignments and a full-time receptionist

       4
         This Court’s standard of review is limited to determining whether constitutional rights
were violated, whether an error of law was committed, or whether necessary findings of fact are
supported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa.
C.S. § 704.
       5
        A “consequential condition” is “one that is a natural consequence of the original injury.”
Carlow Univ. v. Workers’ Comp. Appeal Bd. (Wunschel) (Pa. Cmwlth., No. 1814 C.D. 2012, filed
July 12, 2013), slip op. at 6. Pursuant to Commonwealth Court Internal Operating
Procedure § 414(a), “an unreported panel decision of this [C]ourt issued after January 15, 2008,
[may be cited] for its persuasive value, but not as binding precedent.” 210 Pa. Code § 69.414(a).

                                               15
position offered to her by Employer. The gist of Employer’s argument appears to
be that there is not substantial evidence of record to support the WCJ’s finding that
the caregiver/companion job assignments and the full-time receptionist position
were not within Claimant’s work restrictions, and, therefore, the WCJ should have
continued his analysis and considered whether Claimant followed through on the
offered caretaker/companion job assignments and the full-time receptionist position
in bad faith. More specifically, Employer argues that Dr. Pushkarewicz did not place
Claimant under a driving restriction that prevented Claimant from performing the
offered caretaker/companion job assignments or the full-time receptionist position.
Employer    also   argues    that   Claimant’s   refusal   to   accept   the   offered
caretaker/companion job assignments and the full-time receptionist position had
nothing to do with Claimant’s work-related injury, but rather, related to her personal
choices, including that the caretaker/companion job assignments and full-time
receptionist position conflicted with her travel agency schedule.        In response,
Claimant argues that the Board properly affirmed the WCJ’s decision to not suspend
Claimant’s workers’ compensation benefits because the substantial, credible
evidence of record establishes that the caregiver/companion job assignments and the
full-time receptionist position were not within Claimant’s work restrictions due to
the required driving distance, and, therefore, the burden never shifted to Claimant to
demonstrate that she followed through on the caretaker/companion job assignments
and full-time receptionist position in good faith.
             In workers’ compensation proceedings, the WCJ is the ultimate finder
of fact. Williams v. Workers’ Comp. Appeal Bd. (USX Corp.-Fairless Works),
862 A.2d 137, 143 (Pa. Cmwlth. 2004). As fact-finder, matters of credibility,
conflicting medical evidence, and evidentiary weight are within the WCJ’s exclusive

                                          16
province. Id. If the WCJ’s findings are supported by substantial evidence, they are
binding on appeal.       Agresta v. Workers’ Comp. Appeal Bd. (Borough of
Mechanicsburg), 850 A.2d 890, 893 (Pa. Cmwlth. 2004). Substantial evidence is
relevant evidence that a reasonable mind might accept as adequate to support a
finding. Mrs. Smith’s Frozen Foods Co. v. Workmen’s Comp. Appeal Bd. (Clouser),
539 A.2d 11, 14 (Pa. Cmwlth. 1988). “In performing a substantial evidence analysis,
this [C]ourt must view the evidence in a light most favorable to the party [that]
prevailed before the fact[-]finder.” Hoffmaster v. Workers’ Comp. Appeal Bd.
(Senco Prods., Inc.), 721 A.2d 1152, 1155 (Pa. Cmwlth. 1998). “Moreover, we are
to draw all reasonable inferences which are deducible from the evidence in support
of the fact[-]finder’s decision in favor of that prevailing party.” Id.
             An employer seeking a suspension or modification of benefits on the
basis that the claimant has recovered some or all of his ability to work, must produce:
(1) credible medical evidence establishing that the claimant’s physical condition has
changed; and (2) evidence that the employer referred the claimant to a then-available
job that the claimant is capable of performing based on his medical clearance.
Kachinski v. Workmen’s Comp. Appeal Bd. (Vepco Constr. Co.), 532 A.2d 374, 380
(Pa. 1987). The burden then shifts to the claimant to demonstrate that he followed
through on the job referral in good faith. Id. In the event that the referral does not
result in a job, the claimant’s benefits should continue. Id.
             Here, the WCJ’s finding that the caregiver/companion job assignments
and the full-time receptionist position were not within Claimant’s work restrictions
is supported by substantial evidence.             Claimant credibly testified that
Dr. Pushkarewicz placed her under a driving restriction and that, as a result of such
driving restriction, she had to reject certain caregiver/companion job assignments.

                                          17
Claimant also credibly testified that she did not follow-up with Employer regarding
the full-time receptionist position or attempt to perform such position because the
drive from her home to Employer’s main office would take her approximately 1 hour
in traffic and would exceed Dr. Pushkarewicz’s driving restriction. In addition,
while she was not yet treating Claimant at the time that Claimant rejected the
caregiver/companion job assignments and the full-time receptionist position,
Dr. Towsen noted that Claimant would likely have had problems driving because
any movement, including turning, that would bring Claimant’s right arm to shoulder
height would have been difficult for Claimant given the condition of her right
shoulder.      We must also note that, even though the WCJ did not find
Dr. Rubenstein’s testimony to be credible, the WCJ recognized that Dr. Rubenstein
had agreed that Claimant continued to be subject to work restrictions, which
included driving up to 3 hours per day, but not more than 1 hour at a time.6

       6
          While Employer does not specifically argue that the WCJ should not have considered
Claimant’s commute from her residence to Employer’s office in determining whether the offered
full-time receptionist position was available to Claimant—i.e., within Claimant’s physical
restrictions—we note that a claimant’s inability to commute to and from an offered position can
support a finding that an offered position is not available to a claimant. See, e.g., Roadway
Express, Inc. v. Workmen’s Comp. Appeal Bd. (Palmer), 659 A.2d 12, 18-19 (Pa. Cmwlth.),
appeal denied, 670 A.2d 145 (Pa. 1995) (concluding there was substantial evidence of record to
support finding that offered dispatcher job located 120 miles from claimant’s place of residence
was not actually available to claimant because employer’s expert testified claimant could not
perform dispatcher position if claimant was also commuting 120 miles to work each day due to
the psychological overlay of his injuries); Topps Mkt. 601 v. Workers’ Comp. Appeal Bd.
(VanGorder) (Pa. Cmwlth., No. 2276 C.D. 2009, filed March 16, 2010) (concluding WCJ did not
err by concluding employer failed to establish offered position was actually available to claimant
when claimant was no longer physically capable of commuting from his residence to employer’s
store but was capable of performing modified duty position at store); Smith v. Workers’ Comp.
Appeal Bd. (Franco Constr.) (Pa. Cmwlth., No. 1108 C.D. 2007, filed Jan. 16, 2008) (remanding
matter to Board with instructions to remand to WCJ to address whether impact of claimant’s bus
commute on claimant’s work-related injuries would have impact on availability of offered
position).

                                               18
Furthermore, although not the specific focus of the parties’ arguments before this
Court, the WCJ noted that Claimant was subject to a lifting restriction and continued
to accept caregiver/companion job assignments within that restriction. Given that
there is substantial evidence of record to establish that the caregiver/companion job
assignments and the full-time receptionist position were not within Claimant’s work
restrictions (driving and/or lifting), Employer could not have met its burden of proof
and, therefore, the burden never shifted to Claimant to establish that she followed
through on the offered caretaker/companion job assignments and full-time
receptionist position in good faith. The WCJ was not required to consider whether
Claimant failed to follow-up on the offered caretaker/companion job assignments
and full-time receptionist position in bad faith for reasons unrelated to her
May 24, 2014 work-related injury because the burden never shifted to Claimant. For
these reasons, we cannot conclude that the Board and the WCJ erred by failing to
suspend Claimant’s workers’ compensation benefits.
             Next, we address Employer’s argument that the WCJ committed an
error of law by reinstating Claimant’s total disability benefits as of
November 9, 2016, because, in doing so, the WCJ impermissibly expanded the
description of Claimant’s work-related injury to include a consequential condition,
when Claimant did not file a review petition seeking to amend the description of her
injury set forth in the NCP and there was no material mistake made at the time that
Employer issued the NCP. More specifically, Employer argues that the condition
that necessitated Claimant’s need to undergo the right shoulder replacement surgery
was separate and distinct from the May 24, 2014 work-related right rotator cuff tear
and/or was a condition that developed over time and that did not exist at the time
that Employer issued the NCP. Employer, therefore, contends that the WCJ could

                                         19
not simply amend Claimant’s injury description as a means to reinstate Claimant’s
total disability benefits because no material mistake in the description of Claimant’s
work-related injury existed at the time that Employer issued the NCP. Employer
further argues that, even if the NCP contained a material mistake and the WCJ was
permitted to amend Claimant’s injury description, the medical evidence upon which
the WCJ relied to establish a causal relationship between the accepted right shoulder
rotator cuff tear and the shoulder replacement surgery was not competent to support
an award of benefits.7
               In making these arguments, Employer appears to ignore the fact that
the WCJ did not amend Claimant’s injury description nor was the WCJ required to
amend Claimant’s injury description before reinstating Claimant’s benefits, because
the reverse shoulder replacement surgery was performed to treat Claimant’s
May 24, 2014 work-related right shoulder rotator cuff tear and not some new or
consequential condition. Despite Employer’s contention that the condition that
necessitated Claimant’s need to undergo the reverse shoulder replacement surgery
was separate and distinct from the May 24, 2014 work-related right rotator cuff tear,

       7
           Claimant has not presented any substantive response in opposition to Employer’s
argument that the WCJ committed an error of law by reinstating Claimant’s total disability benefits
as of November 9, 2016, in connection with a consequential condition relating to her May 24, 2014
work-related right shoulder rotator cuff tear. Rather, Claimant argues that Employer waived this
issue by failing to raise it before the Board. In response, Employer contends that it properly
preserved this issue in its briefs to both the WCJ and the Board. We have reviewed Employer’s
briefs to both the WCJ and the Board and must conclude that Employer adequately preserved this
issue for purposes of this appeal. In both of Employer’s briefs, Employer referenced Claimant’s
failure to file a petition to review seeking to amend the description of her work-related injury to
include the alleged condition that resulted in Claimant’s need to undergo a right shoulder
replacement. (See Supplemental Reproduced Record at 22, 37.) While Employer may not have
used the language “consequential condition,” Employer’s references to Claimant’s failure to file a
petition to review seeking to amend the description of her injury are sufficient to preserve
Employer’s issue on appeal.

                                               20
Employer has not directed our attention to any medical testimony or other evidence
that would tend to establish this contention as fact. In fact, the evidence of record
establishes that the reverse shoulder replacement surgery was simply an additional
surgery that Dr. Towsen performed to repair the May 24, 2014 work-related right
shoulder rotator cuff tear because Dr. Pushkarewicz’s April 8, 2015 rotator cuff
repair surgery had failed. As discussed above, Dr. Towsen opined that the rotator
cuff repair surgery performed by Dr. Pushkarewicz on April 8, 2015, had failed and
had resulted in a rotator cuff deficiency in Claimant’s right shoulder. Dr. Towsen
further opined that Claimant continued to suffer from her May 24, 2004 work-related
rotator cuff injury and that all of the care that Claimant had received for her right
shoulder since that date, including the reverse shoulder replacement surgery, was
directly related to that original injury.
              Employer is essentially asking this Court to speculate, based on
Dr. Rubenstein’s opinion that Claimant had a good functional result, had reached
maximum medical improvement, and required no further treatment as of the date of
his independent medical examination, that Claimant’s need for the reverse shoulder
replacement surgery was separate and distinct from the May 24, 2014 work-related
right shoulder rotator cuff tear and related to a condition that developed over time.
What Employer ignores here is that the WCJ specifically found Dr. Rubenstein’s
testimony not credible, noting that Dr. Rubenstein had examined Claimant on
April 19, 2016, acknowledged ongoing disability while simultaneously opining that
Claimant did not require further treatment for her work injury, and had not reviewed
Claimant’s June 14, 2017 MRI or the August 11, 2017 reverse shoulder replacement
surgery. Thus, Dr. Rubenstein’s testimony, which was rejected as not credible,
cannot be used to support Employer’s position that Claimant had reached maximum

                                            21
medical improvement from her work-related injury prior to her reverse shoulder
replacement surgery, such that the work-related injury did not necessitate the 2017
surgery. For these reasons, we cannot conclude that the WCJ committed an error of
law by reinstating Claimant’s total disability benefits as of November 9, 2016.
            Lastly, we address Employer’s argument that the Board committed an
error of law by substituting its own judgment for that of the WCJ and modifying the
WCJ’s order to award Claimant indemnity benefits for total disability from
November 9, 2016, and ongoing thereafter. More specifically, Employer argues that
the WCJ and the Board relieved Claimant of her burden of proving the duration and
extent of her disability and improperly imposed the burden of proving Claimant’s
ability to perform work onto Employer after reinstating Claimant’s total disability
benefits for a non-work-related shoulder replacement. In response, Claimant argues
that the Board properly clarified the WCJ’s order to avoid any misinterpretation of
the language “through the present” because, in the context of an award of disability
benefits, “through the present” means the same as “ongoing.”
            We simply are not persuaded by Employer’s argument that the Board
somehow substituted its own judgment for that of the WCJ by modifying the WCJ’s
order to award Claimant indemnity benefits for total disability from
November 9, 2016, and “ongoing” rather than “through the present.” The Board
modified the WCJ’s order simply to correct language that could be subject to
misinterpretation. In addition, the WCJ did not make any findings of fact or
conclusions of law that would suggest that he intended for Claimant’s workers’
compensation benefits to be modified, suspended, or terminated as of the date of his
decision. For these reasons, we cannot conclude that the Board committed an error

                                        22
of law by modifying the WCJ’s order to award Claimant indemnity benefits for total
disability from November 9, 2016, and ongoing thereafter.
            Accordingly, we affirm the Board’s order.

                                        P. KEVIN BROBSON, Judge

                                       23
       IN THE COMMONWEALTH COURT OF PENNSYLVANIA

P&A Marketing and Allegheny          :
Point Insurance,                     :
                      Petitioners    :
                                     :
           v.                        :   No. 1588 C.D. 2018
                                     :
Workers’ Compensation Appeal         :
Board (Spencer),                     :
                      Respondent     :

                                ORDER

           AND NOW, this 12th day of August, 2019, the order of the Workers’
Compensation Appeal Board is hereby AFFIRMED.

                                     P. KEVIN BROBSON, Judge


Electronically Filed
Intermediate Court of Appeals
CAAP-11-0000594
25-MAR-2014
08:13 AM


315 F.2d 289
UNITED STATES of America, Plaintiff-Appellee,v.Gloria GREEN, Defendant-Appellant.
No. 13861.
United States Court of Appeals Seventh Circuit.
March 28, 1963.

Julius Lucius Echeles, Sheldon J. Sandman, Chicago, Ill., for appellant.
James P. O'Brien, U.S. Atty., John Powers Crowley, Asst. U.S. Atty., Chicago, Ill., John Peter Lulinski, Asst. U.S. Atty., of counsel, for appellee
Beofore HASTINGS, Chief Judge, and DUFFY and SWYGERT, Circuit Judges.
SWYGERT, Circuit Judge.

1
It is stated for defendnt, Gloria Green, in her brief, 'The only issue here is whether or not the government agents illegally entrapped the defendant into committing the crime.'

2
Defendant was convicted after a trial to the court without a jury on a twocount indictment, charging her with selling narcotics in violation of 26 U.S.C. 4705(a) in that on May 24, 1961, she sold to William Jackson two grams of heroin for $110.00 and that onJune 2, 1961, she sold to Jackson eight grams of heroin for $250.00.

3
There is no need we think to undertake a recital of the facts in detail; it would serve no purpose other than to unduly lengthen the opinion.  It is sufficient to state the essential facts relative to the question of entrapment.

4
Jackson, a federal narcotics agent, was in the company of a government informer, one Bedford, when the latter called Green and arranged a meeting.  At the meeting the sale of the heroin described in Count I was made.  Green accepted $110.00 from Bedford who had in turn received it from Jackson.  Later delivery of the heroin was planned.  The next morning delivery was made in an alleyway where defendant pointed to a small manila package lying on the ground.  The package contained the heroin.  On June 1, 1961, substantially the same thing happended when a sale was arranged for and made of the heroin described in Count II.

5
Bedford was not a witness at the trial.  Jackson testified he never saw defendant before the first sale and that he had made no investigation of her himself.

6
Defendant testified that Bedford was her cousin by marriage and that she had known him for three years; that she had never sold him narcotics before May 24, 1961, and before that she had never handled narcotics; that Bedford had called her seven or eight times before May 24 and importuned her to get some narcotics for his sick wife.  At first she refused, but on May 24, she met him and Jackson and afterwards called a man known as Big Red, who said he would have nothing to do with Bedford, but would arrange to provide the narcotics through her; that the transaction was completed and later she told Bedford where Big Red would put the narcotics in the alley; that between May 24 and June 1, 1961, Bedford again called her a number of times and finally she was importuned to undertake a similar arrangement with Big Red and make a sale of narcotics on June 1.

7
There was additional evidence submitted by the government to the effect that the first meeting between Jackson, Bedford, and Green on May 24, 1961, occurred at a street intersection; that Bedford introduced Jackson to Gloria Green and told her 'This is Benny, the fellow I told you about.'  Jackson then ordered a spoon of heroin.  Green stated that it would cost $110.00.  Jackson offered her the money.  She said, 'Give it to Sonny.'  Jackson handed the $110.00 to Bedford, who handed it to Green.  Green then said, 'Go over to Sonny's house, I will call you in about an hour.'  Jackson later met defendant in an alley where the first narcotics were delivered.  When he informed her he would like to see her again, she replied, 'Get in touch with Sonny, he knows how to get in touch with me.'

8
At the next meeting, June 1, 1961, defendant quizzed Jackson about the quality of the last delivery and also mentioned that as of then she hadn't had a 'bust' (arrest) and didn't want one.  At her direction Jackson placed the money for the next delivery in a shopping bag she was carrying.  Green then called a taxicab and said of Jackson, 'Go over to Sonny's house.  I will call you when I am ready.'

9
There were a number of contradictions in the record.  Probably the most glaring was defendant's story that Bedford had called her a number of times asking her to get narcotics for his wife, yet when she first met agent Jackson, Bedford introduced him as, 'This is Benny; the fellow I told you about.'

10
We have examined the record and are convinced that the evidence was sufficient for the trial judge to hold that there was no entrapment.  It supports the essential holding relating to defendant's willingness and predisposition to commit the offense.  Of course, the sole judge of credibility was the judge hmself and we think the evidence permitted him to draw the conclusion that the story of entrapment was a fabrication.

11
The judgment is affirmed.


431 F.2d 634
M.S.I. SHIPPING CO., Ltd., Plaintiff-Appellee,v.DADE DRYDOCK CORP., and Fairbanks Morse, Inc., Defendants-Appellants.
No. 29026.
United States Court of Appeals, Fifth Circuit.
July 27, 1970.

Thomas G. Spicer, Don Nicholson, Miami, Fla., for Fairbanks Morse.
G. Morton Good, Miami, Fla., for Dade Drydock Corp.
Raymond T. Greene, Greene & Downing, Miami, Fla., for plaintiff-appellee.
Before TUTTLE, THORNBERRY and INGRAHAM, Circuit Judges.
PER CURIAM:

1
This is an appeal from a judgment of the District Court, sitting without a jury in admiralty.  The court found appellant Dade Drydock liable to M.S.I. Shipping Co., Ltd. for breach of contract in the repair of the port drive shaft of the M/V Santa Inez on July 17, 1965, and for damages incurred on July 17, 1965, and for damages incurred on July 22, 1965, in the sum of $2850, and in January and February, 1966, in the sum of $6375.  The court further found that Dade Drydock was entitled to be indemnified by Fairbanks Morse for the above damages as a subcontractor of Dade Drydock.  Though the historical facts of the case are not in dispute, appellant argues that the conclusions drawn by the trial court are 'clearly erroneous.'

2
Both parties agree that the standard of review here is as stated in McAllister v. United States, 348 U.S. 19, 75 S.Ct. 6, 99 L.Ed. 20.  Although appellant urgently contends that inferences opposing those drawn by the trial court are so strongly supported as to require reversal of the trial court's judgment, we have carefully reviewed the trial court's extensive findings and conclusions and we are not left 'with a definite and firm conviction that a mistake has been committed'-- the McAllister standard.

3
Fairbanks Morse here concedes that if Dade Drydock is ultimately liable, then it is obligated to indemnify Dade Drydock.

4
Both judgments are, therefore, affirmed.


                             146 T.C. No. 1

                   UNITED STATES TAX COURT

             GERD TOPSNIK, Petitioner v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2482-14.                            Filed January 20, 2016.

        In 2004 P, a German citizen, made an installment sale of his
stock in a U.S. corporation, and in 2010, the year in issue, he received
equal monthly payments pursuant to a promissory note executed in
connection with the sale. He filed a late Form 1040NR, U.S.
Nonresident Alien Income Tax Return, for 2010 claiming that the
installment sale proceeds were exempt from taxation by virtue of the
U.S.-Germany Tax Treaty. On Nov. 20, 2010, P completed
paperwork to formally abandon his lawful permanent resident (LPR)
status.

       R determined that P is liable for an income tax deficiency for
2010 attributable to the gain on his installment sale of stock. R also
determined that P was a “covered expatriate” who expatriated in 2010
and must recognize gain on the deemed sale of his installment
obligation on the day before his expatriation under I.R.C. sec. 877A.
R further determined that P is liable for an accuracy-related penalty
and a failure to file addition to tax. P alleges that he is not liable for
the installment sale proceeds because he was a German resident who
                                        -2-

      expatriated on Dec. 31, 2009. P has moved for summary judgment,
      and R has cross-moved for partial summary judgment.

           Held: P expatriated on Nov. 20, 2010, when he formally
      abandoned his status as an LPR.

            Held, further, P is liable for tax on gains attributable to the 11
      monthly installment payments that were made during 2010 before his
      expatriation date.

             Held, further, P is liable for tax on gain from the deemed sale
      of his right to installment sale proceeds on the day before his
      expatriation date pursuant to I.R.C. sec. 877A.

      Charles Herbert Magnuson, for petitioner.

      Michael K. Park and Najah J. Shariff, for respondent.

                                     OPINION

      KERRIGAN, Judge: This case is before the Court on petitioner’s motion

for summary judgment and respondent’s cross-motion for partial summary

judgement. Petitioner was issued a notice of deficiency for tax year 2010. In his

motion petitioner contends that: (1) he was a German resident in 2010; (2) section

877A does not apply; and (3) the section 6662 penalty and the section 6551
                                        -3-

addition to tax do not apply. In respondent’s cross-motion for partial summary

judgment respondent contends that petitioner (1) was not a German resident and

(2) was a “covered expatriate” who expatriated in 2010 and must recognize gain

on the deemed sale of his installment obligation on the day before his expatriation

date under section 877A.

      Unless otherwise indicated, all section references are to the Internal

Revenue Code (Code) in effect for the tax year in issue, and all Rule references are

to the Tax Court Rules of Practice and Procedure. We round all monetary

amounts to the nearest dollar.

                                    Background

      Petitioner was born in Germany. He has a German passport and a German

driver’s license. Respondent contends that petitioner owned the Schwartze Pfütze

inn (inn) and had a room there. Petitioner did not present evidence of ownership

of the inn, and he claims that he and his brother managed it and that he had access

to a room there.

Petitioner’s Green Card

      On February 3, 1977, petitioner received a Form I-551, Permanent Resident

Card or Alien Registration Card (green card), and became a lawful permanent

resident (LPR) of the United States. Petitioner renewed his green card every 10
                                        -4-

years. On March 3, 2003, petitioner requested renewal of his green card by filing

a U.S. Immigration and Naturalization Service (INS) Form I-90, Application to

Replace Permanent Resident Card. On his Form I-90 petitioner characterized

himself as a permanent resident and listed his U.S. mailing address in Hawaii.

Petitioner’s Form I-90 was approved on March 1, 2004, and his LPR status was

renewed through March 1, 2014.

Petitioner’s Joint Venture, Settlement, and Stock Sale

      In 1986 petitioner started a joint venture named Gourmet Foods, Inc.

(Gourmet Foods), with its principal place of business in California. In 2000

petitioner sued a number of individuals and entities involved with Gourmet Foods’

business. The suit ended in settlement with petitioner agreeing to sell, on July 30,

2004, his stock in Gourmet Foods for $5,427,000 in an installment sale. Petitioner

was entitled to receive an initial downpayment of $1,600,000 and then monthly

installments of $42,500 until the remaining $3,827,000 was paid. At the time of

sale petitioner’s tax basis in the Gourmet Foods stock was $748,418 and his gross

profit from the installment sale was $4,678,582. His gross profit percentage was

86.21%.

      Petitioner received the downpayment and monthly installment payments as

planned. The final monthly installment payment was made on September 3, 2013.
                                          -5-

In 2010 petitioner received 12 monthly installment payments of $42,500 for a total

of $510,000.

      As of November 19, 2010, the amount of unpaid principal and accrued

interest on the remainder of the installment agreement had a fair market value of

$1,373,374.

Formal Abandonment of Petitioner’s Green Card

      On November 20, 2010, petitioner completed a U.S. Citizenship and

Immigration Services (USCIS) Form I-407, Abandonment of Lawful Permanent

Resident Status, to formally abandon his green card and LPR status. USCIS

accepted his surrendered green card. On his Form I-407 petitioner provided an

“intended or actual permanent residence abroad” in the Philippines.

Petitioner’s Postabandonment Noncompliance

      Since filing his Form I-407 petitioner has failed to file the required Form

8854, Initial and Annual Expatriation Statement, and has failed to certify, under

penalties of perjury, that he has complied with all of his U.S. Federal tax

obligations for the five taxable years preceding the taxable year that includes the

expatriation date, including his obligations to file income tax returns and

obligations to pay all relevant tax liabilities, interest, and penalties. Petitioner did
                                         -6-

not file all his U.S. income tax returns and was not in payment compliance on the

tax owed for the five years before his expatriation.

Petitioner’s 2010 Tax Return

      Petitioner did not file a Form 1040, U.S. Individual Income Tax Return, for

tax year 2010. On August 2, 2011, he did, however, file a delinquent Form

1040NR, U.S. Nonresident Alien Income Tax Return. On his Form 1040NR

petitioner reported $439,671 ($510,000 × 86.21% gross profit percentage) as

being exempt under Article 13 (Gains) of the U.S.-Germany Tax Treaty.

Jeopardy Assessment, Levy and Notice of Deficiency

      On July 18, 2013, respondent made a jeopardy assessment of an increase in

tax deficiency of $138,903, an accuracy-related penalty of $27,781, and a failure

to timely file addition to tax of $13,890 for the taxable period in 2010. On August

7 and September 3, 2013, respondent levied on $49,310 of petitioner’s remaining

installment sale proceeds in partial satisfaction of his 2010 income tax liability.

      On September 11, 2013, respondent issued petitioner a notice of deficiency

for taxable year 2010 determining the same deficiency, accuracy-related penalty

under section 6662, and addition to tax for failure to timely file under section

6651(a)(1) as in the jeopardy assessment. The deficiency included the first 11 of
                                          -7-

the monthly installment payments made during the 2010 tax year as well as the

section 877A deemed sale proceeds.

Prior District Court Litigation

       On March 16, 2011, respondent made a jeopardy assessment of petitioner’s

liabilities for tax, penalties, and interest for the years 2004-09 and, thereafter,

levied on the Gourmet Foods installment payments in partial satisfaction of those

liabilities.

       On August 23, 2011, petitioner filed a complaint and, thereafter, an

amended complaint against the United States in the U.S. District Court for the

Central District of California requesting a review of respondent’s jeopardy

assessments and levies, including the foregoing jeopardy assessment and levies,

and requesting refunds for 2004 and 2005 and damages for unauthorized

collection actions. The defendant United States moved to dismiss the case on

several grounds, including improper venue. After noting that petitioner “does not

reside in any judicial district since he currently resides in Germany”, the District

Court held that, under the venue provisions of 28 U.S.C. sec. 1402(a)(1),

petitioner “may not file his claim in a district court” and that his “only recourse is

to prosecute his claim in the United States Claims Court, which has concurrent

jurisdiction over tax refund actions.” Topsnik v. United States, No.
                                        -8-

2:11-cv-06958-JHN-MRW, 2012 WL 10637570, at *1 (C.D. Cal. Jan. 17, 2012),

aff’d, 554 F. App’x 630 (9th Cir. 2014) (Topsnik I). On that basis the District

Court granted the defendant’s motion to dismiss. Id.1

Information Exchanges Between the United States and Germany

      On August 23, 2013, the U.S. Competent Authority made a request,

pursuant to Article 26, Exchange of Information and Administrative Assistance of

the U.S.-Germany Tax Treaty, to the German Competent Authority for

information pertaining to petitioner’s residency status in Germany and his tax

return filing history in Germany.

      On November 21, 2013, the U.S. Competent Authority received a letter

from the German Competent Authority which provided the following information:

(1) for tax year 2010 petitioner was registered in Germany as a person subject to

taxation as a nonresident; (2) petitioner did not file a German tax return for 2010;

      1
        Following the District Court’s dismissal of petitioner’s suit due to improper
venue and while petitioner’s appeal of that ruling was pending before the Court of
Appeals for the Ninth Circuit, petitioner brought suit for refund in the Court of
Federal Claims. The defendant United States moved to continue a temporary stay
of the case pending the outcome of petitioner’s appeal of the District Court ruling.
The Court of Federal Claims denied the motion on the ground that there was no
venue issue before it, and that, whatever disposition the Court of Appeals were to
make of petitioner’s appeal, it would retain subject matter jurisdiction over
petitioner’s refund claim and, therefore, could proceed to address the merits of that
claim. See Topsnik v. United States, 114 Fed. Cl. 1 (2013) (Topsnik II).
                                          -9-

(3) petitioner was not registered in the German township of Oerlenbach in 2010,

nor did he have a registered residence or habitual abode in Germany in 2010; (4)

the inn was sold on December 1, 2010; and (5) from January 1 to April 30, 2010,

the inn was vacant and from May 1 through November 31, 2010, the inn was run

by a landlord.

      On December 9, 2013, the U.S. Competent Authority sent the German

Competent Authority a letter stating that the German Competent Authority’s

response indicates that it is “not apparent” petitioner does not have a residence or

habitual abode in Germany and requested confirmation. The letter also requested

residency information for two additional German cities: Freiburg and Bruchsal.

      On June 24, 2014, the U.S. Competent Authority received a letter from the

German Competent Authority which provided the following information:

(1) petitioner is not listed with the tax authority in Freiburg City; (2) petitioner is

not listed with the tax authority in Bruchsal; and (3) since 2000, petitioner has, on

occasion, resided in a room at Hans and Ingenborg Topsnik’s house in Freiburg

free of charge.
                                        - 10 -

                                     Discussion

I.    Summary Judgment

      Full or partial summary judgment may be granted where the pleadings and

other materials show that there is no genuine dispute as to any material fact and

that a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp.

v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994).

The burden is on the moving party to demonstrate that there is no genuine dispute

as to any material fact and that he or she is entitled to judgment as a matter of law.

FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74-75 (2001). In

considering a motion for summary judgment, evidence is viewed in the light most

favorable to the nonmoving party. Bond v. Commissioner, 100 T.C. 32, 36

(1993). The nonmoving party may not rest upon the mere allegations or denials of

his or her pleading but must set forth specific facts showing there is a genuine

dispute for trial. Sundstrand Corp. v. Commissioner, 98 T.C. at 520.

      Petitioner moved for summary judgment, and respondent cross-moved for

partial summary judgment. Each party has the burden to demonstrate that there is

no genuine dispute as to any material fact. After reviewing the pleadings we

conclude that a decision may be rendered as a matter of law.
                                        - 11 -

II.   Whether Petitioner Was a German Resident During 2010

      Petitioner claims that he was a German resident during 2010 and therefore

the monthly installment payments during 2010 were exempt from U.S. taxation

under the U.S.-Germany Tax Treaty. Respondent contends that petitioner was not

a German resident during 2010.

      To determine whether petitioner was a German resident in 2010, we must

look to the U.S.-Germany Tax Treaty. The U.S.-Germany Tax Treaty, as

applicable for 2010, consists of three documents: (1) the original treaty, which

was signed in 1989 but which entered into force in 1991; (2) the 1989 protocol

executed in 1989 on the same day the treaty was signed and which entered into

force contemporaneously with the treaty; and (3) the 2006 protocol, which entered

into force on December 28, 2007, and is effective for taxes other than withholding

taxes (e.g., for income tax) as of January 1, 2008. Therefore, the original treaty, as

amended by the 2006 protocol (sometimes, post-2006 treaty), is applicable for

petitioner’s 2010 tax year.

      Article 4 of the original treaty defines the term “resident” for purposes

thereof. Before its amendment by the 2006 protocol, article 4, paragraph 1,

provided as follows:
                                        - 12 -

      For the purposes of this Convention, the term “resident of a
      Contracting State” means any person who, under the laws of that
      State, is liable to tax therein by reason of his domicile, residence,
      place of management, place of incorporation, or any other criterion of
      a similar nature, provided, however, that

             (a) this term does not include any person who is liable to tax in
      that State in respect only of income from sources in that State or
      capital situated therein; and

             (b) in the case of income derived or paid by a partnership,
      estate, or trust, this term applies only to the extent that the income
      derived by such partnership, estate, or trust is subject to tax in that
      State as the income of a resident, either in its hands or in the hands of
      its partners or beneficiaries.

            Convention for the Avoidance of Double Taxation and the
      Prevention of Fiscal Evasion With Respect to Taxes on Income and
      Capital and to Certain Other Taxes, U.S.-Ger. Aug. 29, 1989, 1708
      U.N.T.S. 3 (entered into force Aug. 21, 1991).

The 2006 protocol modified article 4, paragraph 1, to read as follows:

      For the purposes of this Convention, the term “resident of a
      Contracting State” means any person who, under the laws of that
      State, is liable to tax therein by reason of his domicile, residence,
      place of management, place of incorporation, or any other criterion of
      a similar nature, and also includes that State and any political
      subdivision or local authority thereof. The term, however, does not
      include any person who is liable to tax in that State in respect only of
      income from sources in that State or of profits attributable to a
      permanent establishment in that State or capital situated therein.
      [Protocol Amending the Convention for the Avoidance of Double
      Taxation and the Prevention of Fiscal Evasion With Respect to Taxes
      on Income and Capital and to Certain Other Taxes Signed on 29th
                                         - 13 -

      August 1989, U.S.-Ger., June 1, 2006, 2504 U.N.T.S. 90, available at
      https://treaties.un.org/doc/Publication/UNTS/Volume%202504/v2504
      .pdf.]

      Article 4, paragraph 1, of the original treaty, through subparagraph (a) (as

applicable to individuals) is identical, in substance, to article 4, paragraph 1 of the

post-2006 treaty. Both define a “resident of a Contracting State” to include an

individual “liable to tax therein by reason of his * * * [domicile or residence]”,

and both exclude from the definition “any person who is liable to tax in that State

in respect only of income from sources in that State * * * or capital situated

therein.”

      Article 13, paragraph 1 (the same in both the original and post-2006

treaties), provides:

      Gains derived by a resident of a Contracting State from the alienation
      of immovable property * * * [i.e., real property] situated in the other
      Contracting State may be taxed in that other State.

      Article 13, paragraph 2 (also unchanged by the 2006 protocol), provides in

pertinent part:

      For the purposes of this Article, the term “immovable” property
      situated in the other Contracting State shall include

                       *   *     *      *         *   *     *

            (b) shares * * * in a company that is * * * a resident of that
      other Contracting State, the assets of which company consist or
                                        - 14 -

      consisted wholly or principally of immovable property situated in
      such other Contracting State * * *

      Article 13, paragraph 5, of both the original and post-2006 treaties provides,

for relevant purposes, that gains from the alienation of intangible property (other

than the shares referred to in article 13, paragraph 2(b)) “shall be taxable only in

the Contracting State of which the alienator is a resident.”

      Petitioner’s claim of German residency rests on (a) estoppel and (b) his

contacts with Germany during the years in issue.

      A.     Estoppel

      Petitioner argues that, because respondent argued before the District Court

in Topsnik I that petitioner is a German resident, and because the court dismissed

the case for improper venue on that basis, respondent is estopped, under the

doctrine of judicial estoppel, from asserting a contrary position in this case. This

argument and the underlying facts are identical to the argument he presented in

Topsnik v. Commissioner, 143 T.C. 240 (2014) (Topsnik IV),2 where we held that

estoppel did not apply because petitioner’s status as a German resident during the

      2
       We follow the same conventions used in Topsnik IV, which referred to
Topsnik v. United States, No. 2:11-cv-06958-JHN-MRW, 2012 WL 10637570
(C.D. Cal. Jan. 17, 2012), aff’d, 554 F. App’x 630 (9th Cir. 2014), as Topsnik I, to
Topsnik v. United States, 114 Fed. Cl. 1 (2013), as Topsnik II, and to Topsnik v.
United States, 12 F. Supp. 3d 1 (D.D.C. Dec. 2, 2013), as Topsnik III.
                                         - 15 -

years in issue was not addressed by the parties and was not in issue. See id. at

257-258. The same analysis applies here with respect to 2010. We do not agree

with petitioner.

      B.     German Contacts

      Petitioner’s German contacts include a German driver’s license and a

German passport. He also contends that he owned the inn.

      As noted supra, with respect to individuals, both the original treaty and the

post-2006 treaty limit the definition of a “‘resident of a Contracting State’” to

individuals “liable to tax therein by reason of * * * [domicile or residence]”, and

both exclude from the definition “any person who is liable to tax in that State in

respect only of income from sources in that State * * * or capital situated therein.”

The treaty test for residence in a contracting State is the individual’s liability to

pay tax to the State as a resident, which, in the case of Germany, means that the

individual must be taxable on his or her worldwide income. See Staff of J. Comm.

on Taxation, Explanation of Proposed Protocol to the Income Tax Treaty Between

the United States and Germany, at 9 (J. Comm. Print 2007) (“Individuals resident

in Germany are subject to tax on their worldwide income.”); Tax Treaties (CCH)

para. 3229, p. 77,181. The test for residency under the U.S.-Germany Tax Treaty

is confirmed by the commentary with respect to article 4 of the Organization for
                                         - 16 -

Economic Cooperation and Development (OECD) Model Double Tax Convention

on Income and Capital (1977) (OECD Model Treaty), article 4, paragraph 1 of

which is, in all pertinent respects, identical to article 4, paragraph 1, of the original

and post-2006 treaties.3 The commentary to article 4, paragraph 1 states, in

pertinent part: “As far as individuals are concerned, the definition aims at covering

the various forms of personal attachment to a State which, in the domestic taxation

laws, form the basis of a comprehensive taxation (full liability to tax).” OECD

Committee on Fiscal Affairs, Model Tax Convention on Income and on Capital, at

C(4-9) (1997);4 see Topsnik IV, 143 T.C. at 259-260.

      Petitioner’s recitation of his contacts with Germany during 2010 is not

relevant to his status as a German resident during that year except insofar as they

served to subject him to German taxation of his worldwide income. Petitioner

      3
        Where the parties to a bilateral tax treaty were both OECD members when
the model treaty and commentary were drafted (which is the case herein) and the
bilateral treaty wording is substantially the same as that of the model treaty (also
the case herein), we have used the model treaty commentary to interpret provisions
of the bilateral tax treaty. See Podd v. Commissioner, T.C. Memo. 1998-418, slip
op. at 9-10 (and the cases cited thereat).
      4
       Subsequent updates of the OECD Model Treaty left unchanged, in all 18
pertinent respects, the article 4, paragraph 1, definition of resident contained in the
1977 OECD Model Treaty as it pertains to individuals. Therefore, the above-
quoted commentary with respect to that definition applies to all of the OECD
Model Treaties published since 1977. See, e.g., Tax Treaties (CCH) paras.
200.04, 200A.04.
                                       - 17 -

does not allege that he is subject to German taxation on his worldwide income,

and the evidence in the record is uniformly to the contrary.

       The information obtained by the German competent authority from the

German tax authority reveals that (1) for tax year 2010 petitioner was registered in

Germany as a person subject to taxation as a nonresident; (2) petitioner did not file

a German tax return for 2010; (3) petitioner was not registered in the German

township of Oerlenbach, Freiburg City, or Bruchsal in 2010, nor did he have a

registered residence or habitual abode in Germany in 2010; and (4) since 2000

petitioner has, on occasion, resided in a room at Hans and Ingenborg Topsnik’s

house in Freiburg free of charge. There is no evidence in the record to refute the

information obtained by the German competent authority. We find that petitioner

was not a “resident” of Germany in 2010 as defined by article 4, paragraph 1, of

the U.S.-Germany Tax Treaty. Accordingly, petitioner’s monthly installment

payments were taxable by the United States.

III.   Whether Petitioner Is a “Covered Expatriate”

       A.    Section 877A Generally

       The Heroes Earnings Assistance and Relief Tax Act of 2008, Pub. L. No.

110-245, sec. 301, 122 Stat. at 1638-1644, which was signed into law on June 17,

2008, added new section 877A effective for individuals who expatriate on or after
                                         - 18 -

June 17, 2008. Section 877A(a) imposes a mark-to-market regime on covered

expatriates. Under section 877A(a)(1) all property of a covered expatriate is

treated as being sold on the day before his or her expatriation date for its fair

market value. Section 877A(a)(2)(A) provides that any gain arising from the

deemed sale is taken into account for the taxable year of the deemed sale

notwithstanding any other provisions of the Code.

      B.     Expatriate

      The term “expatriate” includes: “(A) any United States citizen who

relinquishes his citizenship, and (B) any long-term resident of the United States

who ceases to be * * * [an LPR] of the United States (within the meaning of

section 7701(b)(6)).” Sec. 877A(g)(2). Under the regulations associated with

section 7701(b)(6), a person generally is an LPR if he holds a green card. See sec.

301.7701(b)-1(b)(1), Proced. & Admin. Regs.

      Section 877A(g)(5) defines a “long-term resident” of the United States by

cross-reference to section 877(e)(2), which provides that a long-term resident is:

      [A]ny individual (other than a citizen of the United States) who is a
      lawful permanent resident of the United States in at least 8 taxable
      years during the period of 15 taxable years ending with the taxable
      year * * * [of expatriation]. For purposes of the preceding sentence,
      an individual shall not be treated as a lawful permanent resident for
      any taxable year if such individual is treated as a resident of a foreign
      country for the taxable year under the provisions of a tax treaty
                                        - 19 -

      between the United States and the foreign country and does not waive
      the benefits of such treaty applicable to residents of the foreign
      country.

      Petitioner was an LPR of the United States beginning on February 3, 1977,

the date he received his green card. If petitioner expatriated in 2010, as we find

and discuss below, then to be a long-term resident he would have to be an LPR for

8 of the 15 tax years beginning with tax year 1996. In Topsnik IV we held that

petitioner was an LPR of the United States during tax years 2004-09. We further

held that petitioner was not a resident of Germany during tax years 2004-09. Id. at

261. We held above that petitioner was not a German resident in 2010. Those

years constitute 7 of the 8 years necessary for petitioner to fit under the definition

of long-term resident of the United States. Petitioner argues that he has been a

resident of Germany since 1999. Even if we accept that he is correct for the tax

years 1999-2003, he does not argue, and has presented no evidence to suggest, that

he was not an LPR of the United States for the three years from 1996-98. Taken

together with our holding in Topsnik IV, this means that petitioner was an LPR for

at least 10 out of the 15 years before formally abandoning his LPR status.

Therefore, petitioner is treated as a “long-term resident of the United States” for

the purposes of section 877A.
                                        - 20 -

      C.     Covered Expatriates

      We must now determine whether petitioner was a “covered expatriate”.

Section 877A(g)(1) provides that a “covered expatriate” means an expatriate who

meets at least one of the requirements set out in section 877(a)(2)(A)-(C).

Subparagraph (C) provides that a person is a covered expatriate if “such individual

fails to certify under penalty of perjury that he has met the requirements of this

title for the 5 preceding taxable years or fails to submit such evidence of such

compliance as the Secretary may require.”

      Section 877A(i) provides that the Secretary shall prescribe regulations as

may be necessary and appropriate to carry out the purposes of the section. Such

regulations have not been yet been provided. Instead, the IRS has promulgated

guidance regarding this section in Notice 2009-85, 2009-45 I.R.B. 598. We are

not bound by Notice 2009-85, supra, see Compaq Computer Corp. v.

Commissioner, 113 T.C. 363, 372 (1999), but it is an official statement of the

Commissioner’s position and we may let it persuade us, see Nationalist Movement

v. Commissioner, 102 T.C. 558, 583 (1994), aff’d, 37 F.3d 216 (5th Cir.1994).

      Notice 2009-85, sec. 8, 2009-45 I.R.B. at 611, explains that for purposes of

certifying tax compliance for the five years before expatriation pursuant to section

877(a)(2)(C):
                                        - 21 -

      All U.S. citizens who relinquish their U.S. citizenship and all long-
      term residents who cease to be lawful permanent residents of the
      United States (within the meaning of section 7701(b)(6)) must file
      Form 8854 in order to certify, under penalties of perjury, that they
      have been in compliance with all federal tax laws during the five
      years preceding the year of expatriation. Individuals who fail to make
      such certification will be treated as covered expatriates within the
      meaning of section 877A(g) * * *

      For the year of his expatriation petitioner failed to complete and file a Form

8854 certifying under penalties of perjury that he has complied with all of his U.S.

Federal tax obligations for the five taxable years preceding the taxable year that

includes his expatriation date. Respondent has provided evidence that petitioner

did not file all of his U.S. income tax returns before expatriating and was not in

payment compliance for taxes owed for the five years before expatriation in

taxable year 2010. Thus petitioner could not have certified under penalties of

perjury on a Form 8854 that he had been in tax compliance for the five years

before expatriation. Consequently, because petitioner failed to certify tax

compliance for the five years before expatriation, he is a “covered expatriate” as

defined by section 877A(g)(1)(A).

      As a covered expatriate petitioner is treated as having sold all his property

on the day before his expatriation date and is subject to income tax on the net
                                       - 22 -

unrealized gain arising from property deemed sold while he was still a U.S. LPR.

See sec. 877A(a)(2)(A); see also Notice 2009-85, supra.

      D.      Expatriation Date

      Since petitioner is a covered expatriate subject to taxation under section

877A, we must determine his expatriation date. Section 877A(g)(3) defines the

term “expatriation date” as the date an individual relinquishes U.S. citizenship or,

in the case of a long-term resident of the United States, the date on which the

individual ceases to be an LPR of the United States within the meaning of section

7701(b)(6).

      Section 7701(b)(6) provides that an individual is an LPR if:

            (A) such individual has the status of having been lawfully
      accorded the privilege of residing permanently in the United States as
      an immigrant in accordance with the immigration laws, and

           (B) such status has not been revoked (and has not been
      administratively or judicially determined to have been abandoned).

      An individual shall cease to be treated as * * * [an LPR] of the United
      States if such individual commences to be treated as a resident of a
      foreign country under the provisions of a tax treaty between the
      United States and the foreign country, does not waive the benefits of
      such treaty applicable to residents of the foreign country, and notifies
      the Secretary of the commencement of such treatment.

      Section 301.7701(b)-1(b)(3), Proced. & Admin. Regs., indicates that when

an alien initiates a determination, “resident status is considered to be abandoned
                                       - 23 -

when the individual’s application for abandonment (INS Form I-407) * * * is filed

with the INS”.

      Petitioner argues that he was a German resident in 2010 and that he

therefore ceased to be an LPR on December 31, 2009. Respondent contends that

petitioner ceased to be an LPR on November 20, 2010, when he initiated

abandonment of his LPR status by completing a Form I-407 and surrendering his

green card.

      We held above that petitioner was not a German resident during 2010. We

find that his date of expatriation was November 20, 2010, when he filed with the

INS a Form I-407 and surrendered his green card. See id.

IV.   Section 877A

      Petitioner argues that section 877A, enacted in 2008, is inapplicable to his

2004 installment sale transaction because the statute cannot be retroactive. He

also argues that if section 877A does apply, it was applied improperly.

      A.      Applicability to Right to Installment Sale Payments

      Notice 2009-85, sec. 3, 2009-45 I.R.B. at 599, states in relevant part that,

for purposes of the mark-to-market regime, a covered expatriate is deemed to have

sold any interest in property that he or she is considered to have owned other than

property described in section 877A(c) (deferred compensation, specified tax-
                                        - 24 -

deferred accounts, and interest in a nongrantor trust). On the day before

petitioner’s expatriation date, petitioner held the right to monthly installment

payments that he received in exchange for the 2004 sale of his shares of stock in

Gourmet Foods. See sec. 877A(a)(1).

      An installment obligation received as a result of an installment sale is

generally treated as property for purposes of the Code. Section 15A.453-

1(d)(2)(i), Temporary Income Tax Regs., 46 Fed. Reg. 10717 (Feb. 4, 1981),

states: “An installment obligation is considered to be property and is subject to

valuation * * * without regard to whether the obligation is embodied in a note, an

executory contract, or any other instrument, or is an oral promise enforceable

under local law.”

      To determine which property would be subject to the mark-to-market

regime of section 877A(a), Notice 2009-85, supra, advises that we look to see

whether property is of a type whose value would be includible in the value of a

decedent’s gross estate for Federal estate tax purposes if the covered expatriate

died on the day before his expatriation date. A covered expatriate is considered to

own any interest in property that would be taxable as part of his gross estate for

Federal estate tax purposes as if he or she had died on the day before the

expatriation date as a citizen or resident of the United States. Id.
                                         - 25 -

      The value of an installment obligation held at death is included in the value

of a decedent’s gross estate for Federal estate tax purposes. Section 2031(a)

specifies that the value of the gross estate comprises the value of “all property, real

or personal, tangible or intangible, wherever situated”, to the extent provided in

sections 2033 though 2046. Section 2033 provides that “[t]he value of the gross

estate shall include the value of all property to the extent of the interest therein of

the decedent at the time of his death.” Section 20.2033-1(b), Estate Tax Regs.,

lists examples of property includible in a decedent’s gross estate and provides, in

relevant part, that “[n]otes or other claims held by the decedent are likewise

included”. In Gump v. Commissioner, 124 F.2d 540, 543 (9th Cir. 1942), aff’g 42

B.T.A. 197 (1940), the Court of Appeals for the Ninth Circuit held that the fair

market value of an installment note received in exchange for a sale of stock was

included in a decedent’s gross estate.

      In arguing that the 2008 statute is inapplicable to his 2004 transaction,

petitioner misstates the law. An installment obligation is treated as property which

is held at the time an expatriate’s assets are marked-to-market. Petitioner’s assets

are marked-to-market on November 19, 2010, the day before his expatriation.
                                        - 26 -

      B.     Mark-to-Market Calculation

      Because petitioner’s right to receive monthly installment payments is

property whose value would be included in the value of his gross estate for

Federal estate tax purposes if he died on the day before he expatriated, petitioner is

deemed to have sold the installment obligation for its fair market value on the day

before he expatriated. See sec. 877A(a)(1); Notice 2009-85, supra.

      Petitioner argues that even if section 877A does apply to his transaction, it

was applied improperly. Respondent contends that section 877A was applied

properly.

      In computing a tax liability under the mark-to-market regime, a covered

expatriate must use the fair market value of each interest in property as of the day

before the expatriation date in accordance with the valuation principles applicable

for purposes of Federal estate tax, without regard to sections 2032 and 2032A

(relating to alternate valuation dates or the valuation of certain farm or real

property). Notice 2009-85, supra. Section 20.2031-4, Estate Tax Regs., provides

guidance for valuing installment notes for purposes of including the value in the

value of a decedent’s gross estate. It states: “The fair market value of notes,

secured or unsecured, is presumed to be the amount of unpaid principal, plus

interest accrued to the date of death, unless the executor establishes that the value
                                           - 27 -

is lower or that the notes are worthless.” See Estate of Robinson v. Commissioner,

69 T.C. 222 (1977). On November 19, 2010, the day before petitioner expatriated,

petitioner’s right to receive monthly installment payments is presumed to have had

a fair market value of $1,373,374 on the basis of the amount of unpaid principal

and accrued interest.

      Section 453B(b) provides that a taxpayer’s basis in an installment obligation

is the excess of the face value of the obligation (the remaining principal amount)

over an amount equal to the income which would be returnable were the

obligation satisfied in full (the portion of the payments which would be included

in the taxpayer’s income). Petitioner’s basis in his right to receive monthly

installment payments is $189,388, the excess of the face amount of the right,

$1,373,374, over an amount equal to the income which would be returnable were

the right satisfied in full, $1,183,986.

      Respondent correctly applied section 877A to petitioner’s transaction.

      Respondent’s motion for partial summary judgment will be granted, and

petitioner’s motion for summary judgment will be denied.

      Any contentions we have not addressed are irrelevant, moot, or meritless.
                            - 28 -

To reflect the foregoing,

                                     An appropriate order

                            will be issued.