It’s Official: Antarctica Is (Not) a Foreign Country

If you earn income on a research expedition in Antarctica, can you claim a tax exemption for foreign earned income? The tax regulations allow an exclusion from gross income for any foreign earned income, but the latter term is defined as residency for a qualified period in a “foreign country.”

The United States Tax Court ruled this week in Arnett v. United States that Antarctica is not a foreign country and therefore income earned there is fully taxable. “The term “foreign country” when used in a geographical sense includes any territory under the sovereignty of a government other than that of the United States…. As Antarctica is not a foreign country for purposes of the Code, we conclude that petitioner is not entitled to exclude the wage income he earned in Antarctica.”

But wait! In 1993 the Supreme Court ruled in Smith v. United States that Antarctica is a foreign country for purposes of the Foreign Tort Claims Act. It seems the FTCA precludes tort claims against the United States if the claim arises in a foreign country. In Smith the spouse of a construction worker sued the United States for wrongful death arising out of a project with the National Science Foundation. The Supreme Court in Smith held “that the FTCA’s waiver of sovereign immunity does not apply to tort claims arising in Antarctica.”

No matter, the Tax Court in Arnett distinguished Smith by noting that that holding applied solely to cases arising under the FTCA.

So I guess the rule is fairly clear: Antarctica is a foreign country if you are suing the United States, but is not a foreign country if the United States is suing you.