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section 911 to individuals who receive compensation from the
United States but who are not employees of the U.S. Government.1
The Ways and Means Committee report accompanying ERTA
explains the change further:
The bill extends the benefits of the exclusion to
individuals who are paid by the United States but who are
not eligible for any exclusion under section 912 or any
other provision of U.S. law. As a general rule, therefore,
employees of the Federal Government will not be eligible for
the exclusion. [H. Rept 97-201 (1981), 1981-2 C.B. 352,
355.]
It is respondent's position that petitioner was eligible
for, and did receive, certain benefits from the U.S. Government,
such as allowances, reimbursements and expenses for cost of
living and overseas differentials, education expenses, and
quarters and housing. Section 912 generally provides that
amounts received by civilian officers and employees of the United
States as foreign area, cost of living, and Peace Corps
allowances are exempt from taxation. To be eligible for these
benefits and this exclusion, a taxpayer must be a civilian
officer or an employee of the U.S. Government, a determination we
have yet to make. Consequently, an analysis of section 912 alone
is not helpful in resolving the issue before us as it presupposes
petitioner is a U.S. employee. As revealed by petitioners' tax
1 Stated more precisely, the 1981 amendment to sec. 911 did
not directly increase the exclusion from income therein; it may
have done so indirectly by narrowing the limitation on that
exclusion.
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