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TRA 1986 repealed the "inhabitant rule" and required U.S.
corporations that were inhabitants of the USVI to report and pay
tax on their worldwide income to the IRS.2 Section 1277(c)(2)(A)
of TRA 1986 applied the amendments of section 1275(b) of TRA 1986
not only to any taxable year beginning after the effective date
of TRA 1986 but also to any "pre-1987 open year." Section
1277(c)(2)(C) of TRA 1986 defines a "pre-1987 open year" as "any
taxable year beginning before January 1, 1987, if on the date of
the enactment of this Act the assessment of a deficiency of
income tax for such taxable year is not barred by any law or rule
of law."
Respondent determined that 1984 and 1985 are "pre-1987 open
years" within the meaning of section 1277(c)(2)(C) of TRA 1986
and, accordingly, contends that petitioner is required to pay tax
to the United States on its worldwide income during those years.
Petitioner does not dispute respondent's position with regard to
2 The Tax Reform Act of 1986, Pub. L. 99-514, sec. 1275(b),
100 Stat. 2085, provides:
SEC. 1275(b) Clarification of Treatment of Virgin
Islands Inhabitants.-–Subparagraph (B) of section
7651(5) (relating to the Virgin Islands) is amended to
read as follows:
(B) For purposes of this title, section 28(a)
of the Revised Organic Act of the Virgin Islands
shall be effective as if such section 28(a) had
been enacted before the enactment of this title
and such section 28(a) shall have no effect on the
amount of income tax liability required to be paid
by any person to the United States.
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