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they prove that the income is specifically exempted. E.g., sec.
61(a); Cook v. Tait, 265 U.S. 47, 54, 56 (1924).
Petitioners contend that the compensation they earned for
services they performed on Johnston Island during the years in
issue is excludable under section 931, or, in the alternative,
under section 911. Respondent, on the other hand, contends that
petitioners’ income for the years in issue is not excludable
under either provision. For the reasons discussed below, we
agree with respondent.
I. Section 931
Petitioners contend that the compensation they earned on
Johnston Island is excludable under section 931 because Johnston
Island is a possession of the United States and they otherwise
satisfy the requirements of that section.
A. Statutory Language Before the Tax Reform Act of 1986
Before the enactment of section 1272(a) of the Tax Reform
Act of 1986 (TRA 1986), Pub. L. 99-514, 100 Stat. 2593, section
9319 permitted citizens of the United States to exclude income
9Sec. 931, as in effect before enactment of the Tax Reform
Act of 1986 (TRA 1986), Pub. L. 99-514, 100 Stat. 2085, read in
pertinent part as follows:
SEC. 931. INCOME FROM SOURCES WITHIN POSSESSIONS OF
THE UNITED STATES.
(a) General Rule.--In the case of individual
citizens of the United States, gross income means only
gross income from sources within the United States if
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