Joseph D. Specking, et al. - Page 14




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                    �1.931-1. Citizens of the United States and                       
               domestic corporations deriving income from sources                     
               within a possession of the United States.--(a)                         
               Definitions. (1) As used in section 931 and this                       
               section, the term “possession of the United States”                    
               includes American Samoa, Guam, Johnston Island, Midway                 
               Islands, the Panama Canal Zone, Puerto Rico, and Wake                  
               Island.  However, the term does not include (i) the                    
               Virgin Islands and (ii), when used with respect to                     
               citizens of the United States, the term does not                       
               include Puerto Rico or, in the case of taxable years                   
               beginning after December 31, 1972, Guam.                               
                    (2) As used in section 931 and this section, the                  
               term “United States” includes only the States, the                     
               Territories of Alaska and Hawaii, and the District of                  
               Columbia. [Emphasis added.]                                            
          The last amendment to section 1.931-1, Income Tax Regs., was                
          promulgated in 1975.  T.D. 7385, 40 Fed. Reg. 50260 (Oct. 29,               
          1975).                                                                      
               B.  Statutory Language After TRA 1986                                  
               TRA 1986 section 1272(a) amended old section 931 to read, in           
          pertinent part:                                                             
               SEC. 931.  INCOME FROM SOURCES WITHIN GUAM, AMERICAN                   
               SAMOA, OR THE NORTHERN MARIANA ISLANDS.                                
                    (a) General Rule.--In the case of an individual                   
               who is a bona fide resident of a specified possession                  
               during the entire taxable year, gross income shall not                 
               include--                                                              
                    (1) income derived from sources within any                        
                    specified possession, and                                         
                    (2) income effectively connected with the                         
                    conduct of a trade or business by such individual                 
                    within any specified possession.                                  
                        *     *     *     *     *     *     *                         
                    (c) Specified Possession.--For purposes of this                   





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