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petitioners may not exclude any of that compensation under
section 911(a).
C. Analysis
We agree with respondent that under section 1.911-2(g) and
(h), Income Tax Regs., Johnston Island cannot constitute a
foreign country for purposes of section 911 because the island
constitutes a possession under the sovereignty of the United
States. Inasmuch as Johnston Island does not fall within the
definition of a foreign country, the compensation petitioners
earned on Johnston Island does not come within the definition of
“foreign earned income”, nor was their “tax home” in a foreign
country. Sec. 911(b)(1)(A) and (d). Consequently, petitioners
cannot satisfy the requirements for the exclusion from income
provided by section 911.
We do not agree with petitioners that section 1.931-1(b)(2),
Income Tax Regs., nonetheless operates to provide them an
exclusion from income under section 911. Section 1.931-1(b)(2),
Income Tax Regs., was promulgated in 1960 by T.D. 6500. See 25
Fed. Reg. 11402, 11951 (Nov. 26, 1960). Subsequent amendments to
the regulations promulgated under section 931 did not change the
text of section 1.931-1(b)(2), Income Tax Regs. See T.D. 7283,
38 Fed. Reg. 20823 (Aug. 3, 1973); T.D. 7385, 40 Fed. Reg. 50260
(Oct. 29, 1975). At the time section 1.931-1(b)(2), Income Tax
Regs., was promulgated, section 911(a)(1) provided an exclusion
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