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income includes “all income from whatever source derived,”
including compensation for services and interest. Secs.
61(a)(1), (4). Section 85(a) provides that an individual’s gross
income includes unemployment compensation.
Ignoring these statutory provisions, petitioners argue that
their compensation for services, unemployment compensation, and
interest do not constitute gross income because these items of
income are not listed in section 1.861-8(f), Income Tax Regs.
Their argument is misplaced and takes section 1.861-8(f), Income
Tax Regs., out of context. The rules of sections 861-865 have
significance in determining whether income is considered from
sources within or without the United States. The source rules do
not exclude from U.S. taxation income earned by U.S. citizens
from sources within the United States. See, e.g., Williams v.
Commissioner, 114 T.C. 136, 138-139 (2000) (rejecting claim that
income is not subject to tax because it is not from any of the
sources listed in sec. 1.861-8(a), Income Tax Regs.); Aiello v.
Commissioner, T.C. Memo. 1995-40 (rejecting claim that the only
sources of income for purposes of sec. 61 are listed in sec.
861); Great-West Life Assur. Co. v. United States, 230 Ct. Cl.
477, 678 F.2d 180, 183 (1982) (“The determination of where income
is derived or ‘sourced’ is generally of no moment to either
United States citizens or United States corporations, for
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