- 5 -
On timely filed 1995, 1996, and 1997 returns, petitioner,
relying on section 931, excluded wage income relating to his
employment with De Silva.
C. Petitioner’s State Tax Payments and Refunds
On his 1994 return, petitioner claimed an $8,708 deduction
for California State income taxes paid. In 1995, petitioner
received a $1,150 California State income tax refund. Petitioner
did not report the amount of the 1995 refund on his 1995 Federal
income tax return. On his 1995 return, petitioner claimed a
$4,000 deduction for California State income taxes paid. In
1996, petitioner received a $3,839 California State income tax
refund. On his 1996 return, petitioner reported as income and
also deducted that $3,839 refund.
OPINION
The issues for decision are whether petitioner’s income
earned from services performed in international waters is
excludable from income under section 931, and whether he must
include in gross income the amount of his State tax refunds.
A. Provisions in the Tax Reform Act of 1986 Relating to Guam,
American Samoa, and the CNMI
1. Retention and Revision of the Section 931(a) Exclusion
Individuals who are U.S. citizens or resident aliens are
taxed by the United States on their worldwide income. Sec. 1.1-
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