- 15 - is U.S. source income. Petitioner relies primarily on section 931(a) and on section 1.863-6, Income Tax Regs., for the proposition that the compensation he earned for services performed in international waters is sourced in American Samoa or is effectively connected with a trade or business in American Samoa. 2. Ocean-Based Personal Services Income We first consider respondent’s contention that petitioner’s income earned in international waters is U.S. source income under section 863(d). Generally, personal services income of U.S. persons9 is sourced where the services are performed, without regard to the location of the payor, the residence of the taxpayer, the place of contracting, or the place of payment. Secs. 861(a)(3), 862(a)(3); Dillin v. Commissioner, 56 T.C. 228, 244 (1971); sec. 1.861-4(a), Income Tax Regs. Before 1987, income earned by U.S. citizens and residents from personal services performed in international waters was generally sourced where the services were performed; thus, income from those activities was generally treated as foreign source income. Sec. 862(a)(3); H. Rept. 99-426, at 381 (1985), 1986-3 C.B. (Vol. 2) 381; S. Rept. 99-313, at 357 (1986), 1986-3 C.B. (Vol. 3) 357; H. Conf. Rept. 99-841, at II-599 (1986), 1986-3 C.B. (Vol. 4) 599. This resulted in a larger foreign tax credit 9 A U.S. person is a citizen or resident of the United States. Sec. 7701(a)(30)(A).Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
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