John A. Francisco - Page 20




                                       - 20 -                                         
               Petitioner contends that, in the absence of regulations                
          under section 931(d)(2), we should conclude that under section              
          1.863-6, Income Tax Regs., petitioner’s fishing income is                   
          American Samoa source and thus excludable under section 931(a).             
          We disagree.  Sections 1.861-1 to 1.863-5, Income Tax Regs.,                
          adopted before 1986, do not treat income earned from personal               
          services performed in international waters as U.S. source income;           
          instead, they provide that the source of income from personal               
          services is the place where the services are performed.  Sec.               
          1.861-4(b)(1), Income Tax Regs.  Income earned from personal                
          services performed in international waters was not treated as               
          U.S. source income until section 863(d)(2) was enacted in 1986.12           
          Thus, section 1.863-6, Income Tax Regs., does not support                   
          petitioner’s position.                                                      
               The Secretary has not proposed that section 1.863-6, Income            
          Tax Regs., be changed to refer to section 1.863-8, Proposed                 
          Income Tax Regs.  Thus, section 1.863-6, Income Tax Regs., does             
          not incorporate section 1.863-8, Proposed Income Tax Regs.  As a            
          result, income earned from services performed in international              
          waters, which is sourced in the United States by section 863(d)             
          and section 1.863-8, Proposed Income Tax Regs., is not treated as           
          American Samoan source if earned by a resident of American Samoa.           


               12  Sec. 863(d) is effective for tax years beginning after             
          Dec. 31, 1986.  1986 TRA sec. 1213(b); see also sec. 1.863-8(b),            
          Proposed Income Tax Regs.                                                   





Page:  Previous  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  Next

Last modified: May 25, 2011