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of Guam, the CNMI, or American Samoa is required to
file a U.S. return and to pay taxes on a net basis if
he receives income from sources outside the three
possessions (i.e., U.S. or foreign source income).
* * *
S. Rept. 99-313, supra at 480-481, 1986-3 C.B. (Vol. 3) at 480-
481.
Section 1271(d) of the 1986 TRA provides that Guam, American
Samoa, and the CNMI may not enact any tax law that discriminates
against any U.S. person or any resident of any other possession.
Petitioner contends that treating income from personal services
earned by residents of the possessions as U.S. source income
under section 863(d) violates section 1271(d) of the 1986 TRA
because there are different classes of taxpayers within the
possessions and there may be unintentional discrimination. We
disagree because the provision petitioner cites applies to those
specified possessions, and not to the United States.
Petitioner also asserts that a U.S. citizen who resides in
American Samoa can avoid sourcing income from the performance of
services in international waters in the United States by
operating as a personal services corporation formed in American
Samoa because Congress exempted bona fide residents of the
specified possessions from the treatment of subpart F for
controlled foreign corporations. Sec. 957(c)(2).
Congress anticipated that problem in the 1986 TRA. S. Rept.
99-313, supra at 358. Congress stated that this problem was
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