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6. Whether Petitioner’s Income Was Effectively Connected
With a Trade or Business in American Samoa
We next consider whether, as petitioner contends, his income
is excludable from U.S. income on the grounds that it was
effectively connected with a trade or business in American Samoa.
As stated earlier, section 931(a)(2) provides that the
income of an individual who resides in, for example, American
Samoa, is excludable from U.S. income if it is “effectively
connected with the conduct of a trade or business” in American
Samoa. Petitioner contends that all his fishing-related income
is effectively connected with the conduct of a trade or business
in American Samoa because he performed substantial services in
American Samoa (e.g., preparing the vessel before trips and
unloading the catch afterwards) and that those services were a
material factor in the production of his income.
Under section 864(c), income can be “effectively connected
with the conduct of a trade or business within the United States”
if it is from “sources within”, or “sources without”, the United
States. Sec. 864(c)(1)(A), (c)(4). In the absence of
regulations under section 931(a)(2) defining the phrase
“effectively connected with the conduct of a trade or business”,
both parties refer to provisions governing whether income is
effectively connected with a U.S. trade or business under section
864(c), and contend that application of those principles favors
their respective position. We believe respondent has the better
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