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Generally, under section 1, U.S. citizens such as
petitioners who reside in the United States are required to pay
tax on their worldwide income. The particular source (domestic
or overseas) of a U.S. citizen’s income has no effect on its
treatment as “income” for Federal income tax purposes, and a U.S.
citizen’s Federal income tax liability is computed (before any
foreign tax credits that might be available to the taxpayer)
without regard to the source of the taxpayer’s income. Sec. 1.1-
1(b), Income Tax Regs.
With regard to the definition of income, section 61
expressly states that gross income constitutes “all income” and
expressly lists as one of the categories of income “compensation
for services” rendered by the taxpayer, which certainly would
include Gary’s wages as a salesman and any fee income Fran
received for computer consulting. Sec. 61(a)(1). Also, section
61(a)(4) expressly lists “interest,” which certainly would
include interest income petitioners received in 1997.
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Last modified: May 25, 2011