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respondent’s regulations thereunder, specifically section 1.861-
8(f)(1), Income Tax Regs.
Petitioners misread section 61. That section prefaces its
use of the word “source” by the word “whatever”, thereby making
the particular source of a U.S. taxpayer’s income (and the income
sourcing rules of sections 861-865) irrelevant for purposes of
the definition of income under section 61. The precise language
of section 61(a) provides as follows:
Except as otherwise provided in this subtitle, gross
income means all income from whatever source derived,
including (but not limited to) * * *. [Emphasis supplied.]
It is helpful to read carefully the specific language from
the regulations under section 861 on which petitioners rely. The
introductory language of section 1.861-8(f)(1), Income Tax Regs.,
states as follows:
(f) Miscellaneous matters--(1) Operative sections.
The operative sections of the Code which require the
determination of taxable income of the taxpayer from
specific sources or activities and which give rise to
statutory groupings to which this section is applicable
include the sections described below. [Emphasis
added.]
As we have explained, section 61 does not “require the
determination of petitioners’ taxable income from specific
sources”. Rather, section 61 explicitly states that petitioners’
income from “whatever” source constitutes income under
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Last modified: May 25, 2011