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On August 28, 2001, we decided Specking v. Commissioner,
117 T.C. 95 (2001), affd. sub nom. Haessly v. Commissioner, 68
Fed. Appx. 44 (9th Cir. 2003), affd. sub nom. Umbach v.
Commissioner, 357 F.3d 1108 (10th Cir. 2003), representing a
consolidated group of cases involving three of the above
petitions filed in the Tax Court. In our decision in Specking v.
Commissioner, supra, we held that Johnston Island does not
constitute a foreign country for purposes of section 911 and does
not constitute a specified possession for purposes of section
931. We concluded that section 931 applies to income earned on
Johnston Island for years beginning after December 31, 1986, and,
therefore, that wages earned on Johnston Island constituted
taxable income.
Three months after Specking was decided by this Court, on
November 13, 2001, in response to a letter request from a
Raytheon employee on Johnston Island, respondent mailed to the
employee a letter and a copy of section 1.931-1, Income Tax
Regs., in which letter such regulation was described as “current
as of October 24, 2001”, and in which regulation Johnston Island
was listed as a possession.
On November 30, 2001, after an audit of petitioner’s 2000
Federal income tax return, respondent mailed to petitioner a
letter notifying petitioner that the $185,048 in Raytheon wages
that petitioner received in 2000 constituted taxable income with
respect to which $54,139 in taxes was due. This letter stated
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