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not constitute a specified possession for purposes of section
931. We also held that section 931 controls over the conflicting
regulation at section 1.931-1, Income Tax Regs., and that, for
years beginning after December 31, 1986, section 931 applies to
income earned by U.S. citizens on Johnston Island, making the
wages taxable income.
On June 16, 2003, the Court of Appeals for the Ninth Circuit
decided Haessly v. Commissioner, 68 Fed. Appx. 44 (9th Cir.
2003), affg. Specking v. Commissioner, 117 T.C. 95 (2001), and
held that Johnston Island does not constitute a foreign country
for purposes of section 911 and, following its opinion in Farrell
v. United States, supra, that Johnston Island does not constitute
a specified possession for purposes of section 931. The Court of
Appeals affirmed our opinion in Specking v. Commissioner, supra,
and concluded that wages earned on Johnston Island constituted
taxable income.
On June 24, 2003, the taxpayer in Jones v. Commissioner,
T.C. Memo. 2003-14, filed an appeal of our decision therein to
the Court of Appeals for the Eleventh Circuit, which appeal is
still pending.
In the above deficiency determinations by respondent, and in
the above court opinions regarding the taxability of Johnston
Island wages by the District Court, the Tax Court, and the Courts
of Appeals, no penalties were asserted against the taxpayers, and
none was imposed by the courts.
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