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On August 8, 2003, we decided Hautzinger v. Commissioner,
T.C. Memo. 2003-236, involving the fifth petition filed in the
Tax Court involving Johnston Island wages. In our decision in
Hautzinger, consistent with the above court opinions, we held
that Johnston Island does not constitute a specified possession
for purposes of section 931 and that section 931 controls over
the conflicting regulation at section 1.931-1, Income Tax Regs.
Therefore, we concluded that wages earned on Johnston Island
constituted taxable income.
In addition, however, in Hautzinger, we decided that the
taxpayer was negligent in falsely reporting on his Federal income
tax return that his Raytheon wages were earned by him on American
Samoa, a specified possession for purposes of section 931, and
not on Johnston Island, where the wages in fact were earned.
Because of such false reporting of the source of the wages, we
sustained respondent’s determination of a section 6662(a)
accuracy-related penalty. The taxpayer in Hautzinger did not
file an appeal of our decision.
On December 11, 2003, the Court of Appeals for the Tenth
Circuit in Umbach v. Commissioner, 357 F.3d 1108 (10th Cir.
2003), affg. Specking v. Commissioner, 117 T.C. 95 (2001),
representing the consolidated cases of Umbach v. Commissioner,
supra, and Specking v. Commissioner, supra, affirmed our decision
in Specking. The Court of Appeals held that Johnston Island does
not constitute a foreign country for purposes of section 911 and
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Last modified: May 25, 2011