- 15 -
for purposes of excluding from taxable income wages earned
therein) precludes any reasonable reliance by petitioner on
section 1.931-1, Income Tax Regs. (in which regulation Johnston
Island was and is still listed as a possession of the United
States). Respondent contends that petitioner should have known
that his interpretation was “too good to be true”. Respondent
also contends that regardless of whether petitioner made an
adequate disclosure on his 2000 Federal income tax return of
facts relating to his Johnston Island wages, petitioner did not
have a reasonable basis for the nontaxable treatment thereof.
We believe that for 2000 imposition on petitioner of the
accuracy-related penalty with regard to the nontaxable treatment
of his Johnston Island wages is inappropriate.
Although the District Court case and all five Tax Court
cases regarding the taxability of Johnston Island wages have
since been decided in favor of respondent, the question of
whether petitioner had a reasonable basis for the nontaxability
of his Johnston Island wages is to be evaluated as of March 4,
2001, the day petitioner filed his 2000 individual Federal income
tax return. We note particularly respondent’s letter of
November 13, 2001, in which respondent continued to refer
Johnston Island employees to section 1.931-1, Income Tax Regs.,
and to describe the regulation as “current”. We also note
respondent’s failure, as of March 2001, to assert any accuracy-
related penalty against any of the taxpayers who were litigating
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011