- 17 -
the TRA 1986 amended old section 931 because the Treasury did not
amend or withdraw that regulation. Id. at 110-111. In Specking,
we held that old section 931 no longer applied to the taxpayers
there, id., and that “Consequently, the regulatory provision also
has no application to them and is obsolete as to petitioners [in
Specking]”, id. at 111. In so holding, we stated:
We do not agree with petitioners that respondent’s
failure to amend section 1.931-1, Income Tax Regs.,
supports petitioners’ position. As the Supreme Court
recently observed regarding another unamended regula-
tion provision: “The Treasury’s relaxed approach to
amending its regulations to track Code changes is well
documented. * * * The absence of any amendment * * * is
more likely a reflection of the Treasury’s inattention
than any affirmative intention on its part to say
anything at all.” United Dominion Indus., Inc. v.
United States, 532 U.S. * * * [822, 836-837 (2001)].
Id.13
13Even before we issued our Opinion in Specking v. Commis-
sioner, 117 T.C. 95 (2001), affd. sub nom. Haessly v. Commis-
sioner, 68 Fed. Appx. 44 (9th Cir. 2003), affd. sub nom. Umbach
v. Commissioner, 57 F.3d 1108 (10th Cir. 2003), the United States
District Court for the District of Hawaii (U.S. District Court)
held that taxpayers who earned compensation during 1994, 1995,
and 1996 while working on Johnston Island must include such
compensation in gross income for those years. Farrell v. United
States, 87 AFTR 2d 2001-1159, 2001-1 USTC par. 50,279 (D. Haw.
2001), affd. 313 F.3d 1214 (9th Cir. 2002). In so holding, the
U.S. District Court rejected the arguments of the taxpayers in
Farrell and petitioners here (1) that the amendment by the TRA
1986 of old section 931 was not effective because certain imple-
menting agreements were not entered into between the United
States and the specified possessions identified in sec. 931 after
that amendment and (2) that the taxpayers were entitled to rely
on sec. 1.931-1 Income Tax Regs., promulgated under old section
931 because that regulation was not amended or withdrawn by the
Treasury after the TRA 1986 amended old section 931. In reject-
ing the argument of the taxpayers in Farrell with respect to the
(continued...)
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