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We conclude that petitioners’ arguments relating to (1) the
effective date of the amendment by the TRA 1986 of old section
931 and (2) the failure by the Treasury to amend or withdraw
section 1.931-1, Income Tax Regs., did not provide petitioners
with a reasonable basis in claiming the $99,980 exclusion of 2001
13(...continued)
effective date of the amendment by TRA 1986 of old section 931,
the U.S. District Court stated:
the outdated Section 931 was no longer in the Internal
Revenue Code in the 1994 to 1996 period. Had Congress
intended that the outdated Section 931 have continuing
effect, it would have stated so in the amended Section
931.
Farrell v. United States, 87 AFTR 2d 2001-1159, at 2001-1161 n.5,
2001-1 USTC par. 50,279, at 87,552 n.5.
In rejecting the argument of the taxpayers in Farrell that sec.
1.931-1, Income Tax Regs., promulgated under old section 931
allowed them to exclude the income earned while working on
Johnston Island, the U.S. District Court stated:
Although Section 931 was amended, Regulation
1.931-1 was not amended to reflect the changes made to
Section 931. See 10 United States Tax Reporter 9312
(2000) (explanation of IRC section 931) (“Caution: The
Treasury has not yet amended Reg section 1.931-1 to
reflect changes made by P.L. 99-514”). To read Regula-
tion 1.931-1 as including Johnston Island as a “speci-
fied possession” for purposes of 26 U.S.C. section 931
[(]1986) would be contrary to the plain intent of
Congress, which is to allow income to be excluded from
gross income for only Guam, American Samoa, and the
Northern Mariana Islands. Accordingly, this court does
not give any deference to the Treasury’s outdated
interpretation of “possession” in Regulation 1.931-1.
* * *
Farrell v. United States, 87 AFTR 2d 2001-1159, at 2001-1160 to
2001-1161, 2001-1 USTC par. 50,279, at 87,552.
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