Edward D. Clark - Page 6

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          Petitioner received an additional $9,051 of military retirement             
          pay in 2004 that he failed to report.  Petitioner has conceded              
          that the interest income and U.S. military retirement pay he                
          received in the years in issue are not excludable as foreign                
          earned income.                                                              
               Petitioner’s earned income for the years in issue consists             
          of wage income and vacation pay.  The amount of petitioner’s                
          earned income for each of the years in issue is:                            
                         Year                Total Earned Income                      
                         2002                     $48,737.84                          
                         2003                     55,373.77                           
                         2004                     52,626.07                           
          Income Earned in International Waters                                       
               U.S. citizens are generally taxed on their worldwide income            
          unless a specific exclusion applies.  Sec. 61(a) (“gross income             
          means all income from whatever source derived”); Cook v. Tait,              
          265 U.S. 47, 56 (1924); Specking v. Commissioner, 117 T.C. 95,              
          101-102 (2001), affd. sub nom. Umbach v. Commissioner, 357 F.3d             
          1108 (10th Cir. 2003), affd. sub nom. Haessly v. Commissioner, 68           
          Fed. Appx. 44 (9th Cir. 2003).                                              
               Section 911(a) provides in relevant part that a qualified              
          individual may elect to exclude, subject to limitations set forth           
          in section 911(b)(2), his or her foreign earned income from gross           
          income.  Section 911(b)(1)(A) defines an individual’s “foreign              

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