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Even if general sourcing rules were applicable in this case
to override the plain meaning of section 911 and the regulations,
section 863(c) would not apply to petitioner’s situation because
his voyages neither began nor ended in the United States or one
of its possessions. Rather, section 863(d) would require
petitioner to include income earned in international waters as
income from “ocean activities” sourced in the United States. See
Arnett v. Commissioner, 473 F.3d 790, 797 (7th Cir. 2007), affg.
126 T.C. 89 (2006). Section 863(d) provides, in relevant part,
as follows:
SEC. 863(d). Source Rules for Space and Certain
Ocean Activities.--
(1) In general.--Except as provided in
regulations, any income derived from a space or
ocean activity--
(A) if derived by a United States
person, shall be sourced in the United States
* * *
* * * * * * *
(2) Space or ocean activity.--For purposes of
paragraph (1)--
(A) In general.--The term “space or
ocean activity” means--
* * * * * * *
(ii) any activity conducted on or
under water not within the jurisdiction
(as recognized by the United States) of
a foreign country, possession of the
United States, or the United States.
* * * * * * *
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