Treasury Regulations, Subchapter A, Sec. 1.931-1T
From TaxAlmanac
Sec. 1.931-1T Exclusion of certain income from sources within Guam, American Samoa, or the Northern Mariana Islands (temporary)
(a) General rule. (1) An individual (whether a United States citizen or an alien), who is a bona fide resident of a section 931 possession during the entire taxable year, shall exclude from gross income the income derived from sources within any section 931 possession and the income effectively connected with the conduct of a trade or business by such individual within any section 931 possession, except amounts received for services performed as an employee of the United States or any agency thereof.
(2) The following example illustrates the application of the general rule in paragraph (a)(1) of this section:
Example. D, a United States citizen, files returns on a calendar year basis. In April 2005, D moves to American Samoa, purchases a house, and accepts a permanent position with a local employer. For the remainder of the year and throughout 2006, D continues to live and work in American Samoa, and establishes a closer connection to American Samoa than to the United States or any foreign country. In September 2007, as a result of the termination of his employment in American Samoa, D sells his house and moves to State H. D is entitled to the exclusion provided in section 931 for 2006, but not for 2005 or 2007 (assuming that during the first quarter of 2005 and the last quarter of 2007, D has a tax home outside of American Samoa or a closer connection to the United States or a foreign country).
(b) Deductions and credits. In any case in which any amount otherwise constituting gross income is excluded from gross income under the provisions of section 931, there shall not be allowed as a deduction from gross income any items of expenses or losses or other deductions (except the deduction under section 151, relating to personal exemptions), or any credit, properly allocable to, or chargeable against, the amounts so excluded from gross income. For purposes of the preceding sentence, the rules of §1.861–8 shall apply (with creditable expenditures treated in the same manner as deductible expenditures).
(c) Definitions. For purposes of this section:
(1) The term section 931 possession means a possession that is a specified possession and that has entered into an implementing agreement, as described in section 1271(b) of the Tax Reform Act of 1986 (Public Law 99–514 (100 Stat. 2085)), with the United States that is in effect for the entire taxable year.
(2) The term specified possession means Guam, American Samoa, or the Northern Mariana Islands.
(3) The rules of §1.937–1T shall apply for determining whether an individual is a bona fide resident of a section 931 possession.
(4) The rules of §1.937–2T shall apply for determining whether income is from sources within a section 931 possession.
(5) The rules of §1.937–3T shall apply for determining whether income is effectively connected with the conduct of a trade or business within a section 931 possession.
(d) Effective date. This section shall apply for taxable years ending after October 22, 2004.
[T.D. 9194, 70 FR 18930, Apr. 11, 2005]
