EXEMPTION FOR CERTAIN ALLOWANCES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90M00005R000200020008-5
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 6
• Document Creation Date: December 27, 2016
• Document Release Date: December 3, 2012
• Sequence Number: 8
• Publication Date: August 24, 1988
• Content Type: MISC

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INCOME TAXU
question of faQ Foster v. U. S., D.C.Ny, .
1963
221
F
,
.Supp. 291, affirmed 329 F.2d
717.
United Stara Air Force Europe Child ctrl.
dance Center m Germany was United State-,
agency for purposes of subsec. (a)(2) of tW
se
ti
d
c
on un
o aye law and on record showing
Center w a s esablished and operated u n
_.._-
control, solely b effectuate Air Force
Forcetronnec:ed. so that amounts paid to tr
payers in 19&9 as employees of Center w
en,
not excludable from taxable income; sore
were amounts e . udable under taxpayers' a,.
ternative ?ossencions (1) that Center wat
since Center was in fact true payer, ar
that Center was a.. c TV-:.-, C--.
propriated fund activity, since even if Cent
were not at unappropriated fund activit j
' Ji
.vhich Tax Court A_
i
term
n
lo. Question at law
For purposes of this section pennittin4
.,mounts earned from sources outside
vhether taxpayer successfully maintaiaerd
a dispute. Caraeater v. U. S. CA.T1
01. Findings of strict court
In action fir recovery of taxes,
r than in Caiforxia, thus precluding
luring those .ears from taxable -scoot
rasis that that income was community
'rty income, was sot clearly errooeom.
U. S., C.A_CaL 1973, 484 F.2d 9S.
2. Findings of Tam Court -.
Tax Court's Scx findings in a can
3rned incomes from sources without
35 F.2d 231, certiorari denied 35 S.4
CH. 1 INCOME FROM OUTSIDE U. S. I NC 912
93, Scope of review
In determining whether salary paid to
American citizen was exempt from income
to because salary was a payment for services
rendered without the L-suted States, court of
appeals could not make a finding as to where
compensation was reaer ed even if it was ap-
parent from general finozugs that salary was
received in the United Sates from an Ameri-
pa firm resident in New York. C. 1. R V.
Fislte's Estate, CCA-1942, 128 F.2d 487,
certiorari denied 63 SCt. 63, 317 U.S. 635, 87
I.Ed. 512.
94. Issues renewable
Conclusion of Tax C,-ntrt as to whether
party was bona fide rtsidctt of foreign coun-
try for taxable year wir~-;n this section ex-
empting from gross ia-o?e amounts received
by such residents from scmrces without Unit-
ed States is conclusion of law or at least mix-
ed question of law ace: fan., and is subject to
judicial review by tour; of appeals which may
substitute its judgment fen that of Tax Court.
Sochurek v. C. I. R-, C_4_7, 1962, 300 F.2d
34.
Question whether taxpayers were bona fide
too sresidents of the United States for more
than six months durira the taxable year, so
that their income from sources outside the
N
United States siwnld be exempt from tezarl n
under this se==c r_ a question of lav rid
the court of av,rals was not required r fol-
low the decisr of the Tax Court. C . R
v. Swent, C.C_&4. 1946, 155 F.2d 513. - -
orari denied f- SCt. 491, 329 U.S. 8:. -1
L.Ed. 685.
The conclusa of Board of Tax A-tcL's
[now Tax Coat: under undisputed fans sat
taxpayer was a boon fide nonresident if he
United States rid that amount paid hr as
compensation was exempt from inconr .
was not a "fm of fact", and hen= was
reviewable, sm- when ultimate findint s a
conclusion of av. or at least a determirar,
of a mixed o:r_s~n of law and fact. a
finding is sub= z, judicial review. C.. L
v. Fiske's Estrr . CC.A.1942, 128 F.2c 44'.
certiorari dentin t_ S.Ct. 63, 317 U.S. 6 _ t-
L.Ed. 512.
95. Reversal
Where corr. of appeals thought :3.2
Court's decisir . Crary to that of the :.-
missioner, lac- warrant in the record s
was without remc=ahle basis in the law.
of appeals was impelled to reverse the ze
sion. C. I. R R. Swent, C.C.A.4, 1946 :f
F.2d 513, cern-rz denied 67 S.Ct. 491 :Z-
U.S. 801, 91 LT` 685.
1912. Exemption for certain allowances
The following items shall not be included in
ross i
g
ncome, and shat x
aempt from taxation under this subtitle:
(1) Foreign areas allowances.-In the case civilian officers zc
employees of the Government of the United Sty amounts receive:
allowances or otherwise (but not amounts rece:. as post different:
under-
(A) chapter 9 of title I of the Foreign Se .ice Act of 1980.
(B) section 4 of the Central Intelligence -A_-ncy Act of 194
amended (SC U.S.C., sec. 403e),
(C) title U of the Overseas Differentials a : Allowances Act. _-
(D) subsection (e) or (f) of the first sect-- cT the Administra_ ?e
Expenses Ac of 1946, as amended, or sec 22 of such Act.
(2) Cost-of- .
tmag allowances -In th
-
e case o . -
Wan officers or e.--
ployees of the Government of the United Stag r
ti
d
a
one
outside _e
continental United 'States (other than Alaska's :amounts (other th-
- .amounts receiv
d
e
under title II of the Overseas Differentials and t_-
baances Act)
i
rece
ved as cost-of-living allowars in accordance w:`
regulations appro% eel by the President.
s=?~ (3) Peace Corps allowances.-In the case of _-
individual who L, a
-as' blunteec or v
l
o
unteer leader within the meany= of the Peace Co---,
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6:
Act and members of his family, amounts received as all--winces unde,
section 5 or 6 of the Peace Corps Act other than amounts r-.zeived as-
(A) termination payments under section 5(c) or scion 6(1) c
such Act,
(B) leave allowances,
(C) if such individual is a volunteer leader trainii the Unit
ed States, allowances to members of his family, an:
(D) such portion of living allowances as the Presdent may de-
termine under the Peace Corps Act as constituting bask compen-
sation.
(Aug. 16, 1954, c. 736, 68A Sty 290; Sept. 6, 1960, Pub.L. 86-70-_ T'=3e V, ? 52.
(a), 74 Stat- 802; Sept. 22, 1961. Pub.L. 87-293, Title II, ? 201(k-. '= Stat. 6255.
Oct. 17, 1980, Pub.L. 96-465. Title lI, ? 2206(eX3), 94 Stat. 2163.
1939 Internal Revenue Code. Smi1ar pro.
visions to this section were contaaed in sec-
tion 116(1), (k) of the 1939 Interest: Revenue
Code.
Derivadoa and Similar Prom see
Historical Note under section 115 of this title.
Refereaees in Text. The Form m Service
Act of 1980. referred to in par. (I)KA), is Pub.
L. 96-465, Oct. 17, 1980, 94 Seat 2071.
Chapter 9 of title I of the Foreign Service Act
of 1980 is classified generally to subchapter
IX (sectian 4081 et seq.) of chapter 52 of Ti-
tle 22, Foreign Relations and Iuer-..ourse.
For complete classification of this Act to the
Code, see Short Title note set out ender sec-
tion 3901 of Title 22 and Tables .flume.
Section 4 of the Central Intelligrtce Agen-
cy Act of 1949, as amended (50 US.C-, sec.
403e), referred to in par. (1)(B), is ifi
to section 40-;e of Title 50, War are National
Defense.
Title 11 of the Overseas Differentials and
Allowance Act, referred to in puts (1)(C)
and (2), was title II of Pub.L. 86-'"-. Sept. 6,
1960, 74 Star. 792, which was re ealed and
reenacted as sections 5922 to 5925 of Title 5,
Government Organization and Em:ioy-ees, by
Pub.L. tit-554, Sept. 6, 1966, 80 Sat 378.
Sectiors 1(e) and (I) and 22 of tie Admin-
istrative Expenses Act of 1946, refired to in
par. (1XD). were repealed and the previsions
thereof reenacted as sections 572617n, 5727(b)
to (e), and 5913 of Title 5, Governx ent Orga-
nization and Employees, by Pub.L 89-554,
Sept. 6, 1966, 80 Stat. 378.
The Peace Corps Act, referred :o in par.
(3), is Pub.L 87-293, Sept. 22, 19f:. 75 Stat.
612, which is classified principally c chapter
34 (section 2501 et seq.) of Title 2_, Foreign
Relations and Intercourse. Sens 5 and f
of that Act are classified to a 2504 ate
2505 of Title 22. For coke dassificatiot
of this Act to the Code, am a Title note
set out under section 2501 oTxie 22 and Ta-
bles volume.
1980 Amendment Par CA). Pub.L
96-465 substituted referees:. z chapter 9 of
title I of the Foreign Serve= A-- of 1980 fee
reference to title IX of the F -6gn Service
Act of 1946.
1961 Amendment. Pa- 3). Pub.L
87-293 added par. (3).
1960 Amendment. Pub-L 3n-'07 exempt.
ed foreign areas allowance raved undo
section 4 of the Central 1n=Ti-ere Agency
Act of 1949. title II of the Cvc==s Diferta
tials and Allowances Act, stnse-.on (e) or (f+
of the first section of the Ar>mmztrative Es-
penses Act of 1946, or secum = of such Act
provided that amounts re=-ec is post differ.
entials shall not be exempt me in the prove
sions relating to costof-leveret ak-winces ei.
cluded Alaska from the rm -continenza
United States" and amours rived undo
title II of the Overseas Dif als and A]-
lowances Act.
Effective Date of 1910 Asesdaen .
Amendment by Pub.L 96-b! eve I&
15, 1981, except as othervese ?rovided. =
section 2403 of Pub.L 96-$1 an out as an
Effective Date note under wcnm 3901 of T.
tle 22, Foreign Relations act: I=--rooursn.
Effective Date of 1961 tivemdaest Sav
tion 201(d) of Pub.L 87-2 P--vided tent
"The amendments node tv atote+cbetea 60
and (b) of this section [to tha se:,oa and w--
tion 1303 of this title] shall roil with ess,tai
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 INCO.%? TAXES
of his may, amounts received as alloa-anoes under
e Peat~ Corps Act other than amounts received as-
tion pr gents under section 5(c) or section 6(l) of
Iowans
ndividia_ is a volunteer leader training in the Unit.
rvancef tc m
b
f
em
ers o
his family, and
rtion cf loving allowances as the President may da'
the Plc Cor
s A
t
p
c
as constituting basic compen.
k Stat Sept. 6, 1960, Pub.L. 86-707, rnie v, ? 523
2, 1%1. P.L. 87-293, Title II, ? 201(a), 75 Scat 625;
465, Tize 12, ? 2206(eX3), 94 Stat. 2163.)
R1 orical Note
e. Similar ;co-
'ntained a =c-
ternal 1-veawe
ovlslora See
I S of the tc1e.
=oreign 3cvsae
(IXA), a Pitb.
44 Stat. X i.
ign Serve Act
to subs
apter 5-- of Ti-
d Interzurzr.
his Ac; n zne
out una= se-_-
'es vofune_
?Iligenee a-tn-
-0 U.S.C:. S C _ _
1). is clmsfeel
? and Nmcn ttl
:Terentias nut
-t pars. : r C 1
r707, S_c
repeale: am
925 of The `-.
Employ= -6t?
80 Stat "8.
of the Ana-
referrer a a
the provers
-26(b), 5-
rnment ergs--
ub. L. 8;-5ct,_
ed to tr mr.
1961, 7! ._1
.lly to shiers
e 22, Fmk
Relations and Intercourse. Sec6m= 5 and 6
of that Act are cl
ifi
ass
ed to sections 2504 11ad
2505 of Title 27 For
(I
--
n?+t ropy
96-465 substituted reference to meter 9 d
title I of the Fo
i .- ~__
re
Act
.? 1146.
1%1 Amendment. Par. (3),
87-293 added par. (3).
1960 Amendment. Pub.L. 86-7t)7
ed foreign areas allowances recejed'
Act of 1949, title 11 of the thu
tials
d All
c
an
owances Act, subsection (e)
eM
_ . . . . W,
of the first secti
f
on o
th
provided that amounts received as post
eluded Alaska from the term -continemw
title 11 or the Overseas Differehtiah and A ;
lowa
A
nces
ct.
Effective Date of 1980
Amendment by Pub.L. 96-465
15, 1981, except as otherwise pepritfitd
section 2401
.
-
f a.t, r
96
65
o
tnective Date note under section 39M 41f
tie 22, Foreign Relations and Inaeroo,
Effective Date of 1%1 Amemim=
"The amendments made by s b
Lion 1303 of this title] shall apply .till
to taxable years ending after J` OC6.4,
Te -? %-- a. A- t. mooneyhan, C.A.
Tx.1968, 404 F.2c r'. certiorari denied 89
S.Ct. 1593, 394 U .S : _t_ 1, 22 L.Ed.2d 778.
2. Cost-of-living alowt aces
In action by ta.--a,=7 to recover income
taxes alleged to have Seen erroneously and il-
legally assessed ant: silo cted, evidence failed
to establish that tE-_a wcr s basic compensa-
tion as a civilian eacicwee of the Hawaii Air
National Guard wat 5.xe:d by statute, or that
be received cost-of-i?,mg allowances in accor-
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I INCOME
FROM OUTSIDE U. S. 26 ? 912
io::ion 3401 of this title) shall apply aiti -e-
to remuneration paid after the date of
enactment of this Act [Sept. 22. lot --. -
Section 201(d) of Pub.L. 87-293 repel
rc Pub.L. 89-572, ? 5(a), Sept. 13, 19ti, to
S . 765. Such repeal not deemed to of
memdments contained in such provisions w-
wz1on 5(b) of Pub.L. 89-572, set out is a
sz under former section 2515 of Title
Fertigrt Relations and Intercourse.
Effective Date of 1960 Amendment Ser-
a= 523(b) of Pub.L. 86-707 provided
ma-
?%mgraphs (1) and (2) of section 912 Y rc
b--nal Revenue Code of 1954, as amen:
lw rtbsection (a) of this section [pars.(1,1
a` this section], shall apply only witi
> to amounts received on or after the
of ::he enactment of this Act [Sept. 6, 19ni
txaSle years ending on or after such date-
Repeals; Amendments and Applicatiot. of
Amendments Unaffected. Section 201(= s
P t.L 87-293 was repealed by Pu:.L.
1c572, ? 5(a), Sept. 13, 1966, 80 Stat_
Soc-L repeal not deemed to affect amendmens
to this section contained in such prosistnns.
eve continuation in full force and effect ur :
modified by appropriate authority of al :L-
. tionas, authorization. regulations. :r-
des contracts, agreements, and other actt.-za
owed undertaken, or entered into under a:-
tttxny of the repealed provisions, see ser:cr
3(L, of Pub.L. 89-572, set out as a note una=
farmer section 2515 of Title 22, Foreign Rca-
atam and Intercourse.
Note 2
Delegation of Faoeions. Function of de-
termining the pe=a: of living allowances
constituting bast ?-impensation for Peace
Corps voluntary n volunteer leaders under
par. (3) delegated zv President to Director of
Peace Corps to be oe^formed in consultation
with the Secretari z me Treasury, see section
1-104 of Ex.Ord-Nc. 12137, May 16, 1979,
44 F.R. 29023, se_ our under section 2501 of
Title 22, Foreign L=oons and Intercourse.
Delegation of Amity. Authority of the
President under pir =1 delegated to the Sec-
retary of Defense r->? respect to the military
departments, and a secretary of the Trea-
sury with respect r ::6e Coast Guard, con-
cerning civilian emricu es of nonappropriated
fund instrumentals of the armed forces, see
section 201 of Ea.CrcNo.11137, Jan. 7, 1964,
set out under serer `c21 of Title 5, Govern.
ment Organizatior an? Employees.
Legislative Hiss.. For a comprehensive
analysis of this seen as contained in House
Report No. 1337. Smi=te Report No. 1622,
and Conference Racer No. 2543, which ac-
companied the Ibrcnal Revenue Code of
1954, see pp. 439`_ X163, of the 1954 U.S.
Code Cong. and Ai mews. See, also, Pub.
L. 86-707, 1960 I.:. Code Cong. and Adm.
News, p. 3338; I-L.. 87-293, 1961 U.S.
Code Cong. and Aeni. ;ews, p. 2842; Pub.L.
96-465, 1980 C: t cte Cong. and Adm.
News, p. 4419.
Cross References
Amounts paid employees of American Inrr-r of Taiwan not treat= as earned income under
this section, see section 3310 of Tre -- . Foreign Relations me intercourse.
Aadority of Secretary to require informa:cr on returns concerninr 11:cw-ances under this sec-
tion, see section 6011 of this title
Libra : References
laaee-..al Revenue X3055, 4108 et seq
.JS Internal Revenue ?? 432, 433. 4?t
ae:
t`094611 area allowances I
L R+rdga area allowances
Ta.'tayer who had accepted an indefinre
moment as equipment specialist in 1-z^
*'"nn of Bureau of Public Roads, v6-ht=
moo til==t United states agency charged w?c
ittwwr ills section dealing with foreign &-a
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26 ? 912
Note 2
dance with regulations approed by the Presi-
dent, bat, evidence established that his com-
pensanon was fixed by lawful regulation, and
that be did not receive a ward-5sing allow-
ance d=ing the period in cn=vversy, and
therefore taxpayer did not ove pad his income
tax on theory that a portion of the salary re-
ceised by him represented a cm-of-living al-
lowance excludable from taxable income un-
der this section dealing wih exclusion of
amoun s received by employees of the govern-
ment stationed outside the Visited States re-
ceived as cost-of-living allowance in accor-
dance with regulations apgrosed by the
President. Barnett v. U. S.. D.C.Hawaii
1959, 1-74 F.Supp. 907, affimed 289 F.2d
939.
This section and Ex.Ord. No. 10000, set
out nncsr section 5941 of Tire 22, providing
for exclusion of costof-livinf a&,wances for
certain government employees outside conti-
nental United States or an Aaslra whose ba-
sic compensation was fixed by statute, was
meant to encompass persons such as taxpayer
even though Attorney Genera: had discretion
to fix specific amount of his basic salary as
United States attorney withit certain defined
[? 913.
statutory limitations Manson v. C.
1961. 36 T.C. 953.
Petitioner, employs: of governnetr
American Samoa. was xcc entitled to es-?
cost-of-living allowanr received in 195_ a
1953, under this secti= since in order zr
excludible such alloaz= must have zsc
paid in accordance wa regulations ate,
by President, and dung those years, 2L
were no such regula=tes authorizing y
ment of such allowance a, employees of 1p,
ernment of American Sa?os. Bell y_ C
R., 1959, 32 T.C. 939. aL`-med 278 F.2t :It
Cost-of-living allownac of United Sun,
citizen employed by Te itorial Go
of American Samoa was not exempt m
this section since dt-~ '!Lied to show
such allowance was ntrsuant to regnarn
approved by Presides. Davis v. C. L
1958, 30 T.C. 462.
Increase in the brim salary of a
court clerk in Alaska z a set increase !or-
costs is not exempt tax under this r.
tion. Brunelle v. C. 1 R_ 1950, 15 T.c.
affirmed 192 F.2d 4-
2:
Repealed. Pub.L. 97-34, Title I, ? 112(a), Aug. 1
1981, 95 Stat. 194]
Section, added Pub.L. 9`-615, ? 203(a),
Nov. L 1978, 92 Stat. 310:, and amended
Pub.L 96-222, Title 1, ? 1:8(axl)(B), (F),
Apr. 1. 1980, 94 Stat. 2:3. _25; Pub.L.
96-60& ? 1(a), Dec. 28, 198:, 94 Stat. 3550,
related to a deduction for certain expenses of
living abroad.
Effective Date of Fepeal Repeal
with respect to taxahe years beginning
Dec. 31, 1981, see maim 115 or Pwz.
97-34, set out as at Ef"stive Date of :.
Amendment note unti. non 911 of t3s li
tie.
[Subpart C-Repealed]
[?? 921, 922. Repealed. Pub.L. 94-455, Tide X, ? 10M
Oct. 4, 1976, 90 Stat. 1648]
Section 921, Acts Aug. :6, 1954, c. 736,
68A Scat. 290; Oct. 4, 197f_ Ptb.L. 94-455,
Title- XIX, ? 1901(ax116), 9J Scat. 1784, de-
fined Western Hemisphere Lade corporation.
Secrizn 922, Acts Aug. :5. 1954, c. 736,
68A Scat 291; Dec. 10, 19":. Pub.L. 92-178,
Title V. ? 502(c), 85 Stat. 553. Oct. 4, 1976,
Pub.L 94-455, Title X, ? 1:52(a), (cXl), 90
Star. 1647, 1648; Nov. L 1978, Pub.L.
W
95-600, Title III, ? 3:'i~ K 15). 92 Sr*.
related to the specie cretion for F>ras
Hemisphere trade -
Effective Date of "e veal Repeal *
beginning after Dec 31. 1979- tsnr tetra
1052(d) of Pub.L 94155. set out n s
tive Date of 1976 A-MendmCilt 0000!
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STAT
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