On April 21, 1952, petitioner received a "Notification of Personnel Action" issued by the Government of American Samoa. This notification was in substance as follows:

5. Nature of Action -- Appointment (Amendment)

6. Effective date -- 7/1/51

7. Civil Service or Other Legal Authority

GAS ltr. 10A(2)

Ser. 344 dtd 4/15/52

8. Position Title -- Engineer

9. Service, Grade, Salary -- Grade 12 $ 7,440 per annum plus 25% cost of living allowance

10. Organizational Designations1959 U.S. Tax Ct. LEXIS 133">*137 -- Public Works Dept.

11. Headquarters -- Pago Pago, Tutuila, American Samoa

32 T.C. 839">*841 On July 6, 1951, petitioner received an "Acceptance of Responsibility by Government of American Samoa of Former Navy Employees Under Employment Agreement." This acceptance of responsibility reads in substance as follows:

Ref (a) Your Employment Agreement dated 6 June 1951

1. The Government of American Samoa hereby agrees to fulfill the obligations of your Employment Agreement except as outlined below. This obligation is accepted in consideration of your promise to remain in the employ of the Government of American Samoa through the term specified in Reference (a). This term extends through 18 June 1953.

In the event later decisions of the Civil Service Commission and/or the Department of Interior permit the acquisition of federal status it is agreed that such status will be retroactive to 1 July 1951.

For the Government of American Samoa

[s] L. E. Fuerstenan

The petitioner voluntarily accepted employment in American Samoa and after July 1, 1951, was at no time under any continual obligation to the Navy Department to remain there.

We find as an ultimate fact that of the $ 9,995.87 gross income1959 U.S. Tax Ct. LEXIS 133">*138 which petitioner reported on his return for 1952 as compensation which he had received from the Government of American Samoa, 25 per cent thereof, or $ 2,498.97, was cost-of-living allowances paid to him and we further find that of the gross income of $ 5,021.27 which petitioner reported on his 1953 return as having been received from the Government of American Samoa, 25 per cent thereof, or $ 1,255.32, was paid him as cost-of-living allowances.

The foregoing Findings of Fact are in addition to those found by us in our report filed June 11, 1958. 30 T.C. 559">George R. Bell, supra. Those Findings of Fact remain undisturbed.

OPINION.

As has already been stated, our report in this proceeding was filed June 11, 1958, 30 T.C. 559">George R. Bell, supra. Petitioner had contended that all of the payments which he had received during the calendar years 1952 and 1953 from the Government of American Samoa were excludible from his gross income under the provisions of section 251, I.R.C. 1939. We held against petitioner on that issue. For reasons already stated, petitioner was granted a rehearing to enable him to raise the issue that 25 per cent of the 1959 U.S. Tax Ct. LEXIS 133">*139 payments which he received from the Government of American Samoa was paid to him as cost-of-living allowances and was excludible from his gross income under the provisions of section 116(j), I.R.C. 1939.

We think the facts which have been stipulated by the parties clearly show that 25 per cent of the amounts which petitioner received from the Government of American Samoa in 1952 and 1953 was paid to him as cost-of-living allowances. The question is: Is the amount 32 T.C. 839">*842 which petitioner received as cost-of-living allowances in each of the taxable years excludible from his gross income under section 116(j), I.R.C. 1939? Section 116(j) reads:

SEC. 116. EXCLUSIONS FROM GROSS INCOME.

(j) In the case of a clerk or employee in the Foreign Service of the United States, amounts received as cost-of-living allowances under authority of section 3, as amended, of the Act of February 23, 1931; and in the case of an ambassador, minister, diplomatic, consular, or Foreign Service officer, amounts received as post allowances under the authority of section 12, as amended and renumbered, of the Act of May 24, 1924; and in the case of other civilian officers or employees of the Government of the1959 U.S. Tax Ct. LEXIS 133">*140 United States stationed outside continental United States, amounts received as cost-of-living allowances in accordance with regulations approved by the President.

It is of course plain that the first part of the statute is not applicable to petitioner. Only that part of the statute which reads "and in the case of other civilian officers or employees of the Government of the United States stationed outside continental United States, amounts received as cost-of-living allowances in accordance with regulations approved by the President" could be applicable. The question we have to decide, it seems to us, is whether the cost-of-living allowances which petitioner received from the Government of American Samoa were paid him "in accordance with regulations approved by the President." After careful consideration, we think that question must be answered in the negative.

From the research which we have made we find the following is the situation:

Under Executive Order 10,000, 3 C.F.R. secs. 202-210 (1948 Supp.), the President authorized the Civil Service Commission to establish territorial post differentials and territorial cost-of-living allowances. The territorial post differentials were1959 U.S. Tax Ct. LEXIS 133">*141 to be selected on the basis of extraordinarily difficult living conditions, excessive physical hardship, or notably unhealthful conditions. The territorial cost-of-living allowances were to be determined by considering the relative consumer price levels in the area and in the District of Columbia.

Thereafter, the Civil Service Commission issued regulations providing for the payment of territorial post differentials and territorial cost-of-living allowances in specified areas. American Samoa was designated as an area at which territorial post differentials were to be paid. However, American Samoa was not designated as an area at which territorial cost-of-living allowances were to be paid although it is possible that an area may qualify for both.

Under the original regulations promulgated by the Civil Service Commission it was stated that both the territorial post differentials and territorial cost-of-living allowances represent compensation properly includible in the gross income of the recipient. (See 5 C.F.R. Part 350. 6(h).) Thereafter, following a change in Internal Revenue Service 32 T.C. 839">*843 policy (Rev. Rul. 237, 1953-2 C.B. 52) the1959 U.S. Tax Ct. LEXIS 133">*142 Commissioner amended its regulations (5 C.F.R. Part 350 (1958 Supp.)) to the effect that payments of differentials are includible within the gross income of the recipient, but that payments of cost-of-living allowances are excludible. No changes insofar as American Samoa was concerned were made with respect to designating it as an area wherein territorial cost-of-living allowances were to be paid.

The distinction made by the regulations issued by the Civil Service Commission and approved by the President as to territorial post differentials and territorial cost-of-living allowances precludes the recovery requested by the petitioner here. The Civil Service Commission has not designated American Samoa as an area wherein cost-of-living allowances are to be paid. In the absence of such a designation, there appears to exist no regulation approved by the President providing for the payment of a cost-of-living allowance in American Samoa.

We, therefore, conclude that petitioner's contention that the cost-of-living allowances which he received in 1952 and 1953 from the Government of American Samoa should be excluded from his gross income cannot be sustained. This holding is in harmony1959 U.S. Tax Ct. LEXIS 133">*143 with our decision in Edward L. Davis, 30 T.C. 462">30 T.C. 462 . See also M. E. S. Brunelle, 15 T.C. 766">15 T.C. 766, affd. 192 F.2d 423.

In connection with our holding against petitioner on this issue, we direct attention to the decision of the United States District Court for the District of Hawaii, in Barnett v. United States, 174 F. Supp. 907">174 F. Supp. 907. In that case the taxpayer was employed as a civilian employee with the Hawaii Air National Guard and was seeking a refund on the ground that he was paid a "cost-of-living allowance" and that this cost-of-living allowance was excludible from his gross income under the provisions of section 116(j), I.R.C. 1939. The court in that case denied the taxpayer's claim for a refund and said:

Plaintiff testified that he received a cost-of-living allowance in addition to his regular pay during the years 1949 through 1953. This, however, is his opinion which is not conclusive because the record does not support his contention. But even if it were true, it is still necessary to prove that the cost-of-living allowances were received by him in accordance1959 U.S. Tax Ct. LEXIS 133">*144 with regulations approved by the President before the deduction would be allowable. No such regulations have been produced, and the Court has found none.

It will be noted that the court in the above language pointed out that it did not think the taxpayer had proved that he received any "cost-of-living allowances," but that even if it be assumed that he had received such an allowance, the taxpayer could not exclude such allowance from his gross income because he had not proved that the "cost-of-living allowances were received by him in accordance with regulations approved by the President."

32 T.C. 839">*844 In the instant case, unlike as in the Barnett case, we have found as a fact that in each of the taxable years petitioner did receive amounts which were labeled "cost-of-living allowances." But, nevertheless, we have pointed out that such "cost-of-living allowances" were not paid petitioner in accordance with regulations approved by the President. It is this latter factor, as was stressed by the court in the Barnett case, which determines whether the cost-of-living allowances are excludible. As we have already explained, petitioner does not bring himself within that provision1959 U.S. Tax Ct. LEXIS 133">*145 of the applicable statute.

Decision will be entered for the respondent.