Spike "Spitball" Weaver, a hard-throwing pitcher, was approaching the end of his major league baseball career. After becoming a free agent at the end of the Year 1 baseball season, he signed a lucrative three-year contract (which specified a substantial signing bonus) to play for the Tokyo Bombers in the fledgling World Baseball League starting in Year 2. The team's management paid 50% of the bonus in Year 1 and will pay the remaining 50% during Years 2 through 4. This league includes 12 teams, only four of which are located in the United States. Although Spike's salary is paid over a 12-month period, he resides in Japan only for the seven-month regular season, the preseason training period, and the post-season playoffs (if his team makes the playoffs). He spends the remainder of his time at his home in Fitzgerald, Georgia. The tax manager for whom you regularly work has asked you to prepare a memorandum to the file indicating what factors should be considered in allocating Spike's bonus and salary according to work performed at the U.S. and non-U.S. locations.
She suggests that at a minimum you consider
• Reg. Sec. 1.861-4
• Rev. Rul. 76-66, 1976-1 C.B. 189
• Rev. Rul. 87-38, 1987-1 C.B. 176
• Peter Stemkowski v. CIR, 50 AFTR 2d 82-5739, 82-2 USTC ¶9589 (2nd Cir., 1982)