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Hrblockfreetax Publication 1212 - Introductory Material Table of Contents Future Developments Photographs of Missing Children IntroductionOrdering forms and publications. Hrblockfreetax Tax questions. Hrblockfreetax Useful Items - You may want to see: Future Developments For the latest information about developments related to Pub. Hrblockfreetax 1212, such as legislation enacted after it was published, go to www. Hrblockfreetax irs. Hrblockfreetax gov/pub1212. Hrblockfreetax Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Hrblockfreetax Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Hrblockfreetax You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Hrblockfreetax Introduction This publication has two purposes. Hrblockfreetax Its primary purpose is to help brokers and other middlemen identify publicly offered original issue discount (OID) debt instruments they may hold as nominees for the true owners, so they can file Forms 1099-OID or Forms 1099-INT as required. Hrblockfreetax The other purpose of the publication is to help owners of publicly offered OID debt instruments determine how much OID to report on their income tax returns. Hrblockfreetax The list of publicly offered OID debt instruments (OID list) is on the IRS website. Hrblockfreetax The original issue discount tables, Sections I-A through III-F, are only available on the IRS website at www. Hrblockfreetax irs. Hrblockfreetax gov/pub1212 by clicking the link under Recent Developments. Hrblockfreetax The tables are posted to the website in late November or early December of each year. Hrblockfreetax The information on these lists come from the issuers of the debt instruments and from financial publications and is updated annually. Hrblockfreetax (However, see Debt Instruments Not on the OID List, later. Hrblockfreetax ) Brokers and other middlemen can rely on this list to determine, for information reporting purposes, whether a debt instrument was issued at a discount and the OID to be reported on information returns. Hrblockfreetax However, because the information in the list has generally not been verified by the IRS as correct, the following tax matters are subject to change upon examination by the IRS. Hrblockfreetax The OID reported by owners of a debt instrument on their income tax returns. Hrblockfreetax The issuer's classification of an instrument as debt for federal income tax purposes. Hrblockfreetax Instructions for issuers of OID debt instruments. Hrblockfreetax   In general, issuers of publicly offered OID debt instruments must, within 30 days after the issue date, report information about the instruments to the IRS on Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. Hrblockfreetax See the form instructions for more information. Hrblockfreetax Issuers should report errors in and omissions from the list in writing at the following address:  IRS OID Publication Project SE:W:CAR:MP:T  1111 Constitution Ave. Hrblockfreetax NW, IR-6526 Washington, D. Hrblockfreetax C. Hrblockfreetax 20224 REMIC and CDO information reporting requirements. Hrblockfreetax   Brokers and other middlemen must follow special information reporting requirements for real estate mortgage investment conduits (REMIC) regular, and collateralized debt obligations (CDO) interests. Hrblockfreetax The rules are explained in Publication 938, Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). Hrblockfreetax   Holders of interests in REMICs and CDOs should see chapter 1 of Publication 550 for information on REMICs and CDOs. Hrblockfreetax Comments and suggestions. Hrblockfreetax   We welcome your comments about this publication and your suggestions for future editions. Hrblockfreetax   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Hrblockfreetax NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Hrblockfreetax Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Hrblockfreetax   You can send your comments from www. Hrblockfreetax irs. Hrblockfreetax gov/formspubs/. Hrblockfreetax Click on “More Information” and then on “Comment on Tax Forms and Publications. Hrblockfreetax ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Hrblockfreetax Ordering forms and publications. Hrblockfreetax   Visit www. Hrblockfreetax irs. Hrblockfreetax gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Hrblockfreetax Internal Revenue Service 1201 N. Hrblockfreetax Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Hrblockfreetax   If you have a tax question, check the information available on IRS. Hrblockfreetax gov or call 1-800-829-1040. Hrblockfreetax We cannot answer tax questions sent to any of the preceding addresses. Hrblockfreetax Useful Items - You may want to see: Publication 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 550 Investment Income and Expenses 938 Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). Hrblockfreetax Form (and Instructions) 1096 Annual Summary and Transmittal of U. Hrblockfreetax S. Hrblockfreetax Information Returns 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-INT Interest Income 1099-OID Original Issue Discount 8949 Sales and Other Dispositions of Capital Assets Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses W-8 Instructions for the Requester of Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY See How To Get Tax Help near the end of this publication for information about getting publications and forms. Hrblockfreetax Prev  Up  Next   Home   More Online Publications
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Hrblockfreetax 2. Hrblockfreetax   Source of Income Table of Contents Introduction Topics - This chapter discusses: Resident Aliens Nonresident AliensInterest Income Dividends Guarantee of Indebtedness Personal Services Transportation Income Scholarships, Grants, Prizes, and Awards Pensions and Annuities Rents or Royalties Real Property Personal Property Community Income Introduction After you have determined your alien status, you must determine the source of your income. Hrblockfreetax This chapter will help you determine the source of different types of income you may receive during the tax year. Hrblockfreetax This chapter also discusses special rules for married individuals who are domiciled in a country with community property laws. Hrblockfreetax Topics - This chapter discusses: Income source rules, and Community income. Hrblockfreetax Resident Aliens A resident alien's income is generally subject to tax in the same manner as a U. Hrblockfreetax S. Hrblockfreetax citizen. Hrblockfreetax If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U. Hrblockfreetax S. Hrblockfreetax tax return. Hrblockfreetax You must report these amounts from sources within and outside the United States. Hrblockfreetax Nonresident Aliens A nonresident alien usually is subject to U. Hrblockfreetax S. Hrblockfreetax income tax only on U. Hrblockfreetax S. Hrblockfreetax source income. Hrblockfreetax Under limited circumstances, certain foreign source income is subject to U. Hrblockfreetax S. Hrblockfreetax tax. Hrblockfreetax See Foreign Income in chapter 4. Hrblockfreetax The general rules for determining U. Hrblockfreetax S. Hrblockfreetax source income that apply to most nonresident aliens are shown in Table 2-1. Hrblockfreetax The following discussions cover the general rules as well as the exceptions to these rules. Hrblockfreetax Not all items of U. Hrblockfreetax S. Hrblockfreetax source income are taxable. Hrblockfreetax See chapter 3. Hrblockfreetax Interest Income Generally, U. Hrblockfreetax S. Hrblockfreetax source interest income includes the following items. Hrblockfreetax Interest on bonds, notes, or other interest-bearing obligations of U. Hrblockfreetax S. Hrblockfreetax residents or domestic corporations. Hrblockfreetax Interest paid by a domestic or foreign partnership or foreign corporation engaged in a U. Hrblockfreetax S. Hrblockfreetax trade or business at any time during the tax year. Hrblockfreetax Original issue discount. Hrblockfreetax Interest from a state, the District of Columbia, or the U. Hrblockfreetax S. Hrblockfreetax Government. Hrblockfreetax The place or manner of payment is immaterial in determining the source of the income. Hrblockfreetax A substitute interest payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as the interest on the transferred security. Hrblockfreetax Exceptions. Hrblockfreetax   U. Hrblockfreetax S. Hrblockfreetax source interest income does not include the following items. Hrblockfreetax Interest paid by a resident alien or a domestic corporation on obligations issued before August 10, 2010, if for the 3-year period ending with the close of the payer's tax year preceding the interest payment, at least 80% of the payer's total gross income: Is from sources outside the United States, and Is attributable to the active conduct of a trade or business by the individual or corporation in a foreign country or a U. Hrblockfreetax S. Hrblockfreetax possession. Hrblockfreetax However, the interest will be considered U. Hrblockfreetax S. Hrblockfreetax source interest income if either of the following apply. Hrblockfreetax The recipient of the interest is related to the resident alien or domestic corporation. Hrblockfreetax See section 954(d)(3) for the definition of related person. Hrblockfreetax The terms of the obligation are significantly modified after August 9, 2010. Hrblockfreetax Any extension of the term of the obligation is considered a significant modification. Hrblockfreetax Interest paid by a foreign branch of a domestic corporation or a domestic partnership on deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law if the interest paid or credited can be deducted by the association. Hrblockfreetax Interest on deposits with a foreign branch of a domestic corporation or domestic partnership, but only if the branch is in the commercial banking business. Hrblockfreetax Dividends In most cases, dividend income received from domestic corporations is U. Hrblockfreetax S. Hrblockfreetax source income. Hrblockfreetax Dividend income from foreign corporations is usually foreign source income. Hrblockfreetax Exceptions to both of these rules are discussed below. Hrblockfreetax A substitute dividend payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as a distribution on the transferred security. Hrblockfreetax Dividend equivalent payments. Hrblockfreetax   U. Hrblockfreetax S. Hrblockfreetax source dividends also include all dividend equivalent payments. Hrblockfreetax Dividend equivalent payments include substitute dividends, payments made pursuant to a specified notional principal contract, and all similar payments that, directly or indirectly, are contingent on or determined by reference to, the payment of a dividend from U. Hrblockfreetax S. Hrblockfreetax sources. Hrblockfreetax    The Internal Revenue Service has issued final regulations that would affect the treatment of dividend equivalent payments and specified notional principal contracts. Hrblockfreetax You can view this regulation at www. Hrblockfreetax irs. Hrblockfreetax gov/irb/2013-52_IRB/ar08. Hrblockfreetax html. Hrblockfreetax First exception. Hrblockfreetax   Dividends received from a domestic corporation are not U. Hrblockfreetax S. Hrblockfreetax source income if the corporation elects to take the American Samoa economic development credit. Hrblockfreetax Second exception. Hrblockfreetax   Part of the dividends received from a foreign corporation is U. Hrblockfreetax S. Hrblockfreetax source income if 25% or more of its total gross income for the 3-year period ending with the close of its tax year preceding the declaration of dividends was effectively connected with a trade or business in the United States. Hrblockfreetax If the corporation was formed less than 3 years before the declaration, use its total gross income from the time it was formed. Hrblockfreetax Determine the part that is U. Hrblockfreetax S. Hrblockfreetax source income by multiplying the dividend by the following fraction. Hrblockfreetax   Foreign corporation's gross income connected with a U. Hrblockfreetax S. Hrblockfreetax trade or business for the 3-year period     Foreign corporation's gross income from all sources for that period   Guarantee of Indebtedness Certain amounts received directly or indirectly, for the provision of a guarantee of indebtedness issued after September 27, 2010, are U. Hrblockfreetax S. Hrblockfreetax source income. Hrblockfreetax They must be paid by a noncorporate resident or U. Hrblockfreetax S. Hrblockfreetax corporation or by any foreign person if the amounts are effectively connected with the conduct of a U. Hrblockfreetax S. Hrblockfreetax trade or business. Hrblockfreetax For more information, see Internal Revenue Code sections 861(a)(9) and 862(a)(9). Hrblockfreetax Personal Services All wages and any other compensation for services performed in the United States are considered to be from sources in the United States. Hrblockfreetax The only exceptions to this rule are discussed in chapter 3 under Employees of foreign persons, organizations, or offices, and under Crew members. Hrblockfreetax If you are an employee and receive compensation for labor or personal services performed both inside and outside the United States, special rules apply in determining the source of the compensation. Hrblockfreetax Compensation (other than certain fringe benefits) is sourced on a time basis. Hrblockfreetax Certain fringe benefits (such as housing and education) are sourced on a geographical basis. Hrblockfreetax Or, you may be permitted to use an alternative basis to determine the source of compensation. Hrblockfreetax See Alternative Basis , later. Hrblockfreetax Multi-level marketing. Hrblockfreetax   Certain companies sell products through a multi-level marketing arrangement, such that an upper-tier distributor, who has sponsored a lower-tier distributor, is entitled to a payment from the company based on certain activities of that lower-tier distributor. Hrblockfreetax Generally, depending on the facts, payments from such multi-level marketing companies to independent (non-employee) distributors (upper-tier distributors) that are based on the sales or purchases of persons whom they have sponsored (lower-tier distributors) constitute income for the performance of personal services in recruiting, training, and supporting the lower-tier distributors. Hrblockfreetax The source of such income is generally based on where the services of the upper-tier distributor are performed, and may, depending on the facts, be considered multi-year compensation, with the source of income determined over the period to which such compensation is attributable. Hrblockfreetax Self-employed individuals. Hrblockfreetax   If you are self-employed, you determine the source of compensation for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. Hrblockfreetax In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. Hrblockfreetax Time Basis Use a time basis to figure your U. Hrblockfreetax S. Hrblockfreetax source compensation (other than the fringe benefits discussed later). Hrblockfreetax Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed services in the United States during the year     Total number of days you performed services during the year   You can use a unit of time less than a day in the above fraction, if appropriate. Hrblockfreetax The time period for which the compensation is made does not have to be a year. Hrblockfreetax Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. Hrblockfreetax Example 1. Hrblockfreetax Christina Brooks, a resident of the Netherlands, worked 240 days for a U. Hrblockfreetax S. Hrblockfreetax company during the tax year. Hrblockfreetax She received $80,000 in compensation. Hrblockfreetax None of it was for fringe benefits. Hrblockfreetax Christina performed services in the United States for 60 days and performed services in the Netherlands for 180 days. Hrblockfreetax Using the time basis for determining the source of compensation, $20,000 ($80,000 × 60/240) is her U. Hrblockfreetax S. Hrblockfreetax source income. Hrblockfreetax Example 2. Hrblockfreetax Rob Waters, a resident of South Africa, is employed by a corporation. Hrblockfreetax His annual salary is $100,000. Hrblockfreetax None of it is for fringe benefits. Hrblockfreetax During the first quarter of the year he worked entirely within the United States. Hrblockfreetax On April 1, Rob was transferred to Singapore for the remainder of the year. Hrblockfreetax Rob is able to establish that the first quarter of the year and the last 3 quarters of the year are two separate, distinct, and continuous periods of time. Hrblockfreetax Accordingly, $25,000 of Rob's annual salary is attributable to the first quarter of the year (. Hrblockfreetax 25 × $100,000). Hrblockfreetax All of it is U. Hrblockfreetax S. Hrblockfreetax source income because he worked entirely within the United States during that quarter. Hrblockfreetax The remaining $75,000 is attributable to the last three quarters of the year. Hrblockfreetax During those quarters, he worked 150 days in Singapore and 30 days in the United States. Hrblockfreetax His periodic performance of services in the United States did not result in distinct, separate, and continuous periods of time. Hrblockfreetax Of this $75,000, $12,500 ($75,000 × 30/180) is U. Hrblockfreetax S. Hrblockfreetax source income. Hrblockfreetax Multi-year compensation. Hrblockfreetax   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. Hrblockfreetax Multi-year compensation is compensation that is included in your income in one tax year but that is attributable to a period that includes two or more tax years. Hrblockfreetax   You determine the period to which the compensation is attributable based on the facts and circumstances of your case. Hrblockfreetax For example, an amount of compensation that specifically relates to a period of time that includes several calendar years is attributable to the entire multi-year period. Hrblockfreetax   The amount of compensation treated as from U. Hrblockfreetax S. Hrblockfreetax sources is figured by multiplying the total multi-year compensation by a fraction. Hrblockfreetax The numerator of the fraction is the number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in the United States in connection with the project. Hrblockfreetax The denominator of the fraction is the total number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in connection with the project. Hrblockfreetax Geographical Basis Compensation you receive as an employee in the form of the following fringe benefits is sourced on a geographical basis. Hrblockfreetax Housing. Hrblockfreetax Education. Hrblockfreetax Local transportation. Hrblockfreetax Tax reimbursement. Hrblockfreetax Hazardous or hardship duty pay as defined in Regulations section 1. Hrblockfreetax 861-4(b)(2)(ii)(D)(5). Hrblockfreetax Moving expense reimbursement. Hrblockfreetax The amount of fringe benefits must be reasonable and you must substantiate them by adequate records or by sufficient evidence. Hrblockfreetax Principal place of work. Hrblockfreetax   The above fringe benefits, except for tax reimbursement and hazardous or hardship duty pay, are sourced based on your principal place of work. Hrblockfreetax Your principal place of work is usually the place where you spend most of your working time. Hrblockfreetax This could be your office, plant, store, shop, or other location. Hrblockfreetax If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work. Hrblockfreetax   If you have more than one job at any time, your main job location depends on the facts in each case. Hrblockfreetax The more important factors to be considered are: The total time you spend at each place, The amount of work you do at each place, and How much money you earn at each place. Hrblockfreetax Housing. Hrblockfreetax   The source of a housing fringe benefit is determined based on the location of your principal place of work. Hrblockfreetax A housing fringe benefit includes payments to you or on your behalf (and your family's if your family resides with you) only for the following. Hrblockfreetax Rent. Hrblockfreetax Utilities (except telephone charges). Hrblockfreetax Real and personal property insurance. Hrblockfreetax Occupancy taxes not deductible under section 164 or 216(a). Hrblockfreetax Nonrefundable fees for securing a leasehold. Hrblockfreetax Rental of furniture and accessories. Hrblockfreetax Household repairs. Hrblockfreetax Residential parking. Hrblockfreetax Fair rental value of housing provided in kind by your employer. Hrblockfreetax   A housing fringe benefit does not include: Deductible interest and taxes (including deductible interest and taxes of a tenant-stockholder in a cooperative housing corporation), The cost of buying property, including principal payments on a mortgage, The cost of domestic labor (maids, gardeners, etc. Hrblockfreetax ), Pay television subscriptions, Improvements and other expenses that increase the value or appreciably prolong the life of property, Purchased furniture or accessories, Depreciation or amortization of property or improvements, The value of meals or lodging that you exclude from gross income, or The value of meals or lodging that you deduct as moving expenses. Hrblockfreetax Education. Hrblockfreetax   The source of an education fringe benefit for the education expenses of your dependents is determined based on the location of your principal place of work. Hrblockfreetax An education fringe benefit includes payments only for the following expenses for education at an elementary or secondary school. Hrblockfreetax Tuition, fees, academic tutoring, special needs services for a special needs student, books, supplies, and other equipment. Hrblockfreetax Room and board and uniforms that are required or provided by the school in connection with enrollment or attendance. Hrblockfreetax Local transportation. Hrblockfreetax   The source of a local transportation fringe benefit is determined based on the location of your principal place of work. Hrblockfreetax Your local transportation fringe benefit is the amount that you receive as compensation for local transportation for you or your spouse or dependents at the location of your principal place of work. Hrblockfreetax The amount treated as a local transportation fringe benefit is limited to actual expenses incurred for local transportation and the fair rental value of any employer-provided vehicle used predominantly by you, your spouse, or your dependents for local transportation. Hrblockfreetax Actual expenses do not include the cost (including interest) of any vehicle purchased by you or on your behalf. Hrblockfreetax Tax reimbursement. Hrblockfreetax   The source of a tax reimbursement fringe benefit is determined based on the location of the jurisdiction that imposed the tax for which you are reimbursed. Hrblockfreetax Moving expense reimbursement. Hrblockfreetax   The source of a moving expense reimbursement is generally based on the location of your new principal place of work. Hrblockfreetax However, the source is determined based on the location of your former principal place of work if you provide sufficient evidence that such determination of source is more appropriate under the facts and circumstances of your case. Hrblockfreetax Sufficient evidence generally requires an agreement between you and your employer, or a written statement of company policy, which is reduced to writing before the move and which is entered into or established to induce you or other employees to move to another country. Hrblockfreetax The written statement or agreement must state that your employer will reimburse you for moving expenses that you incur to return to your former principal place of work regardless of whether you continue to work for your employer after returning to that location. Hrblockfreetax It may contain certain conditions upon which the right to reimbursement is determined as long as those conditions set forth standards that are definitely ascertainable and can only be fulfilled prior to, or through completion of, your return move to your former principal place of work. Hrblockfreetax Alternative Basis If you are an employee, you can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your compensation than the time or geographical basis. Hrblockfreetax If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your compensation. Hrblockfreetax Also, if your total compensation from all sources is $250,000 or more, check “Yes” to both questions on line K on page 5 of Form 1040NR, and attach a written statement to your tax return that sets forth all of the following. Hrblockfreetax Your name and social security number (written across the top of the statement). Hrblockfreetax The specific compensation income, or the specific fringe benefit, for which you are using the alternative basis. Hrblockfreetax For each item in (2), the alternative basis of allocation of source used. Hrblockfreetax For each item in (2), a computation showing how the alternative allocation was computed. Hrblockfreetax A comparison of the dollar amount of the U. Hrblockfreetax S. Hrblockfreetax compensation and foreign compensation sourced under both the alternative basis and the time or geographical basis discussed earlier. Hrblockfreetax Transportation Income Transportation income is income from the use of a vessel or aircraft or for the performance of services directly related to the use of any vessel or aircraft. Hrblockfreetax This is true whether the vessel or aircraft is owned, hired, or leased. Hrblockfreetax The term “vessel or aircraft” includes any container used in connection with a vessel or aircraft. Hrblockfreetax All income from transportation that begins and ends in the United States is treated as derived from sources in the United States. Hrblockfreetax If the transportation begins or ends in the United States, 50% of the transportation income is treated as derived from sources in the United States. Hrblockfreetax For transportation income from personal services, 50% of the income is U. Hrblockfreetax S. Hrblockfreetax source income if the transportation is between the United States and a U. Hrblockfreetax S. Hrblockfreetax possession. Hrblockfreetax For nonresident aliens, this only applies to income derived from, or in connection with, an aircraft. Hrblockfreetax For information on how U. Hrblockfreetax S. Hrblockfreetax source transportation income is taxed, see chapter 4. Hrblockfreetax Scholarships, Grants, Prizes, and Awards Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. Hrblockfreetax However, see Activities to be performed outside the United States , later. Hrblockfreetax For example, payments for research or study in the United States made by the United States, a noncorporate U. Hrblockfreetax S. Hrblockfreetax resident, or a domestic corporation, are from U. Hrblockfreetax S. Hrblockfreetax sources. Hrblockfreetax Similar payments from a foreign government or foreign corporation are foreign source payments even though the funds may be disbursed through a U. Hrblockfreetax S. Hrblockfreetax agent. Hrblockfreetax Payments made by an entity designated as a public international organization under the International Organizations Immunities Act are from foreign sources. Hrblockfreetax Activities to be performed outside the United States. Hrblockfreetax   Scholarships, fellowship grants, targeted grants, and achievement awards received by nonresident aliens for activities performed, or to be performed, outside the United States are not U. Hrblockfreetax S. Hrblockfreetax source income. Hrblockfreetax    These rules do not apply to amounts paid as salary or other compensation for services. Hrblockfreetax See Personal Services, earlier, for the source rules that apply. Hrblockfreetax Pensions and Annuities If you receive a pension from a domestic trust for services performed both in and outside the United States, part of the pension payment is from U. Hrblockfreetax S. Hrblockfreetax sources. Hrblockfreetax That part is the amount attributable to earnings of the pension plan and the employer contributions made for services performed in the United States. Hrblockfreetax This applies whether the distribution is made under a qualified or nonqualified stock bonus, pension, profit-sharing, or annuity plan (whether or not funded). Hrblockfreetax If you performed services as an employee of the United States, you may receive a distribution from the U. Hrblockfreetax S. Hrblockfreetax Government under a plan, such as the Civil Service Retirement System, that is treated as a qualified pension plan. Hrblockfreetax Your U. Hrblockfreetax S. Hrblockfreetax source income is the otherwise taxable amount of the distribution that is attributable to your total U. Hrblockfreetax S. Hrblockfreetax Government basic pay other than tax-exempt pay for services performed outside the United States. Hrblockfreetax Rents or Royalties Your U. Hrblockfreetax S. Hrblockfreetax source income includes rent and royalty income received during the tax year from property located in the United States or from any interest in that property. Hrblockfreetax U. Hrblockfreetax S. Hrblockfreetax source income also includes rents or royalties for the use of, or for the privilege of using, in the United States, intangible property such as patents, copyrights, secret processes and formulas, goodwill, trademarks, franchises, and similar property. Hrblockfreetax Real Property Real property is land and buildings and generally anything built on, growing on, or attached to land. Hrblockfreetax Gross income from sources in the United States includes gains, profits, and income from the sale or other disposition of real property located in the United States. Hrblockfreetax Natural resources. Hrblockfreetax   The income from the sale of products of any farm, mine, oil or gas well, other natural deposit, or timber located in the United States and sold in a foreign country, or located in a foreign country and sold in the United States, is partly from sources in the United States. Hrblockfreetax For information on determining that part, see section 1. Hrblockfreetax 863-1(b) of the regulations. Hrblockfreetax Table 2-1. Hrblockfreetax Summary of Source Rules for Income of Nonresident Aliens Item of income Factor determining source Salaries, wages, other compensation Where services performed Business income:   Personal services Where services performed Sale of inventory—purchased Where sold Sale of inventory—produced Allocation Interest Residence of payer Dividends Whether a U. Hrblockfreetax S. Hrblockfreetax or foreign corporation* Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. Hrblockfreetax Where property is used Sale of real property Location of property Sale of personal property Seller's tax home (but see Personal Property , later, for exceptions) Pension distributions attributable to contributions Where services were performed that earned the pension Investment earnings on pension contributions Location of pension trust Sale of natural resources Allocation based on fair market value of product at export terminal. Hrblockfreetax For more information, see section 1. Hrblockfreetax 863-1(b) of the regulations. Hrblockfreetax *Exceptions include: a) Dividends paid by a U. Hrblockfreetax S. Hrblockfreetax corporation are foreign source if the corporation elects the  American Samoa economic development credit. Hrblockfreetax  b) Part of a dividend paid by a foreign corporation is U. Hrblockfreetax S. Hrblockfreetax source if at least 25% of the  corporation's gross income is effectively connected with a U. Hrblockfreetax S. Hrblockfreetax trade or business for the  3 tax years before the year in which the dividends are declared. Hrblockfreetax Personal Property Personal property is property, such as machinery, equipment, or furniture, that is not real property. Hrblockfreetax Gain or loss from the sale or exchange of personal property generally has its source in the United States if you have a tax home in the United States. Hrblockfreetax If you do not have a tax home in the United States, the gain or loss generally is considered to be from sources outside the United States. Hrblockfreetax Tax home. Hrblockfreetax   Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Hrblockfreetax Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. Hrblockfreetax If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. Hrblockfreetax If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. Hrblockfreetax Inventory property. Hrblockfreetax   Inventory property is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. Hrblockfreetax Income from the sale of inventory that you purchased is sourced where the property is sold. Hrblockfreetax Generally, this is where title to the property passes to the buyer. Hrblockfreetax For example, income from the sale of inventory in the United States is U. Hrblockfreetax S. Hrblockfreetax source income, whether you purchased it in the United States or in a foreign country. Hrblockfreetax   Income from the sale of inventory property that you produced in the United States and sold outside the United States (or vice versa) is partly from sources in the United States and partly from sources outside the United States. Hrblockfreetax For information on making this allocation, see section 1. Hrblockfreetax 863-3 of the regulations. Hrblockfreetax   These rules apply even if your tax home is not in the United States. Hrblockfreetax Depreciable property. Hrblockfreetax   To determine the source of any gain from the sale of depreciable personal property, you must first figure the part of the gain that is not more than the total depreciation adjustments on the property. Hrblockfreetax You allocate this part of the gain to sources in the United States based on the ratio of U. Hrblockfreetax S. Hrblockfreetax depreciation adjustments to total depreciation adjustments. Hrblockfreetax The rest of this part of the gain is considered to be from sources outside the United States. Hrblockfreetax   For this purpose, “U. Hrblockfreetax S. Hrblockfreetax depreciation adjustments” are the depreciation adjustments to the basis of the property that are allowable in figuring taxable income from U. Hrblockfreetax S. Hrblockfreetax sources. Hrblockfreetax However, if the property is used predominantly in the United States during a tax year, all depreciation deductions allowable for that year are treated as U. Hrblockfreetax S. Hrblockfreetax depreciation adjustments. Hrblockfreetax But there are some exceptions for certain transportation, communications, and other property used internationally. Hrblockfreetax   Gain from the sale of depreciable property that is more than the total depreciation adjustments on the property is sourced as if the property were inventory property, as discussed above. Hrblockfreetax   A loss is sourced in the same way as the depreciation deductions were sourced. Hrblockfreetax However, if the property was used predominantly in the United States, the entire loss reduces U. Hrblockfreetax S. Hrblockfreetax source income. Hrblockfreetax   The basis of property usually means the cost (money plus the fair market value of other property or services) of property you acquire. Hrblockfreetax Depreciation is an amount deducted to recover the cost or other basis of a trade or business asset. Hrblockfreetax The amount you can deduct depends on the property's cost, when you began using the property, how long it will take to recover your cost, and which depreciation method you use. Hrblockfreetax A depreciation deduction is any deduction for depreciation or amortization or any other allowable deduction that treats a capital expenditure as a deductible expense. Hrblockfreetax Intangible property. Hrblockfreetax   Intangible property includes patents, copyrights, secret processes or formulas, goodwill, trademarks, trade names, or other like property. Hrblockfreetax The gain from the sale of amortizable or depreciable intangible property, up to the previously allowable amortization or depreciation deductions, is sourced in the same way as the original deductions were sourced. Hrblockfreetax This is the same as the source rule for gain from the sale of depreciable property. Hrblockfreetax See Depreciable property , earlier, for details on how to apply this rule. Hrblockfreetax   Gain in excess of the amortization or depreciation deductions is sourced in the country where the property is used if the income from the sale is contingent on the productivity, use, or disposition of that property. Hrblockfreetax If the income is not contingent on the productivity, use, or disposition of the property, the income is sourced according to your tax home as discussed earlier. Hrblockfreetax If payments for goodwill do not depend on its productivity, use, or disposition, their source is the country in which the goodwill was generated. Hrblockfreetax Sales through offices or fixed places of business. Hrblockfreetax   Despite any of the earlier rules, if you do not have a tax home in the United States, but you maintain an office or other fixed place of business in the United States, treat the income from any sale of personal property (including inventory property) that is attributable to that office or place of business as U. Hrblockfreetax S. Hrblockfreetax source income. Hrblockfreetax However, this rule does not apply to sales of inventory property for use, disposition, or consumption outside the United States if your office or other fixed place of business outside the United States materially participated in the sale. Hrblockfreetax   If you have a tax home in the United States but maintain an office or other fixed place of business outside the United States, income from sales of personal property, other than inventory, depreciable property, or intangibles, that is attributable to that foreign office or place of business may be treated as U. Hrblockfreetax S. Hrblockfreetax source income. Hrblockfreetax The income is treated as U. Hrblockfreetax S. Hrblockfreetax source income if an income tax of less than 10% of the income from the sale is paid to a foreign country. Hrblockfreetax This rule also applies to losses if the foreign country would have imposed an income tax of less than 10% had the sale resulted in a gain. Hrblockfreetax Community Income If you are married and you or your spouse is subject to the community property laws of a foreign country, a U. Hrblockfreetax S. Hrblockfreetax state, or a U. Hrblockfreetax S. Hrblockfreetax possession, you generally must follow those laws to determine the income of yourself and your spouse for U. Hrblockfreetax S. Hrblockfreetax tax purposes. Hrblockfreetax But you must disregard certain community property laws if: Both you and your spouse are nonresident aliens, or One of you is a nonresident alien and the other is a U. Hrblockfreetax S. Hrblockfreetax citizen or resident and you do not both choose to be treated as U. Hrblockfreetax S. Hrblockfreetax residents as explained in chapter 1. Hrblockfreetax In these cases, you and your spouse must report community income as explained later. Hrblockfreetax Earned income. Hrblockfreetax   Earned income of a spouse, other than trade or business income and a partner's distributive share of partnership income, is treated as the income of the spouse whose services produced the income. Hrblockfreetax That spouse must report all of it on his or her separate return. Hrblockfreetax Trade or business income. Hrblockfreetax   Trade or business income, other than a partner's distributive share of partnership income, is treated as the income of the spouse carrying on the trade or business. Hrblockfreetax That spouse must report all of it on his or her separate return. Hrblockfreetax Partnership income (or loss). Hrblockfreetax   A partner's distributive share of partnership income (or loss) is treated as the income (or loss) of the partner. Hrblockfreetax The partner must report all of it on his or her separate return. Hrblockfreetax Separate property income. Hrblockfreetax   Income derived from the separate property of one spouse (and which is not earned income, trade or business income, or partnership distributive share income) is treated as the income of that spouse. Hrblockfreetax That spouse must report all of it on his or her separate return. Hrblockfreetax Use the appropriate community property law to determine what is separate property. Hrblockfreetax Other community income. Hrblockfreetax   All other community income is treated as provided by the applicable community property laws. Hrblockfreetax Prev  Up  Next   Home   More Online Publications