Home

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Publication

US

Tax

Guide

for

Aliens

English

Publication

Introductory

Material

Future

Developments

Introduction

Comments

and

suggestions

Ordering

forms

and

publications

Tax

questions

Whats

New

Reminders

Nonresident

Alien

or

Resident

Alien

Introduction

Topics

This

chapter

discusses

Useful

Items

You

may

want

to

see

Nonresident

Aliens

Resident

Aliens

Green

Card

Test

Resident

status

taken

away

Resident

status

abandoned

Termination

of

residency

after

June

and

before

June

Termination

of

residency

after

June

Substantial

Presence

Test

Days

of

Presence

in

the

United

States

Regular

commuters

from

Canada

or

Mexico

Days

in

transit

Crew

members

Medical

condition

Exempt

individual

Foreign

governmentrelated

individuals

Household

staff

exception

Teachers

and

trainees

Students

Professional

athletes

Form

Closer

Connection

to

a

Foreign

Country

Closer

connection

to

two

foreign

countries

Tax

home

Foreign

country

Establishing

a

closer

connection

When

you

can

not

have

a

closer

connection

Form

Effect

of

Tax

Treaties

Information

to

be

reported

DualStatus

Aliens

First

Year

of

Residency

Residency

starting

date

under

substantial

presence

test

Statement

required

to

exclude

up

to

days

of

presence

Residency

starting

date

under

green

card

test

Residency

during

the

preceding

year

FirstYear

Choice

Statement

required

to

make

the

firstyear

choice

for

Choosing

Resident

Alien

Status

Making

the

choice

Last

Year

of

Residency

Earlier

residency

termination

date

Termination

of

residency

De

minimis

presence

Residency

during

the

next

year

Statement

required

to

establish

your

residency

termination

date

Nonresident

Spouse

Treated

as

a

Resident

How

To

Make

the

Choice

Amended

return

Suspending

the

Choice

Ending

the

Choice

Aliens

From

American

Samoa

or

Puerto

Rico

Source

of

Income

Introduction

Topics

This

chapter

discusses

Resident

Aliens

Nonresident

Aliens

Interest

Income

Exceptions

Dividends

Dividend

equivalent

payments

First

exception

Second

exception

Guarantee

of

Indebtedness

Personal

Services

Multilevel

marketing

Selfemployed

individuals

Time

Basis

Multiyear

compensation

Geographical

Basis

Principal

place

of

work

Housing

Education

Local

transportation

Tax

reimbursement

Moving

expense

reimbursement

Alternative

Basis

Transportation

Income

Scholarships

Grants

Prizes

and

Awards

Activities

to

be

performed

outside

the

United

States

Pensions

and

Annuities

Rents

or

Royalties

Real

Property

Natural

resources

Personal

Property

Tax

home

Inventory

property

Depreciable

property

Intangible

property

Sales

through

offices

or

fixed

places

of

business

Community

Income

Earned

income

Trade

or

business

income

Partnership

income

or

loss

Separate

property

income

Other

community

income

Exclusions

From

Gross

Income

Introduction

Topics

This

chapter

discusses

Useful

Items

You

may

want

to

see

Resident

Aliens

Foreign

Earned

Income

and

Housing

Amount

Foreign

country

Nonresident

Aliens

Interest

Income

State

and

local

government

obligations

Portfolio

interest

Obligations

in

registered

form

Obligations

not

in

registered

form

Interest

that

does

not

qualify

as

portfolio

interest

Contingent

interest

Related

persons

Exception

for

existing

debt

Dividend

Income

Certain

dividends

paid

by

foreign

corporations

Certain

interestrelated

dividends

Certain

shortterm

capital

gain

dividends

Services

Performed

for

Foreign

Employer

Employees

of

foreign

persons

organizations

or

offices

Crew

members

Students

and

exchange

visitors

Foreign

employer

Income

from

certain

annuities

Income

affected

by

treaties

Gambling

Winnings

From

Dog

or

Horse

Racing

Gain

From

the

Sale

of

Your

Main

Home

Scholarships

and

Fellowship

Grants

Candidate

for

a

degree

Eligible

educational

institution

Qualified

education

expenses

Expenses

that

do

not

qualify

Amounts

used

to

pay

expenses

that

do

not

qualify

Payment

for

services

How

Income

of

Aliens

Is

Taxed

Introduction

Topics

This

chapter

discusses

Useful

Items

You

may

want

to

see

Resident

Aliens

Nonresident

Aliens

Trade

or

Business

in

the

United

States

Personal

Services

Other

Trade

or

Business

Activities

Students

and

trainees

Business

operations

Partnerships

Beneficiary

of

an

estate

or

trust

Trading

in

stocks

securities

and

commodities

Trading

for

a

nonresident

aliens

own

account

Effectively

Connected

Income

Investment

Income

Assetuse

test

Businessactivities

test

Personal

Service

Income

Pensions

Transportation

Income

Business

Profits

and

Losses

and

Sales

Transactions

Real

Property

Gain

or

Loss

US

real

property

interest

US

real

property

holding

corporation

Publicly

traded

exception

Qualified

investment

entities

Lookthrough

rule

for

QIEs

Disposition

of

REIT

stock

Domestically

controlled

QIE

Wash

sale

Alternative

minimum

tax

Withholding

of

tax

Foreign

Income

Tax

on

Effectively

Connected

Income

Real

property

income

The

Tax

Fixed

or

Determinable

Income

Original

issue

discount

OID

Gambling

Winnings

Social

Security

Benefits

Sales

or

Exchanges

of

Capital

Assets

rule

Reporting

Income

From

Real

Property

Making

the

choice

Revoking

the

choice

Transportation

Tax

Interrupted

Period

of

Residence

Reporting

requirements

Expatriation

Tax

Longterm

resident

LTR

defined

Expatriation

After

June

and

Before

June

Exception

for

dualcitizens

and

certain

minors

Certain

dualcitizens

Certain

minors

Tax

consequences

of

presence

in

the

United

States

Related

employer

Date

of

tax

expatriation

Annual

return

Penalty

How

To

Figure

the

Expatriation

Tax

If

You

Expatriated

Before

June

Other

information

Expatriation

Tax

Return

Expatriation

After

June

Exception

for

dualcitizens

and

certain

minors

Certain

dualcitizens

Certain

minors

Expatriation

date

Former

US

citizen

Former

LTR

How

To

Figure

the

Expatriation

Tax

If

You

Expatriate

After

June

Exceptions

Expatriation

Tax

Return

Deferral

of

payment

of

marktomarket

tax

Figuring

Your

Tax

Introduction

Topics

This

chapter

discusses

Useful

Items

You

may

want

to

see

Tax

Year

Identification

Number

Social

security

number

SSN

and

visa

holders

visa

holders

Individual

taxpayer

identification

number

ITIN

Expired

ITIN

Employer

identification

number

EIN

Filing

Status

Resident

Aliens

Married

filing

jointly

Qualifying

widower

Head

of

household

Nonresident

Aliens

Married

nonresident

alien

Exceptions

Qualifying

widower

Head

of

household

Estates

and

trusts

Special

rules

for

aliens

from

certain

US

possessions

Reporting

Your

Income

Deductions

Resident

Aliens

Nonresident

Aliens

Ordinary

and

necessary

business

expenses

Losses

Educator

expenses

Individual

retirement

arrangement

IRA

Moving

expenses

Reimbursements

Moving

expense

or

travel

expense

Selfemployed

SEP

SIMPLE

and

qualified

retirement

plans

Penalty

on

early

withdrawal

of

savings

Student

loan

interest

expense

Exemptions

Resident

Aliens

Nonresident

Aliens

Residents

of

Mexico

or

Canada

or

US

nationals

Residents

of

South

Korea

Students

and

business

apprentices

from

India

Itemized

Deductions

Resident

Aliens

Nonresident

Aliens

Standard

deduction

Students

and

business

apprentices

from

India

Disaster

tax

relief

State

and

local

income

taxes

Charitable

contributions

Foreign

organizations

Worksheet

Standard

Deduction

Worksheet

for

Students

and

Business

Apprentices

From

India

Worksheet

Standard

Deduction

Worksheet

for

Students

and

Business

Apprentices

From

India

For

an

Original

or

Amended

Form

for

Casualty

Losses

From

Hurricane

Harvey

Irma

or

Maria

Contributions

from

which

you

benefit

Cash

contributions

Noncash

contributions

Contributions

of

appreciated

property

Limit

Casualty

and

theft

losses

Disaster

tax

relief

Losses

from

personal

use

property

Losses

from

incomeproducing

property

Job

expenses

and

other

miscellaneous

deductions

Travel

expenses

Deductible

travel

expenses

Expenses

allocable

to

US

taxexempt

income

More

information

Tax

Credits

and

Payments

Resident

Aliens

Foreign

tax

credit

Child

and

dependent

care

credit

Credit

for

the

elderly

or

the

disabled

Education

credits

Retirement

savings

contributions

credit

Child

tax

credit

Adoption

credit

Earned

income

credit

EIC

Other

information

Nonresident

Aliens

Credits

Foreign

tax

credit

Child

and

dependent

care

credit

Education

credits

Retirement

savings

contributions

credit

Child

tax

credit

Adoption

credit

Credit

for

prioryear

minimum

tax

Earned

income

credit

Tax

Withheld

Withholding

from

wages

Excess

social

security

tax

withheld

Additional

Medicare

Tax

Tax

paid

on

undistributed

longterm

capital

gains

Tax

withheld

at

the

source

Tax

withheld

on

partnership

income

Tax

withheld

on

dispositions

of

US

real

property

interests

Claiming

tax

withheld

on

your

return

Bona

Fide

Residents

of

American

Samoa

or

Puerto

Rico

Residents

of

Puerto

Rico

Residents

of

American

Samoa

DualStatus

Tax

Year

Introduction

Topics

This

chapter

discusses

Useful

Items

You

may

want

to

see

Tax

Year

Income

Subject

to

Tax

Restrictions

for

DualStatus

Taxpayers

Standard

deduction

Exemptions

Head

of

household

Joint

return

Tax

rates

Tax

credits

Exemptions

How

To

Figure

Tax

Income

Social

security

and

railroad

retirement

benefits

Tax

Credits

and

Payments

Credits

Foreign

tax

credit

Child

and

dependent

care

credit

Retirement

savings

contributions

credit

Child

tax

credit

Adoption

credit

Payments

Forms

To

File

Resident

at

end

of

year

Nonresident

at

end

of

year

Statement

When

and

Where

To

File

Filing

Information

Introduction

Topics

This

chapter

discusses

Useful

Items

You

may

want

to

see

What

When

and

Where

To

File

Resident

Aliens

Extensions

of

time

to

file

Nonresident

Aliens

Exceptions

Foreignowned

domestic

disregarded

entities

Form

When

To

File

Extensions

of

time

to

file

When

to

file

for

deductions

and

credits

Protective

return

Waiver

of

filing

deadline

Where

To

File

Aliens

from

the

US

Virgin

Islands

Aliens

from

Guam

or

the

Commonwealth

of

the

Northern

Mariana

Islands

Amended

Returns

and

Claims

for

Refund

Other

Forms

You

May

Have

To

File

FinCEN

Form

Filing

requirements

Recipients

Shippers

or

mailers

Travelers

Penalties

More

information

Form

Penalties

Civil

Penalties

Filing

late

Fraud

Return

over

days

late

Exception

Paying

tax

late

Combined

penalties

Accuracyrelated

penalty

Negligence

or

disregard

Adequate

disclosure

Substantial

understatement

of

income

tax

Substantial

authority

Disclosure

statement

Transaction

lacking

economic

substance

Foreign

financial

asset

Reasonable

cause

Filing

erroneous

claim

for

refund

or

credit

Frivolous

tax

submission

Fraud

Failure

to

supply

taxpayer

identification

number

Criminal

Penalties

Paying

Tax

Through

Withholding

or

Estimated

Tax

Introduction

Topics

This

chapter

discusses

Useful

Items

You

may

want

to

see

Notification

of

Alien

Status

Withholding

From

Compensation

Withholding

on

Wages

New

withholding

tables

Students

and

business

apprentices

from

India

Household

employees

Agricultural

workers

Wages

Exempt

From

Withholding

Residents

of

Canada

or

Mexico

engaged

in

transportationrelated

employment

Residents

of

American

Samoa

and

Puerto

Rico

Residents

of

the

US

Virgin

Islands

Withholding

on

Pensions

Withholding

on

Tip

Income

Independent

Contractors

Central

withholding

agreements

CWA

Final

payment

exemption

Refund

of

Taxes

Withheld

in

Error

Multilevel

marketing

Refund

of

taxes

withheld

in

error

on

social

security

benefits

paid

to

resident

aliens

Withholding

From

Other

Income

Other

income

not

subject

to

withholding

of

or

lower

treaty

rate

Tax

Withheld

on

Partnership

Income

Withholding

on

Scholarships

and

Fellowship

Grants

Alternate

Withholding

Procedure

Nontaxable

grant

or

scholarship

Standard

deduction

Form

Income

Entitled

to

Tax

Treaty

Benefits

Employees

and

independent

contractors

Students

teachers

and

researchers

Special

events

and

promotions

Tax

Withheld

on

Real

Property

Sales

Withholding

certificates

Credit

for

tax

withheld

Social

Security

and

Medicare

Taxes

Additional

Medicare

Tax

Students

and

Exchange

Visitors

Nonresident

Alien

Students

Exchange

Visitors

Refund

of

Taxes

Withheld

in

Error

Agricultural

Workers

SelfEmployment

Tax

Reporting

selfemployment

tax

Additional

Medicare

Tax

Deduction

for

employerequivalent

portion

of

selfemployment

tax

More

information

International

Social

Security

Agreements

Employees

Selfemployed

individuals

Estimated

Tax

Form

NR

How

to

estimate

your

tax

for

When

to

pay

estimated

tax

Fiscal

year

Changes

in

income

deductions

or

exemptions

Amended

estimated

tax

Penalty

for

failure

to

pay

estimated

income

tax

Tax

Treaty

Benefits

Introduction

Tax

treaties

Topics

This

chapter

discusses

Useful

Items

You

may

want

to

see

Treaty

Income

Some

Typical

Tax

Treaty

Benefits

Personal

Services

Teachers

Professors

and

Researchers

Employees

of

Foreign

Governments

Students

Apprentices

and

Trainees

Capital

Gains

Resident

Aliens

US

Residency

Under

Tax

Treaty

TieBreaker

Rule

Special

Rule

for

Canadian

and

German

Social

Security

Benefits

Students

Apprentices

Trainees

Teachers

Professors

and

Researchers

Who

Became

Resident

Aliens

Saving

clause

Time

limit

for

claiming

treaty

exemptions

How

to

report

income

on

your

tax

return

Reporting

Treaty

Benefits

Claimed

Exceptions

Penalty

for

failure

to

provide

required

information

on

Form

Additional

information

Employees

of

Foreign

Governments

and

International

Organizations

Introduction

Employees

of

Foreign

Governments

Exemption

under

Vienna

Conventions

or

a

bilateral

consular

convention

Exemption

under

tax

treaty

Exemption

under

US

tax

law

Requirements

Certification

Employees

of

International

Organizations

Exemption

under

international

organization

agreement

Exemption

under

US

tax

law

Aliens

who

keep

immigrant

lawful

permanent

resident

status

Departing

Aliens

and

the

Sailing

or

Departure

Permit

Introduction

Topics

This

chapter

discusses

Useful

Items

You

may

want

to

see

Aliens

Not

Required

To

Obtain

Sailing

or

Departure

Permits

Category

Category

Category

Category

Category

Category

Aliens

Required

To

Obtain

Sailing

or

Departure

Permits

Getting

a

Sailing

or

Departure

Permit

Where

to

get

a

sailing

or

departure

permit

When

to

get

a

sailing

or

departure

permit

Papers

to

submit

Forms

To

File

Form

Form

Returning

to

the

United

States

Joint

return

on

Form

Paying

Taxes

and

Obtaining

Refunds

Bond

To

Ensure

Payment

Filing

Annual

US

Income

Tax

Returns

How

To

Get

Tax

Help

Taxpayer

Assistance

Inside

the

United

States

Preparing

and

filing

your

tax

return

Getting

tax

forms

and

publications

Access

your

online

account

Individual

taxpayers

only

Using

direct

deposit

Delayed

refund

for

returns

claiming

certain

credits

Getting

a

transcript

or

copy

of

a

return

Using

online

tools

to

help

prepare

your

return

Resolving

taxrelated

identity

theft

issues

Checking

on

the

status

of

your

refund

Making

a

tax

payment

What

if

I

cant

pay

now

Checking

the

status

of

an

amended

return

Understanding

an

IRS

notice

or

letter

Contacting

your

local

IRS

office

Watching

IRS

videos

Getting

tax

information

in

other

languages

The

Taxpayer

Advocate

Service

Is

Here

To

Help

You

What

is

the

Taxpayer

Advocate

Service

What

Can

the

Taxpayer

Advocate

Service

Do

For

You

How

Can

You

Reach

Us

How

Can

You

Learn

About

Your

Taxpayer

Rights

How

Else

Does

the

Taxpayer

Advocate

Service

Help

Taxpayers

Low

Income

Taxpayer

Clinics

Taxpayer

Assistance

Outside

the

United

States

Taxpayer

Advocate

Service

Publication

Additional

Material

Appendix

ATax

Treaty

Exemption

Procedure

for

Students

Belgium

Bulgaria

China

Peoples

Republic

of

Cyprus

Czech

Republic

Estonia

Latvia

Lithuania

and

Slovak

Republic

Egypt

France

Germany

Iceland

Indonesia

Israel

Philippines

and

Thailand

Korea

Norway

Poland

and

Romania

Morocco

Netherlands

Pakistan

Portugal

and

Spain

Slovenia

and

Venezuela

Trinidad

and

Tobago

Tunisia

Appendix

BTax

Treaty

Exemption

Procedure

for

Teachers

and

Researchers

Belgium

Bulgaria

China

Peoples

Republic

of

Commonwealth

of

Independent

States

Czech

Republic

and

Slovak

Republic

Egypt

Hungary

Korea

Philippines

Poland

and

Romania

France

Germany

Greece

India

Indonesia

Israel

Italy

Jamaica

Luxembourg

Netherlands

Norway

Pakistan

Portugal

Slovenia

and

Venezuela

Thailand

Trinidad

and

Tobago

United

Kingdom

Publication

US

Tax

Guide

for

Aliens

For

use

in

preparing

Returns

Publication

Introductory

Material

Future

Developments

For

the

latest

information

about

developments

related

to

Pub

such

as

legislation

enacted

after

it

was

published

go

to

Introduction

For

tax

purposes

an

alien

is

an

individual

who

is

not

a

US

citizen

Aliens

are

classified

as

nonresident

aliens

and

resident

aliens

This

publication

will

help

you

determine

your

status

and

give

you

information

you

will

need

to

file

your

US

tax

return

Resident

aliens

generally

are

taxed

on

their

worldwide

income

the

same

as

US

citizens

Nonresident

aliens

are

taxed

only

on

their

income

from

sources

within

the

United

States

and

on

certain

income

connected

with

the

conduct

of

a

trade

or

business

in

the

United

States

Table

A

Where

To

Find

What

You

Need

To

Know

About

US

Taxes

Commonly

Asked

Questions

Where

To

Find

The

Answer

Am

I

a

nonresident

alien

or

resident

alien

See

chapter

Can

I

be

a

nonresident

alien

and

a

resident

alien

in

the

same

year

See

DualStatus

Aliens

in

chapter

See

chapter

I

am

a

resident

alien

and

my

spouse

is

a

nonresident

alien

Are

there

special

rules

for

us

See

Nonresident

Spouse

Treated

as

a

Resident

in

chapter

See

Community

Income

in

chapter

Is

all

my

income

subject

to

US

tax

See

chapter

See

chapter

Is

my

scholarship

subject

to

US

tax

See

Scholarships

Grants

Prizes

and

Awards

in

chapter

See

Scholarships

and

Fellowship

Grants

in

chapter

See

chapter

What

is

the

tax

rate

on

my

income

subject

to

US

tax

See

chapter

I

moved

to

the

United

States

this

year

Can

I

deduct

my

moving

expenses

on

my

US

return

See

Deductions

in

chapter

Can

I

claim

exemptions

for

my

spouse

and

children

See

Exemptions

in

chapter

I

pay

income

taxes

to

my

home

country

Can

I

get

credit

for

these

taxes

on

my

US

tax

return

See

Tax

Credits

and

Payments

in

chapter

What

forms

must

I

file

and

when

and

where

do

I

file

them

See

chapter

How

should

I

pay

my

US

income

taxes

See

chapter

Am

I

eligible

for

any

benefits

under

a

tax

treaty

See

Income

Entitled

to

Tax

Treaty

Benefits

in

chapter

See

chapter

Are

employees

of

foreign

governments

and

international

organizations

exempt

from

US

tax

See

chapter

Is

there

anything

special

I

have

to

do

before

leaving

the

United

States

See

chapter

See

Expatriation

Tax

in

chapter

The

information

in

this

publication

is

not

as

comprehensive

for

resident

aliens

as

it

is

for

nonresident

aliens

Resident

aliens

are

generally

treated

the

same

as

US

citizens

and

can

find

more

information

in

other

IRS

publications

Table

A

Where

To

Find

What

You

Need

To

Know

About

US

Taxes

provides

a

list

of

questions

and

the

chapter

or

chapters

in

this

publication

where

you

will

find

the

related

discussion

Answers

to

frequently

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are

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in

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back

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Whats

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Disaster

tax

relief

Disaster

tax

relief

was

enacted

for

those

impacted

by

Hurricane

Harvey

Irma

or

Maria

and

residents

of

the

California

Wildfire

Disaster

Area

including

provisions

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you

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calculate

your

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and

theft

losses

differently

for

Also

certain

nonresident

aliens

may

be

allowed

to

calculate

their

standard

deduction

differently

for

or

elect

to

amend

their

original

tax

return

to

take

a

different

standard

deduction

amount

See

the

relevant

discussion

under

Itemized

Deductions

in

chapter

later

Additional

disaster

tax

relief

provisions

See

Pub

Disaster

Relief

for

information

about

other

disaster

tax

relief

provisions

that

are

not

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in

this

publication

Also

go

to

IRSgovDisasterTaxRelief

New

tax

rates

for

For

tax

years

beginning

after

December

and

before

January

the

maximum

tax

rate

for

individuals

has

decreased

from

to

Individual

taxpayer

identification

number

ITIN

renewal

You

may

need

to

renew

your

ITIN

For

more

information

see

Expired

ITIN

under

Identification

Number

in

chapter

Personal

exemption

For

tax

years

beginning

in

the

personal

exemption

amount

is

Beginning

in

and

continuing

through

you

can

not

take

a

deduction

for

a

personal

exemption

for

yourself

your

spouse

or

your

dependents

Reminders

Multilevel

marketing

Clarification

regarding

the

characterization

and

source

of

income

received

from

multilevel

marketing

companies

by

distributors

uppertier

distributors

that

are

based

on

the

sales

or

purchases

of

persons

whom

they

have

recruited

and

sponsored

lowertier

distributors

is

provided

See

Multilevel

marketing

under

Personal

Services

in

chapter

Additional

Medicare

Tax

You

may

be

required

to

pay

Additional

Medicare

Tax

Also

you

may

need

to

report

Additional

Medicare

Tax

withheld

by

your

employer

For

more

information

see

Additional

Medicare

Tax

under

Social

Security

and

Medicare

Taxes

and

SelfEmployment

Tax

in

chapter

For

more

information

on

Additional

Medicare

Tax

go

to

IRSgov

and

enter

Additional

Medicare

Tax

in

the

search

box

Premium

tax

credit

You

may

be

eligible

to

claim

the

premium

tax

credit

if

you

your

spouse

or

a

dependent

enrolled

in

health

insurance

through

the

Health

Insurance

Marketplace

See

Form

and

the

Instructions

for

Form

for

more

information

Advance

payments

of

the

premium

tax

credit

Advance

payments

of

the

premium

tax

credit

may

have

been

made

to

the

health

insurer

to

help

pay

for

the

insurance

coverage

of

you

your

spouse

or

your

dependent

If

advance

payments

of

the

premium

tax

credit

were

made

you

must

file

a

tax

return

and

Form

If

you

enrolled

someone

who

is

not

claimed

as

a

dependent

on

your

tax

return

or

for

more

information

see

the

Instructions

for

Form

Form

If

you

your

spouse

or

a

dependent

enrolled

in

health

insurance

through

the

Marketplace

you

should

have

received

a

Form

If

you

receive

a

Form

for

save

it

It

will

help

you

figure

your

premium

tax

credit

If

you

did

not

receive

a

Form

contact

the

Marketplace

Refunds

of

certain

withholding

tax

delayed

Refund

requests

for

tax

withheld

and

reported

on

Form

Form

or

Form

may

require

additional

time

for

processing

Allow

up

to

months

for

these

refunds

to

be

issued

Thirdparty

designee

You

can

check

the

Yes

box

in

the

ThirdParty

Designee

area

of

your

return

to

authorize

the

IRS

to

discuss

your

return

with

a

friend

family

member

or

any

other

person

you

choose

This

allows

the

IRS

to

call

the

person

you

identified

as

your

designee

to

answer

any

questions

that

may

arise

during

the

processing

of

your

return

It

also

allows

your

designee

to

perform

certain

actions

such

as

asking

the

IRS

for

copies

of

notices

or

transcripts

related

to

your

return

Also

the

authorization

can

be

revoked

See

your

income

tax

return

instructions

for

details

Change

of

address

If

you

change

your

mailing

address

be

sure

to

notify

the

IRS

using

Form

Child

tax

credit

CTC

Earned

income

credit

EIC

and

American

opportunity

tax

credit

AOTC

If

you

are

claiming

the

CTC

EIC

or

AOTC

on

your

return

and

you

had

a

paid

preparer

Form

must

be

attached

to

the

return

Your

preparer

must

complete

the

columns

corresponding

to

the

CTC

and

EIC

Refunds

for

returns

that

claim

the

additional

child

tax

credit

ACTC

or

earned

income

tax

credit

EITC

If

you

are

claiming

the

ACTC

or

EITC

on

your

return

and

you

expect

a

refund

it

will

not

be

issued

before

February

For

more

information

go

to

US

real

property

interest

The

Protecting

Americans

from

Tax

Hikes

Act

PL

made

substantial

changes

to

the

treatment

of

dispositions

and

distributions

of

US

real

property

interests

See

Tax

Withheld

on

Real

Property

Sales

later

Photographs

of

missing

children

The

IRS

is

a

proud

partner

with

the

National

Center

for

Missing

Exploited

Children

NCMEC

Photographs

of

missing

children

selected

by

the

Center

may

appear

in

this

publication

on

pages

that

would

otherwise

be

blank

You

can

help

bring

these

children

home

by

looking

at

the

photographs

and

calling

if

you

recognize

a

child

Nonresident

Alien

or

Resident

Alien

Introduction

You

should

first

determine

whether

for

income

tax

purposes

you

are

a

nonresident

alien

or

a

resident

alien

If

you

are

both

a

nonresident

and

resident

in

the

same

year

you

have

a

dual

status

Dual

status

is

explained

later

Also

explained

later

are

a

choice

to

treat

your

nonresident

spouse

as

a

resident

and

some

other

special

situations

Topics

This

chapter

discusses

How

to

determine

if

you

are

a

nonresident

resident

or

dualstatus

alien

and

How

to

treat

a

nonresident

spouse

as

a

resident

alien

Useful

Items

You

may

want

to

see

Form

and

Instructions

US

Individual

Income

Tax

Return

US

Individual

Income

Tax

Return

US

Nonresident

Alien

Income

Tax

Return

TreatyBased

Return

Position

Disclosure

Under

Section

or

Closer

Connection

Exception

Statement

for

Aliens

Statement

for

Exempt

Individuals

and

Individuals

With

a

Medical

Condition

See

chapter

for

information

about

getting

these

forms

Nonresident

Aliens

If

you

are

an

alien

not

a

US

citizen

you

are

considered

a

nonresident

alien

unless

you

meet

one

of

the

two

tests

described

next

under

Resident

Aliens

Resident

Aliens

You

are

a

resident

alien

of

the

United

States

for

tax

purposes

if

you

meet

either

the

green

card

test

or

the

substantial

presence

test

for

calendar

year

January

Even

if

you

do

not

meet

either

of

these

tests

you

may

be

able

to

choose

to

be

treated

as

a

US

resident

for

part

of

the

year

See

FirstYear

Choice

under

DualStatus

Aliens

later

Green

Card

Test

You

are

a

resident

for

tax

purposes

if

you

are

a

lawful

permanent

resident

of

the

United

States

at

any

time

during

calendar

year

However

see

DualStatus

Aliens

later

This

is

known

as

the

green

card

test

You

are

a

lawful

permanent

resident

of

the

United

States

at

any

time

if

you

have

been

given

the

privilege

according

to

the

immigration

laws

of

residing

permanently

in

the

United

States

as

an

immigrant

You

generally

have

this

status

if

the

US

Citizenship

and

Immigration

Services

USCIS

or

its

predecessor

organization

has

issued

you

an

alien

registration

card

also

known

as

a

green

card

You

continue

to

have

resident

status

under

this

test

unless

the

status

is

taken

away

from

you

or

is

administratively

or

judicially

determined

to

have

been

Resident

status

taken

away

Resident

status

is

considered

to

have

been

taken

away

from

you

if

the

US

government

issues

you

a

final

administrative

or

judicial

order

of

exclusion

or

deportation

A

final

judicial

order

is

an

order

that

you

may

no

longer

appeal

to

a

higher

court

of

competent

jurisdiction

Resident

status

abandoned

An

administrative

or

judicial

determination

of

abandonment

of

resident

status

may

be

initiated

by

you

the

USCIS

or

a

US

consular

officer

If

you

initiate

the

determination

your

resident

status

is

considered

to

be

abandoned

when

you

file

either

of

the

following

documents

with

your

USCIS

Alien

Registration

Receipt

Card

green

card

attached

with

the

USCIS

or

a

US

consular

officer

USCIS

Form

Record

of

Abandonment

of

Lawful

Permanent

Resident

Status

or

A

letter

stating

your

intent

to

abandon

your

resident

status

When

filing

by

mail

you

must

send

by

certified

mail

return

receipt

requested

or

the

foreign

equivalent

and

keep

a

copy

and

proof

that

it

was

mailed

and

received

Until

you

have

proof

your

letter

was

received

you

remain

a

resident

alien

for

tax

purposes

even

if

the

USCIS

would

not

recognize

the

validity

of

your

green

card

because

it

is

more

than

ten

years

old

or

because

you

have

been

absent

from

the

United

States

for

a

period

of

time

If

the

USCIS

or

US

consular

officer

initiates

this

determination

your

resident

status

will

be

considered

to

be

abandoned

when

the

final

administrative

order

of

abandonment

is

issued

If

you

are

granted

an

appeal

to

a

federal

court

of

competent

jurisdiction

a

final

judicial

order

is

required

Under

US

immigration

law

a

lawful

permanent

resident

who

is

required

to

file

a

tax

return

as

a

resident

and

fails

to

do

so

may

be

regarded

as

having

abandoned

status

and

may

lose

permanent

resident

status

A

longterm

resident

LTR

who

ceases

to

be

a

lawful

permanent

resident

may

be

subject

to

special

reporting

requirements

and

tax

provisions

See

Expatriation

Tax

in

chapter

Termination

of

residency

after

June

and

before

June

If

you

terminated

your

residency

after

June

and

before

June

you

will

still

be

considered

a

US

resident

for

tax

purposes

until

you

notify

the

Secretary

of

Homeland

Security

and

file

Form

Termination

of

residency

after

June

For

information

on

your

residency

termination

date

see

Former

LTR

under

Expatriation

After

June

in

chapter

Substantial

Presence

Test

You

will

be

considered

a

US

resident

for

tax

purposes

if

you

meet

the

substantial

presence

test

for

calendar

year

To

meet

this

test

you

must

be

physically

present

in

the

United

States

on

at

least

days

during

and

days

during

the

period

that

includes

and

counting

All

the

days

you

were

present

in

and

of

the

days

you

were

present

in

and

of

the

days

you

were

present

in

Example

You

were

physically

present

in

the

United

States

on

days

in

each

of

the

years

and

To

determine

if

you

meet

the

substantial

presence

test

for

count

the

full

days

of

presence

in

days

in

of

and

days

in

of

Because

the

total

for

the

period

is

days

you

are

not

considered

a

resident

under

the

substantial

presence

test

for

The

term

United

States

includes

the

following

areas

All

states

and

the

District

of

Columbia

The

territorial

waters

of

the

United

States

The

seabed

and

subsoil

of

those

submarine

areas

that

are

adjacent

to

US

territorial

waters

and

over

which

the

United

States

has

exclusive

rights

under

international

law

to

explore

and

exploit

natural

resources

The

term

does

not

include

US

possessions

and

territories

or

US

airspace

Days

of

Presence

in

the

United

States

You

are

treated

as

present

in

the

United

States

on

any

day

you

are

physically

present

in

the

country

at

any

time

during

the

day

However

there

are

exceptions

to

this

rule

Do

not

count

the

following

as

days

of

presence

in

the

United

States

for

the

substantial

presence

test

Days

you

commute

to

work

in

the

United

States

from

a

residence

in

Canada

or

Mexico

if

you

regularly

commute

from

Canada

or

Mexico

Days

you

are

in

the

United

States

for

less

than

hours

when

you

are

in

transit

between

two

places

outside

the

United

States

Days

you

are

in

the

United

States

as

a

crew

member

of

a

foreign

vessel

Days

you

are

unable

to

leave

the

United

States

because

of

a

medical

condition

that

arose

while

you

are

in

the

United

States

Days

you

are

in

the

United

States

under

a

NATO

visa

as

a

member

of

a

force

or

civilian

component

to

NATO

However

this

exception

does

not

apply

to

an

immediate

family

member

who

is

present

in

the

United

States

under

a

NATO

visa

A

dependent

family

member

must

count

every

day

of

presence

for

purposes

of

the

substantial

presence

test

Days

you

are

an

exempt

individual

The

specific

rules

that

apply

to

each

of

these

categories

are

discussed

next

Regular

commuters

from

Canada

or

Mexico

Do

not

count

the

days

on

which

you

commute

to

work

in

the

United

States

from

your

residence

in

Canada

or

Mexico

if

you

regularly

commute

from

Canada

or

Mexico

You

are

considered

to

commute

regularly

if

you

commute

to

work

in

the

United

States

on

more

than

of

the

workdays

during

your

working

period

For

this

purpose

commute

means

to

travel

to

work

and

return

to

your

residence

within

a

period

Workdays

are

the

days

on

which

you

work

in

the

United

States

or

Canada

or

Mexico

Working

period

means

the

period

beginning

with

the

first

day

in

the

current

year

on

which

you

are

physically

present

in

the

United

States

to

work

and

ending

on

the

last

day

in

the

current

year

on

which

you

are

physically

present

in

the

United

States

to

work

If

your

work

requires

you

to

be

present

in

the

United

States

only

on

a

seasonal

or

cyclical

Example

Maria

Perez

lives

in

Mexico

and

works

for

Compañía

ABC

in

its

office

in

Mexico

She

was

assigned

to

her

firms

office

in

the

United

States

from

February

through

June

On

June

she

resumed

her

employment

in

Mexico

On

days

Maria

commuted

each

morning

from

her

home

in

Mexico

to

work

in

Compañía

ABCs

US

office

She

returned

to

her

home

in

Mexico

on

each

of

those

evenings

On

days

she

worked

in

her

firms

Mexico

office

For

purposes

of

the

substantial

presence

test

Maria

does

not

count

the

days

she

commuted

to

work

in

Days

in

transit

Do

not

count

the

days

you

are

in

the

United

States

for

less

than

hours

and

you

are

in

transit

between

two

places

outside

the

United

States

You

are

considered

to

be

in

transit

if

you

engage

in

activities

that

are

substantially

related

to

completing

travel

to

your

foreign

destination

For

example

if

you

travel

between

airports

in

the

United

States

to

change

planes

en

route

to

your

foreign

destination

you

are

considered

to

be

in

transit

However

you

are

not

considered

to

be

in

transit

if

you

attend

a

business

meeting

while

in

the

United

States

This

is

Crew

members

Do

not

count

the

days

you

are

temporarily

present

in

the

United

States

as

a

regular

crew

member

of

a

foreign

vessel

boat

or

ship

engaged

in

transportation

between

the

United

States

and

a

foreign

country

or

a

US

possession

However

this

exception

does

not

apply

if

you

otherwise

engage

in

any

trade

or

business

in

the

United

States

on

those

days

Medical

condition

Do

not

count

the

days

you

intended

to

leave

but

could

not

leave

the

United

States

because

of

a

medical

condition

or

problem

that

arose

while

you

were

in

the

United

States

Whether

you

intended

to

leave

the

United

States

on

a

particular

day

is

determined

based

on

all

the

facts

and

circumstances

For

example

you

may

be

able

to

establish

that

you

intended

to

leave

if

your

purpose

for

visiting

the

United

States

could

be

accomplished

during

a

period

that

is

not

long

enough

to

qualify

you

for

the

substantial

presence

test

However

if

you

need

an

extended

period

In

the

case

of

an

individual

who

is

judged

mentally

incompetent

proof

of

intent

to

leave

the

United

States

can

be

determined

by

analyzing

the

individuals

pattern

of

behavior

before

he

or

she

was

judged

mentally

incompetent

If

you

qualify

to

exclude

days

of

presence

because

of

a

medical

condition

you

must

file

a

fully

completed

Form

with

the

IRS

See

Form

later

You

can

not

exclude

any

days

of

presence

in

the

United

States

under

the

following

circumstances

You

were

initially

prevented

from

leaving

were

then

able

to

leave

but

remained

in

the

United

States

beyond

a

reasonable

period

for

making

arrangements

to

leave

You

returned

to

the

United

States

for

treatment

of

a

medical

condition

that

arose

during

a

prior

stay

The

condition

existed

before

your

arrival

in

the

United

States

and

you

were

aware

of

the

condition

It

does

not

matter

whether

you

needed

treatment

for

the

condition

when

you

entered

the

United

States

Exempt

individual

Do

not

count

days

for

which

you

are

an

exempt

individual

The

term

exempt

individual

does

not

refer

to

someone

exempt

from

US

tax

but

to

anyone

in

the

following

categories

An

individual

temporarily

present

in

the

United

States

as

a

foreign

governmentrelated

individual

under

an

A

or

G

visa

other

than

individuals

holding

or

class

visas

A

teacher

or

trainee

temporarily

present

in

the

United

States

under

a

J

or

Q

visa

who

substantially

complies

with

the

requirements

of

the

visa

A

student

temporarily

present

in

the

United

States

under

an

F

J

M

or

Q

visa

who

substantially

complies

with

the

requirements

of

the

visa

A

professional

athlete

temporarily

in

the

United

States

to

compete

in

a

charitable

sports

event

The

specific

rules

for

each

of

these

four

categories

including

any

rules

on

the

length

of

time

you

will

be

an

exempt

individual

are

discussed

next

Foreign

governmentrelated

individuals

A

foreign

governmentrelated

individual

is

an

individual

or

a

member

of

the

individuals

immediate

family

who

is

temporarily

present

in

the

United

States

As

a

fulltime

employee

of

an

international

organization

By

reason

of

diplomatic

status

or

By

reason

of

a

visa

other

than

a

visa

that

grants

lawful

permanent

residence

that

the

Secretary

of

the

Treasury

determines

represents

fulltime

diplomatic

or

consular

status

Note

You

are

considered

temporarily

present

in

the

United

States

regardless

of

the

actual

amount

of

time

you

are

present

in

the

United

States

An

international

organization

is

any

public

international

organization

that

the

President

of

the

United

States

has

designated

by

Executive

Order

as

being

entitled

to

the

privileges

exemptions

and

immunities

provided

for

in

the

International

Organizations

Act

An

individual

is

a

fulltime

employee

if

his

or

her

work

schedule

meets

the

organizations

standard

fulltime

work

schedule

An

individual

is

considered

to

have

fulltime

diplomatic

or

consular

status

if

he

or

she

Has

been

accredited

by

a

foreign

government

that

is

recognized

by

the

United

States

Intends

to

engage

primarily

in

official

activities

for

that

foreign

government

while

in

the

United

States

and

Has

been

recognized

by

the

President

Secretary

of

State

or

a

consular

officer

as

being

entitled

to

that

status

Members

of

the

immediate

family

include

the

individuals

spouse

and

unmarried

children

whether

by

blood

or

adoption

but

only

if

the

spouses

or

unmarried

childrens

visa

statuses

are

derived

from

and

dependent

on

the

exempt

individuals

visa

classification

Unmarried

children

are

included

only

if

they

Are

under

years

of

age

Reside

regularly

in

the

exempt

individuals

household

and

Are

not

members

of

another

household

Note

Generally

if

you

are

present

in

the

United

States

under

an

A

or

G

class

visa

you

are

considered

a

foreign

governmentrelated

individual

with

fulltime

diplomatic

or

consular

status

of

your

days

count

for

purposes

of

the

substantial

presence

test

Household

staff

exception

If

you

are

present

in

the

United

States

under

an

or

visa

as

a

personal

employee

attendant

or

domestic

worker

for

either

a

foreign

government

or

international

organization

official

you

are

not

considered

a

foreign

governmentrelated

individual

and

must

count

all

your

days

of

presence

in

the

United

States

for

purposes

of

the

substantial

presence

test

Teachers

and

trainees

A

teacher

or

trainee

is

an

individual

other

than

a

student

who

is

temporarily

in

the

United

States

under

a

J

or

Q

visa

and

substantially

complies

with

the

requirements

of

that

visa

You

are

considered

to

have

substantially

complied

with

the

visa

requirements

if

you

have

not

engaged

in

activities

that

are

prohibited

by

US

immigration

laws

and

could

result

in

the

loss

of

your

visa

status

Also

included

are

immediate

family

members

of

exempt

teachers

and

trainees

See

the

definition

of

immediate

family

earlier

under

Foreign

governmentrelated

individuals

You

will

not

be

an

exempt

individual

as

a

teacher

or

trainee

in

if

you

were

exempt

as

a

teacher

trainee

or

student

for

any

part

of

of

the

preceding

calendar

years

However

you

will

be

an

exempt

individual

if

all

of

the

following

conditions

are

met

You

were

exempt

as

a

teacher

trainee

or

student

for

any

part

of

or

fewer

of

the

preceding

calendar

years

A

foreign

employer

paid

all

of

your

compensation

during

You

were

present

in

the

United

States

as

a

teacher

or

trainee

in

any

of

the

prior

years

and

A

foreign

employer

paid

all

of

your

compensation

during

each

of

the

preceding

years

you

were

present

in

the

United

States

as

a

teacher

or

trainee

A

foreign

employer

includes

an

office

or

place

of

business

of

an

American

entity

in

a

foreign

country

or

a

US

possession

If

you

qualify

to

exclude

days

of

presence

as

a

teacher

or

trainee

you

must

file

a

fully

completed

Form

with

the

IRS

See

Form

later

Example

Carla

was

temporarily

in

the

United

States

during

the

year

as

a

teacher

on

a

J

visa

Her

compensation

for

the

year

was

paid

by

a

foreign

employer

Carla

was

treated

as

an

exempt

teacher

for

the

previous

years

but

her

compensation

was

not

paid

by

a

foreign

employer

She

will

not

be

considered

an

exempt

individual

for

the

current

year

because

she

was

exempt

as

a

teacher

for

at

least

of

the

past

years

If

her

compensation

for

the

past

years

had

been

paid

by

a

foreign

employer

she

would

be

an

exempt

individual

for

the

current

year

Students

A

student

is

any

individual

who

is

temporarily

in

the

United

States

on

an

F

J

M

or

Q

visa

and

who

substantially

complies

with

the

requirements

of

that

visa

You

are

considered

to

have

substantially

complied

with

the

visa

requirements

if

you

have

not

engaged

in

activities

that

are

prohibited

by

US

immigration

laws

and

could

result

in

the

loss

of

your

visa

status

Also

included

are

immediate

family

members

of

exempt

students

See

the

definition

of

immediate

family

earlier

under

Foreign

governmentrelated

individuals

You

will

not

be

an

exempt

individual

as

a

student

in

if

you

have

been

exempt

as

a

teacher

trainee

or

student

for

any

part

of

more

than

calendar

years

unless

you

meet

both

of

the

following

requirements

You

establish

that

you

do

not

intend

to

reside

permanently

in

the

United

States

You

have

substantially

complied

with

the

requirements

of

your

visa

The

facts

and

circumstances

to

be

considered

in

determining

if

you

have

demonstrated

an

intent

to

reside

permanently

in

the

United

States

include

but

are

not

limited

to

the

following

Whether

you

have

maintained

a

closer

connection

to

a

foreign

country

discussed

later

Whether

you

have

taken

affirmative

steps

to

change

your

status

from

nonimmigrant

to

lawful

permanent

resident

as

discussed

later

under

Closer

Connection

to

a

Foreign

Country

If

you

qualify

to

exclude

days

of

presence

as

a

student

you

must

file

a

fully

completed

Form

with

the

IRS

See

Form

later

Professional

athletes

A

professional

athlete

who

is

temporarily

in

the

United

States

to

compete

in

a

charitable

sports

event

is

an

exempt

individual

A

charitable

sports

event

is

one

that

meets

the

following

conditions

The

main

purpose

is

to

benefit

a

qualified

charitable

organization

The

entire

net

proceeds

go

to

charity

Volunteers

perform

substantially

all

the

work

In

figuring

the

days

of

presence

in

the

United

States

you

can

exclude

only

the

days

on

which

you

actually

competed

in

a

sports

event

You

can

not

exclude

the

days

on

which

you

were

in

the

United

States

to

practice

for

the

event

to

perform

promotional

or

other

activities

related

to

the

event

or

to

travel

between

events

If

you

qualify

to

exclude

days

of

presence

as

a

professional

athlete

you

must

file

a

fully

completed

Form

with

the

IRS

See

Form

next

Form

If

you

exclude

days

of

presence

in

the

United

States

because

you

fall

into

any

of

the

following

categories

you

must

file

a

fully

completed

Form

You

were

unable

to

leave

the

United

States

as

planned

because

of

a

medical

condition

or

problem

You

were

temporarily

in

the

United

States

as

a

teacher

or

trainee

on

a

J

or

Q

visa

You

were

temporarily

in

the

United

States

as

a

student

on

an

F

J

M

or

Q

visa

You

were

a

professional

athlete

competing

in

a

charitable

sports

event

Attach

Form

to

your

income

tax

return

If

you

do

not

have

to

file

a

return

send

Form

to

the

Department

of

the

Treasury

Internal

Revenue

Service

Center

Austin

TX

by

the

due

date

for

filing

Form

or

Form

The

due

date

for

filing

is

discussed

in

chapter

If

you

do

not

timely

file

Form

you

can

not

exclude

the

days

you

were

present

in

the

United

States

as

a

professional

athlete

or

because

of

a

medical

condition

that

arose

while

you

were

in

the

United

States

This

does

not

apply

if

you

can

show

by

clear

and

convincing

evidence

that

you

took

reasonable

actions

to

become

aware

of

the

filing

requirements

and

significant

steps

to

comply

with

those

requirements

Closer

Connection

to

a

Foreign

Country

Even

if

you

meet

the

substantial

presence

test

you

can

be

treated

as

a

nonresident

alien

if

you

Are

present

in

the

United

States

for

less

than

days

during

the

year

Maintain

a

tax

home

in

a

foreign

country

during

the

year

and

Have

a

closer

connection

during

the

year

to

one

foreign

country

in

which

you

have

a

tax

home

than

to

the

United

States

unless

you

have

a

closer

connection

to

two

foreign

countries

discussed

next

Closer

connection

to

two

foreign

countries

You

can

demonstrate

that

you

have

a

closer

connection

to

two

foreign

countries

but

not

more

than

two

if

you

meet

all

of

the

following

conditions

You

maintained

a

tax

home

beginning

on

the

first

day

of

the

year

in

one

foreign

country

You

changed

your

tax

home

during

the

year

to

a

second

foreign

country

You

continued

to

maintain

your

tax

home

in

the

second

foreign

country

for

the

rest

of

the

year

You

had

a

closer

connection

to

each

foreign

country

than

to

the

United

States

for

the

period

during

which

you

maintained

a

tax

home

in

that

foreign

country

You

are

subject

to

tax

as

a

resident

under

the

tax

laws

of

either

foreign

country

for

the

entire

year

or

subject

to

tax

as

a

resident

in

both

foreign

countries

for

the

period

during

which

you

maintained

a

tax

home

in

each

foreign

country

Tax

home

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

Your

tax

home

is

the

place

where

you

permanently

or

indefinitely

work

as

an

employee

or

a

selfemployed

individual

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

If

you

do

not

fit

either

of

these

categories

you

are

considered

an

itinerant

and

your

tax

home

is

wherever

you

work

For

determining

whether

you

have

a

closer

connection

to

a

foreign

country

your

tax

home

must

also

be

in

existence

for

the

entire

current

year

and

must

be

located

in

the

same

foreign

country

to

which

you

are

claiming

to

have

a

closer

connection

Foreign

country

In

determining

whether

you

have

a

closer

connection

to

a

foreign

country

the

term

foreign

country

means

Any

territory

under

the

sovereignty

of

the

United

Nations

or

a

government

other

than

that

of

the

United

States

The

territorial

waters

of

the

foreign

country

determined

under

US

law

The

seabed

and

subsoil

of

those

submarine

areas

which

are

adjacent

to

the

territorial

waters

of

the

foreign

country

and

over

which

the

foreign

country

has

exclusive

rights

under

international

law

to

explore

and

exploit

natural

resources

and

Possessions

and

territories

of

the

United

States

Establishing

a

closer

connection

You

will

be

considered

to

have

a

closer

connection

to

a

foreign

country

than

the

United

States

if

you

or

the

IRS

establishes

that

you

have

maintained

more

significant

contacts

with

the

foreign

country

than

with

the

United

States

In

determining

whether

you

have

maintained

more

significant

contacts

with

the

foreign

country

than

with

the

United

States

the

facts

and

circumstances

to

be

considered

include

but

are

not

limited

to

the

following

The

country

of

residence

you

designate

on

forms

and

documents

The

types

of

official

forms

and

documents

you

file

such

as

Form

Form

or

Form

The

location

of

Your

permanent

home

Your

family

Your

personal

belongings

such

as

cars

furniture

clothing

and

jewelry

Your

current

social

political

cultural

professional

or

religious

affiliations

Your

business

activities

other

than

those

that

constitute

your

tax

home

The

jurisdiction

in

which

you

hold

a

drivers

license

The

jurisdiction

in

which

you

vote

and

Charitable

organizations

to

which

you

contribute

It

does

not

matter

whether

your

permanent

home

is

a

house

an

apartment

or

a

furnished

room

It

also

does

not

matter

whether

you

rent

or

own

it

It

is

important

however

that

your

home

be

available

at

all

times

continuously

and

not

solely

for

short

stays

When

you

can

not

have

a

closer

connection

You

can

not

claim

you

have

a

closer

connection

to

a

foreign

country

if

either

of

the

following

applies

You

personally

applied

or

took

other

steps

during

the

year

to

change

your

status

to

that

of

a

permanent

resident

or

You

had

an

application

pending

for

adjustment

of

status

during

the

current

year

Steps

to

change

your

status

to

that

of

a

permanent

resident

include

but

are

not

limited

to

the

filing

of

the

following

forms

Form

Request

for

Waiver

of

Certain

Rights

Privileges

Exemptions

and

Immunities

Form

Application

to

Register

Permanent

Residence

or

Adjust

Status

Form

Petition

for

Alien

Relative

Form

Immigrant

Petition

for

Alien

Worker

Form

Application

for

Alien

Employment

Certification

Form

Application

for

Immigrant

Visa

and

Alien

Registration

Form

You

must

attach

a

fully

completed

Form

to

your

income

tax

return

to

claim

you

have

a

closer

connection

to

a

foreign

country

or

countries

If

you

do

not

have

to

file

a

return

send

the

form

to

the

Department

of

the

Treasury

Internal

Revenue

Service

Center

Austin

TX

by

the

due

date

for

filing

Form

or

Form

The

due

date

for

filing

is

discussed

later

in

chapter

If

you

do

not

timely

file

Form

you

can

not

claim

a

closer

connection

to

a

foreign

country

or

countries

This

does

not

apply

if

you

can

show

by

clear

and

convincing

evidence

that

you

took

reasonable

actions

to

become

aware

of

the

filing

requirements

and

significant

steps

to

comply

with

those

requirements

Effect

of

Tax

Treaties

The

rules

given

here

to

determine

if

you

are

a

US

resident

do

not

override

tax

treaty

definitions

of

residency

If

you

are

a

dualresident

taxpayer

you

can

still

claim

the

benefits

under

an

income

tax

treaty

A

dualresident

taxpayer

is

one

who

is

a

resident

of

both

the

United

States

and

another

country

under

each

countrys

tax

laws

The

income

tax

treaty

between

the

two

countries

must

contain

a

provision

that

provides

for

resolution

of

conflicting

claims

of

residence

tiebreaker

rule

If

you

are

treated

as

a

resident

of

a

foreign

country

under

a

tax

treaty

you

are

treated

DualStatus

Aliens

Information

to

be

reported

If

you

are

a

dualresident

taxpayer

and

you

claim

treaty

benefits

you

must

file

a

return

by

the

due

date

including

extensions

using

Form

or

Form

and

compute

your

tax

as

a

nonresident

alien

You

must

also

attach

a

fully

completed

Form

if

you

determine

your

residency

under

a

tax

treaty

and

receive

payments

or

income

items

totaling

more

than

You

may

also

have

to

attach

Form

discussed

in

chapter

See

Reporting

Treaty

Benefits

Claimed

in

chapter

for

more

information

on

reporting

treaty

benefits

DualStatus

Aliens

You

can

be

both

a

nonresident

alien

and

a

resident

alien

during

the

same

tax

year

This

usually

occurs

in

the

year

you

arrive

in

or

depart

from

the

United

States

Aliens

who

have

dual

status

should

see

chapter

for

information

on

filing

a

return

for

a

dualstatus

tax

year

First

Year

of

Residency

If

you

are

a

US

resident

for

the

calendar

year

but

you

were

not

a

US

resident

at

any

time

during

the

preceding

calendar

year

you

are

a

US

resident

only

for

the

part

of

the

calendar

year

that

begins

on

the

residency

starting

date

You

are

a

nonresident

alien

for

the

part

of

the

year

before

that

date

Residency

starting

date

under

substantial

presence

test

If

you

meet

the

substantial

presence

test

for

a

calendar

year

your

residency

starting

date

is

generally

the

first

day

you

are

present

in

the

United

States

during

that

calendar

year

However

you

do

not

have

to

count

up

to

days

of

actual

presence

in

the

United

States

if

on

those

days

you

establish

that

You

had

a

closer

connection

to

a

foreign

country

than

to

the

United

States

and

Your

tax

home

was

in

that

foreign

country

See

Closer

Connection

to

a

Foreign

Country

earlier

In

determining

whether

you

can

exclude

up

to

days

the

following

rules

apply

You

can

exclude

days

from

more

than

one

period

of

presence

as

long

as

the

total

days

in

all

periods

are

not

more

than

You

can

not

exclude

any

days

in

a

period

of

consecutive

days

of

presence

if

all

the

days

in

that

period

can

not

be

excluded

Although

you

can

exclude

up

to

days

of

presence

in

determining

your

residency

starting

date

you

must

include

those

days

when

determining

whether

you

meet

the

substantial

presence

test

Example

Ivan

Ivanovich

is

a

citizen

of

Russia

He

came

to

the

United

States

for

the

first

time

on

January

to

attend

a

business

meeting

and

returned

to

Russia

on

January

His

tax

home

remained

in

Russia

On

March

he

moved

to

the

United

States

and

resided

here

for

the

rest

of

the

year

Ivan

is

able

to

establish

a

closer

connection

to

Russia

for

the

period

January

Thus

his

residency

starting

date

is

March

Statement

required

to

exclude

up

to

days

of

presence

You

must

file

a

statement

with

the

IRS

if

you

are

excluding

up

to

days

of

presence

in

the

United

States

for

purposes

of

your

residency

starting

date

You

must

sign

and

date

this

statement

and

include

a

declaration

that

it

is

made

under

penalties

of

perjury

The

statement

must

contain

the

following

information

as

applicable

Your

name

address

US

taxpayer

identification

number

if

any

and

US

visa

number

if

any

Your

passport

number

and

the

name

of

the

country

that

issued

your

passport

The

tax

year

for

which

the

statement

applies

The

first

day

that

you

were

present

in

the

United

States

during

the

year

The

dates

of

the

days

you

are

excluding

in

figuring

your

first

day

of

residency

Sufficient

facts

to

establish

that

you

have

maintained

your

tax

home

in

and

a

closer

connection

to

a

foreign

country

during

the

period

you

are

excluding

Attach

the

required

statement

to

your

income

tax

return

If

you

are

not

required

to

file

a

return

send

the

statement

to

the

Department

of

the

Treasury

Internal

Revenue

Service

Center

Austin

TX

on

or

before

the

due

date

for

filing

Form

or

Form

The

due

date

for

filing

is

discussed

in

chapter

If

you

do

not

file

the

required

statement

as

explained

above

you

can

not

claim

that

you

have

a

closer

connection

to

a

foreign

country

or

countries

Therefore

your

first

day

of

residency

will

be

the

first

day

you

are

present

in

the

United

States

This

does

not

apply

if

you

can

show

by

clear

and

convincing

evidence

that

you

took

reasonable

actions

to

become

aware

of

the

requirements

for

filing

the

statement

and

significant

steps

to

comply

with

those

requirements

Residency

starting

date

under

green

card

test

If

you

meet

the

green

card

test

at

any

time

during

a

calendar

year

but

do

not

meet

the

substantial

presence

test

for

that

year

your

residency

starting

date

is

the

first

day

in

the

calendar

year

on

which

you

are

present

in

the

United

States

as

a

lawful

permanent

resident

If

you

meet

both

the

substantial

presence

test

and

the

green

card

test

your

residency

starting

date

is

the

earlier

of

the

first

day

during

the

year

you

are

present

in

the

United

States

under

the

substantial

presence

test

or

as

a

lawful

permanent

resident

Residency

during

the

preceding

year

If

you

were

a

US

resident

during

any

part

of

the

preceding

calendar

year

and

you

are

a

US

resident

for

any

part

of

the

current

year

you

will

be

considered

a

US

resident

at

the

beginning

of

the

current

year

This

applies

whether

you

are

a

resident

under

the

substantial

presence

test

or

green

card

test

Example

Robert

Bach

is

a

citizen

of

Switzerland

He

came

to

the

United

States

as

a

US

resident

for

the

first

time

on

May

and

remained

until

November

when

he

returned

to

Switzerland

Robert

came

back

to

the

United

States

on

March

as

a

lawful

permanent

resident

and

still

resides

here

In

calendar

year

Roberts

US

residency

is

deemed

to

begin

on

January

because

he

qualified

as

a

resident

in

calendar

year

FirstYear

Choice

If

you

do

not

meet

either

the

green

card

test

or

the

substantial

presence

test

for

or

and

you

did

not

choose

to

be

treated

as

a

resident

for

part

of

but

you

meet

the

substantial

presence

test

for

you

can

choose

to

be

treated

as

a

US

resident

for

part

of

To

make

this

choice

you

must

Be

present

in

the

United

States

for

at

least

days

in

a

row

in

and

Be

present

in

the

United

States

for

at

least

of

the

number

of

days

beginning

with

the

first

day

of

the

period

and

ending

with

the

last

day

of

For

purposes

of

this

requirement

you

can

treat

up

to

days

of

absence

from

the

United

States

as

days

of

presence

in

the

United

States

When

counting

the

days

of

presence

in

and

above

do

not

count

the

days

you

were

in

the

United

States

under

any

of

the

exceptions

discussed

earlier

under

Days

of

Presence

in

the

United

States

If

you

make

the

firstyear

choice

your

residency

starting

date

for

is

the

first

day

of

the

earliest

period

described

in

above

that

you

use

to

qualify

for

the

choice

You

are

treated

as

a

US

resident

for

the

rest

of

the

year

If

you

are

present

for

more

than

one

period

and

you

satisfy

condition

above

for

each

of

those

periods

your

residency

starting

date

is

the

first

day

of

the

first

period

If

you

are

present

for

more

than

one

period

but

you

satisfy

condition

above

only

for

a

later

Note

You

do

not

have

to

be

married

to

make

this

choice

Example

Juan

DaSilva

is

a

citizen

of

the

Philippines

He

came

to

the

United

States

for

the

first

time

on

November

and

was

here

on

consecutive

days

from

November

through

December

Juan

returned

to

the

Philippines

on

December

and

came

back

to

the

United

States

on

December

He

stayed

in

the

United

States

for

the

rest

of

the

year

During

Juan

was

a

resident

of

the

United

States

under

the

substantial

presence

test

Juan

can

make

the

firstyear

choice

for

because

he

was

in

the

United

States

in

for

Example

The

facts

are

the

same

as

in

Example

except

that

Juan

was

also

absent

from

the

United

States

on

December

and

He

can

make

the

firstyear

choice

for

because

up

to

days

of

absence

are

considered

days

of

presence

for

purposes

of

the

requirement

Statement

required

to

make

the

firstyear

choice

for

You

must

attach

a

statement

to

Form

to

make

the

firstyear

choice

for

The

statement

must

contain

your

name

and

address

and

specify

the

following

That

you

are

making

the

firstyear

choice

for

That

you

were

not

a

resident

in

That

you

are

a

resident

under

the

substantial

presence

test

in

The

number

of

days

of

presence

in

the

United

States

during

The

date

or

dates

of

your

period

of

presence

and

the

period

of

continuous

presence

in

the

United

States

during

The

date

or

dates

of

absence

from

the

United

States

during

that

you

are

treating

as

days

of

presence

You

can

not

file

Form

or

the

statement

until

you

meet

the

substantial

presence

test

for

If

you

have

not

met

the

test

for

as

of

April

you

can

request

an

extension

of

time

for

filing

your

Form

until

a

reasonable

period

after

you

have

met

that

test

To

request

an

extension

to

file

until

October

use

Form

You

can

file

the

paper

form

or

use

one

of

the

electronic

filing

options

explained

in

the

Form

instructions

You

should

pay

with

this

extension

the

amount

of

tax

you

expect

Once

you

make

the

firstyear

choice

you

may

not

revoke

it

without

the

approval

of

the

IRS

If

you

do

not

follow

the

procedures

discussed

here

for

making

the

firstyear

choice

you

will

be

treated

as

a

nonresident

alien

for

all

of

However

this

does

not

apply

if

you

can

show

by

clear

and

convincing

evidence

that

you

took

reasonable

actions

to

become

aware

of

the

filing

procedures

and

significant

steps

to

comply

with

the

procedures

Choosing

Resident

Alien

Status

If

you

are

a

dualstatus

alien

you

can

choose

to

be

treated

as

a

US

resident

for

the

entire

year

if

all

of

the

following

apply

You

were

a

nonresident

alien

at

the

beginning

of

the

year

You

are

a

resident

alien

or

US

citizen

at

the

end

of

the

year

You

are

married

to

a

US

citizen

or

resident

alien

at

the

end

of

the

year

Your

spouse

joins

you

in

making

the

choice

This

includes

situations

in

which

both

you

and

your

spouse

were

nonresident

aliens

at

the

beginning

of

the

tax

year

and

both

of

you

are

resident

aliens

at

the

end

of

the

tax

year

Note

If

you

are

single

at

the

end

of

the

year

you

can

not

make

this

choice

If

you

make

this

choice

the

following

rules

apply

You

and

your

spouse

are

treated

as

US

residents

for

the

entire

year

for

income

tax

purposes

You

and

your

spouse

are

taxed

on

worldwide

income

You

and

your

spouse

must

file

a

joint

return

for

the

year

of

the

choice

Neither

you

nor

your

spouse

can

make

this

choice

for

any

later

tax

year

even

if

you

are

separated

divorced

or

remarried

The

special

instructions

and

restrictions

for

dualstatus

taxpayers

in

chapter

do

not

apply

to

you

Note

A

similar

choice

is

available

if

at

the

end

of

the

tax

year

one

spouse

is

a

nonresident

alien

and

the

other

spouse

is

a

US

citizen

or

resident

See

Nonresident

Spouse

Treated

as

a

Resident

later

If

you

previously

made

that

choice

and

it

is

still

in

effect

you

do

not

need

to

make

the

choice

explained

here

Making

the

choice

You

should

attach

a

statement

signed

by

both

spouses

to

your

joint

return

for

the

year

of

the

choice

The

statement

must

contain

the

following

information

A

declaration

that

you

both

qualify

to

make

the

choice

and

that

you

choose

to

be

treated

as

US

residents

for

the

entire

tax

year

The

name

address

and

taxpayer

identification

number

SSN

or

ITIN

of

each

spouse

If

one

spouse

died

include

the

name

and

address

of

the

person

who

makes

the

choice

for

the

deceased

spouse

You

generally

make

this

choice

when

you

file

your

joint

return

However

you

also

can

make

the

choice

by

filing

Form

Amended

US

Individual

Income

Tax

Return

Attach

Form

Form

or

Form

and

print

Amended

across

the

top

of

the

corrected

return

If

you

make

the

choice

with

an

amended

return

you

and

your

spouse

must

also

amend

any

returns

that

you

may

have

filed

after

the

year

for

which

you

made

the

choice

You

generally

must

file

the

amended

joint

return

within

years

from

the

date

you

filed

your

original

US

income

tax

return

or

years

from

the

date

you

paid

your

income

tax

for

that

year

whichever

is

later

Last

Year

of

Residency

If

you

were

a

US

resident

in

but

are

not

a

US

resident

during

any

part

of

you

cease

to

be

a

US

resident

on

your

residency

termination

date

Your

residency

termination

date

is

December

unless

you

qualify

for

an

earlier

date

as

discussed

next

Earlier

residency

termination

date

You

may

qualify

for

a

residency

termination

date

that

is

earlier

than

December

This

date

is

The

last

day

in

that

you

are

physically

present

in

the

United

States

if

you

met

the

substantial

presence

test

The

first

day

in

that

you

are

no

longer

a

lawful

permanent

resident

of

the

United

States

if

you

met

the

green

card

test

or

The

later

of

or

if

you

met

both

tests

You

can

use

this

date

only

if

for

the

remainder

of

your

tax

home

was

in

a

foreign

country

and

you

had

a

closer

connection

to

that

foreign

country

See

Closer

Connection

to

a

Foreign

Country

earlier

An

LTR

who

ceases

to

be

a

lawful

permanent

resident

may

be

subject

to

special

reporting

requirements

and

tax

provisions

See

Expatriation

Tax

in

chapter

Termination

of

residency

For

information

on

your

residency

termination

date

see

Former

LTR

under

Expatriation

After

June

in

chapter

De

minimis

presence

If

you

are

a

US

resident

because

of

the

substantial

presence

test

and

you

qualify

to

use

the

earlier

residency

termination

date

you

can

exclude

up

to

days

of

actual

presence

in

the

United

States

in

determining

your

residency

termination

date

In

determining

whether

you

can

exclude

up

to

days

the

following

rules

apply

You

can

exclude

days

from

more

than

one

period

of

presence

as

long

as

the

total

days

in

all

periods

are

not

more

than

You

can

not

exclude

any

days

in

a

period

of

consecutive

days

of

presence

if

all

the

days

in

that

period

can

not

be

excluded

Although

you

can

exclude

up

to

days

of

presence

in

determining

your

residency

termination

date

you

must

include

those

days

when

determining

whether

you

meet

the

substantial

presence

test

Example

Lola

Bovary

is

a

citizen

of

Malta

She

came

to

the

United

States

for

the

first

time

on

March

and

resided

here

until

August

On

December

Lola

came

to

the

United

States

for

vacation

and

stayed

here

until

December

when

she

returned

to

Malta

She

is

able

to

establish

a

closer

connection

to

Malta

for

the

period

December

Lola

is

not

a

US

resident

for

tax

purposes

during

and

can

establish

a

closer

connection

to

Malta

for

the

rest

of

calendar

year

Lola

is

a

US

resident

under

the

Residency

during

the

next

year

If

you

are

a

US

resident

during

any

part

of

and

you

are

a

resident

during

any

part

of

you

will

be

treated

as

a

resident

through

the

end

of

This

applies

whether

you

have

a

closer

connection

to

a

foreign

country

than

the

United

States

during

and

whether

you

are

a

resident

under

the

substantial

presence

test

or

green

card

test

Statement

required

to

establish

your

residency

termination

date

You

must

file

a

statement

with

the

IRS

to

establish

your

residency

termination

date

You

must

sign

and

date

this

statement

and

include

a

declaration

that

it

is

made

under

penalties

of

perjury

The

statement

must

contain

the

following

information

as

applicable

Your

name

address

US

taxpayer

identification

number

if

any

and

US

visa

number

if

any

Your

passport

number

and

the

name

of

the

country

that

issued

your

passport

The

tax

year

for

which

the

statement

applies

The

last

day

that

you

were

present

in

the

United

States

during

the

year

Sufficient

facts

to

establish

that

you

have

maintained

your

tax

home

in

and

that

you

have

a

closer

connection

to

a

foreign

country

following

your

last

day

of

presence

in

the

United

States

during

the

year

or

following

the

abandonment

or

rescission

of

your

status

as

a

lawful

permanent

resident

during

the

year

The

date

that

your

status

as

a

lawful

permanent

resident

was

abandoned

or

rescinded

Sufficient

facts

including

copies

of

relevant

documents

to

establish

that

your

status

as

a

lawful

permanent

resident

has

been

abandoned

or

rescinded

If

you

can

exclude

days

as

discussed

earlier

under

De

minimis

presence

include

the

dates

of

the

days

you

are

excluding

and

sufficient

facts

to

establish

that

you

have

maintained

your

tax

home

in

and

that

you

have

a

closer

connection

to

a

foreign

country

during

the

period

you

are

excluding

Attach

the

required

statement

to

your

income

tax

return

If

you

are

not

required

to

file

a

return

send

the

statement

to

the

Department

of

the

Treasury

Internal

Revenue

Service

Center

Austin

TX

on

or

before

the

due

date

for

filing

Form

or

Form

The

due

date

for

filing

is

discussed

in

chapter

If

you

do

not

file

the

required

statement

as

explained

above

you

can

not

claim

that

you

have

a

closer

connection

to

a

foreign

country

or

countries

This

does

not

apply

if

you

can

show

by

clear

and

convincing

evidence

that

you

took

reasonable

actions

to

become

aware

of

the

requirements

for

filing

the

statement

and

significant

steps

to

comply

with

those

requirements

Nonresident

Spouse

Treated

as

a

Resident

If

at

the

end

of

your

tax

year

you

are

married

and

one

spouse

is

a

US

citizen

or

a

resident

alien

and

the

other

spouse

is

a

nonresident

alien

you

can

choose

to

treat

the

nonresident

spouse

as

a

US

resident

This

includes

situations

in

which

one

spouse

is

a

nonresident

alien

at

the

beginning

of

the

tax

year

but

a

resident

alien

at

the

end

of

the

year

and

the

other

spouse

is

a

nonresident

alien

at

the

end

of

the

year

If

you

make

this

choice

you

and

your

spouse

are

treated

for

income

tax

purposes

as

residents

for

your

entire

tax

year

Neither

you

nor

your

spouse

can

claim

under

any

tax

treaty

not

to

be

a

US

resident

You

are

both

taxed

on

worldwide

income

You

must

file

a

joint

income

tax

return

for

the

year

you

make

the

choice

but

you

and

your

spouse

can

file

joint

or

separate

returns

in

later

years

If

you

file

a

joint

return

under

this

provision

the

special

instructions

and

restrictions

for

dualstatus

taxpayers

in

chapter

do

not

apply

to

you

Example

Bob

and

Sharon

Williams

are

married

and

both

are

nonresident

aliens

at

the

beginning

of

the

year

In

June

Bob

became

a

resident

alien

and

remained

a

resident

for

the

rest

of

the

year

Bob

and

Sharon

both

choose

to

be

treated

as

resident

aliens

by

attaching

a

statement

to

their

joint

return

Bob

and

Sharon

must

file

a

joint

return

for

the

year

they

make

the

choice

but

they

can

file

either

joint

or

separate

returns

for

later

years

How

To

Make

the

Choice

Attach

a

statement

signed

by

both

spouses

to

your

joint

return

for

the

first

tax

year

for

which

the

choice

applies

It

should

contain

the

following

information

A

declaration

that

one

spouse

was

a

nonresident

alien

and

the

other

spouse

a

US

citizen

or

resident

alien

on

the

last

day

of

your

tax

year

and

that

you

choose

to

be

treated

as

US

residents

for

the

entire

tax

year

The

name

address

and

identification

number

of

each

spouse

If

one

spouse

died

include

the

name

and

address

of

the

person

making

the

choice

for

the

deceased

spouse

Amended

return

You

generally

make

this

choice

when

you

file

your

joint

return

However

you

also

can

make

the

choice

by

filing

a

joint

amended

return

on

Form

Attach

Form

Form

or

Form

and

print

Amended

across

the

top

of

the

corrected

return

If

you

make

the

choice

with

an

amended

return

you

and

your

spouse

also

must

amend

any

returns

that

you

may

have

filed

after

the

year

for

which

you

made

the

choice

You

generally

must

file

the

amended

joint

return

within

years

from

the

date

you

filed

your

original

US

income

tax

return

or

years

from

the

date

you

paid

your

income

tax

for

that

year

whichever

is

later

Suspending

the

Choice

The

choice

to

be

treated

as

a

resident

alien

is

suspended

for

any

tax

year

after

the

tax

year

you

made

the

choice

if

neither

spouse

is

a

US

citizen

or

resident

alien

at

any

time

during

the

tax

year

This

means

each

spouse

must

file

a

separate

return

as

a

nonresident

alien

for

that

year

if

either

meets

the

filing

requirements

for

nonresident

aliens

discussed

in

chapter

Example

Dick

Brown

was

a

resident

alien

on

December

and

married

to

Judy

a

nonresident

alien

They

chose

to

treat

Judy

as

a

resident

alien

and

filed

joint

and

income

tax

returns

On

January

Dick

became

a

nonresident

alien

Judy

had

remained

a

nonresident

alien

throughout

the

period

Dick

and

Judy

could

have

filed

joint

or

separate

returns

for

because

Dick

was

a

resident

alien

for

part

of

that

year

However

because

neither

Dick

nor

Judy

is

a

resident

alien

at

any

time

during

their

choice

is

suspended

for

that

year

If

either

Ending

the

Choice

Once

made

the

choice

to

be

treated

as

a

resident

applies

to

all

later

years

unless

suspended

as

explained

earlier

under

Suspending

the

Choice

or

ended

in

one

of

the

following

ways

If

the

choice

is

ended

in

one

of

the

following

ways

neither

spouse

can

make

this

choice

in

any

later

tax

year

Revocation

Either

spouse

can

revoke

the

choice

for

any

tax

year

provided

he

or

she

makes

the

revocation

by

the

due

date

for

filing

the

tax

return

for

that

tax

year

The

spouse

who

revokes

the

choice

must

attach

a

signed

statement

declaring

that

the

choice

is

being

revoked

The

statement

must

include

the

name

address

and

identification

number

of

each

spouse

If

one

spouse

dies

include

the

name

and

address

of

the

person

who

is

revoking

the

choice

for

the

deceased

spouse

The

statement

also

must

include

a

list

of

any

states

foreign

countries

and

possessions

that

have

community

property

If

the

spouse

revoking

the

choice

must

file

a

return

attach

the

statement

to

the

return

for

the

first

year

the

revocation

applies

If

the

spouse

revoking

the

choice

does

not

have

to

file

a

return

but

does

file

a

return

for

example

to

obtain

a

refund

attach

the

statement

to

the

return

If

the

spouse

revoking

the

choice

does

not

have

to

file

a

return

and

does

not

file

a

claim

for

refund

send

the

statement

to

the

Internal

Revenue

Service

Center

where

you

filed

the

last

joint

return

Death

The

death

of

either

spouse

ends

the

choice

beginning

with

the

first

tax

year

following

the

year

the

spouse

died

However

if

the

surviving

spouse

is

a

US

citizen

or

resident

and

is

entitled

to

the

joint

tax

rates

as

a

surviving

spouse

the

choice

will

not

end

until

the

close

of

the

last

year

for

which

these

joint

rates

may

be

used

If

both

spouses

die

in

the

same

tax

year

the

choice

ends

on

the

first

day

after

the

close

of

the

tax

year

in

which

the

spouses

died

Legal

separation

A

legal

separation

under

a

decree

of

divorce

or

separate

maintenance

ends

the

choice

as

of

the

beginning

of

the

tax

year

in

which

the

legal

separation

occurs

Inadequate

records

The

IRS

can

end

the

choice

for

any

tax

year

that

either

spouse

has

failed

to

keep

adequate

books

records

and

other

information

necessary

to

determine

the

correct

income

tax

liability

or

to

provide

adequate

access

to

those

records

Aliens

From

American

Samoa

or

Puerto

Rico

If

you

are

a

nonresident

alien

in

the

United

States

and

a

bona

fide

resident

of

American

Samoa

or

Puerto

Rico

during

the

entire

tax

year

you

are

taxed

with

certain

exceptions

according

to

the

rules

for

resident

aliens

of

the

United

States

For

more

information

see

Bona

Fide

Residents

of

American

Samoa

or

Puerto

Rico

in

chapter

If

you

are

a

nonresident

alien

from

American

Samoa

or

Puerto

Rico

who

does

not

qualify

as

a

bona

fide

resident

of

American

Samoa

or

Puerto

Rico

for

the

entire

tax

year

you

are

taxed

as

a

nonresident

alien

Resident

aliens

who

formerly

were

bona

fide

residents

of

American

Samoa

or

Puerto

Rico

are

taxed

according

to

the

rules

for

resident

aliens

Source

of

Income

Introduction

After

you

have

determined

your

alien

status

you

must

determine

the

source

of

your

income

This

chapter

will

help

you

determine

the

source

of

different

types

of

income

you

may

receive

during

the

tax

year

This

chapter

also

discusses

special

rules

for

married

individuals

who

are

domiciled

in

a

country

with

community

property

laws

Topics

This

chapter

discusses

Income

source

rules

and

Community

income

Resident

Aliens

A

resident

aliens

income

is

generally

subject

to

tax

in

the

same

manner

as

a

US

citizen

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

US

tax

return

You

must

report

these

amounts

from

sources

within

and

outside

the

United

States

Nonresident

Aliens

A

nonresident

alien

usually

is

subject

to

US

income

tax

only

on

US

source

income

Under

limited

circumstances

certain

foreign

source

income

is

subject

to

US

tax

See

Foreign

Income

in

chapter

The

general

rules

for

determining

US

source

income

that

apply

to

most

nonresident

aliens

are

shown

in

Table

The

following

discussions

cover

the

general

rules

as

well

as

the

exceptions

to

these

rules

Not

all

items

of

US

source

income

are

taxable

See

chapter

Interest

Income

Generally

US

source

interest

income

includes

the

following

items

Interest

on

bonds

notes

or

other

interestbearing

obligations

of

US

residents

or

domestic

corporations

Interest

paid

by

a

domestic

or

foreign

partnership

or

foreign

corporation

engaged

in

a

US

trade

or

business

at

any

time

during

the

tax

year

Original

issue

discount

Interest

from

a

state

the

District

of

Columbia

or

the

US

government

The

place

or

manner

of

payment

is

immaterial

in

determining

the

source

of

the

income

A

substitute

interest

payment

made

to

the

transferor

of

a

security

in

a

securities

lending

transaction

or

a

salerepurchase

transaction

is

sourced

in

the

same

manner

as

the

interest

on

the

transferred

security

Exceptions

US

source

interest

income

does

not

include

the

following

items

Interest

paid

by

a

resident

alien

or

a

domestic

corporation

on

obligations

issued

before

August

if

for

the

period

ending

with

the

close

of

the

payers

tax

year

preceding

the

interest

payment

at

least

of

the

payers

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

US

possession

However

the

interest

will

be

considered

US

source

interest

income

if

either

of

the

following

apply

The

recipient

of

the

interest

is

related

to

the

resident

alien

or

domestic

corporation

See

section

for

the

definition

of

related

person

The

terms

of

the

obligation

are

significantly

modified

after

August

Any

extension

of

the

term

of

the

obligation

is

considered

a

significant

modification

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

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

Dividends

In

most

cases

dividend

income

received

from

domestic

corporations

is

US

source

income

Dividend

income

from

foreign

corporations

is

usually

foreign

source

income

Exceptions

to

both

of

these

rules

are

discussed

below

A

substitute

dividend

payment

made

to

the

transferor

of

a

security

in

a

securities

lending

transaction

or

a

salerepurchase

transaction

is

sourced

in

the

same

manner

as

a

distribution

on

the

transferred

security

Dividend

equivalent

payments

US

source

dividends

also

include

all

dividend

equivalent

payments

Currently

dividend

equivalent

payments

include

substitute

dividends

and

payments

made

pursuant

to

a

specified

notional

principal

contract

that

directly

or

indirectly

are

contingent

on

or

determined

by

reference

to

the

payment

of

a

dividend

from

US

sources

The

IRS

has

issued

final

and

temporary

regulations

that

affect

the

treatment

of

dividend

equivalent

payments

specified

notional

principal

contracts

and

other

equity

derivatives

These

regulations

generally

do

not

apply

to

transactions

entered

into

before

January

You

can

view

these

regulations

at

First

exception

Dividends

received

from

a

domestic

corporation

are

not

US

source

income

if

the

corporation

elects

to

take

the

American

Samoa

economic

development

credit

Second

exception

Part

of

the

dividends

received

from

a

foreign

corporation

is

US

source

income

if

or

more

of

its

total

gross

income

for

the

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

If

the

corporation

was

formed

less

than

years

before

the

declaration

use

its

total

gross

income

from

the

time

it

was

formed

Determine

the

part

that

is

US

source

income

by

multiplying

the

dividend

by

the

following

fraction

Foreign

corporations

gross

income

connected

with

a

US

trade

or

business

for

the

period

Foreign

corporations

gross

income

from

all

sources

for

that

period

Guarantee

of

Indebtedness

Amounts

received

directly

or

indirectly

for

the

provision

of

a

guarantee

of

indebtedness

issued

after

September

are

US

source

income

if

they

are

paid

by

A

noncorporate

resident

or

US

corporation

or

Any

foreign

person

if

the

amounts

are

effectively

connected

with

the

conduct

of

a

US

trade

or

business

For

more

information

see

Internal

Revenue

Code

section

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

The

only

exceptions

to

this

rule

are

discussed

in

Employees

of

foreign

persons

organizations

or

offices

and

under

Crew

members

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

Compensation

other

than

certain

fringe

benefits

is

sourced

on

a

time

basis

Certain

fringe

benefits

such

as

housing

and

education

are

sourced

on

a

geographical

basis

Or

you

may

be

permitted

to

use

an

alternative

basis

to

determine

the

source

of

compensation

See

Alternative

Basis

later

Multilevel

marketing

Certain

companies

sell

products

through

a

multilevel

marketing

arrangement

such

that

an

uppertier

distributor

who

has

sponsored

a

lowertier

distributor

is

entitled

to

a

payment

from

the

company

based

on

certain

activities

of

that

lowertier

distributor

Generally

depending

on

the

facts

payments

from

such

multilevel

marketing

companies

to

independent

non

employee

distributors

uppertier

distributors

that

are

based

on

the

sales

or

purchases

of

persons

whom

they

have

sponsored

lowertier

distributors

constitute

income

for

the

performance

of

personal

services

in

recruiting

training

and

supporting

the

lowertier

distributors

The

source

of

such

income

is

generally

based

on

where

the

services

of

the

Selfemployed

individuals

If

you

are

selfemployed

you

determine

the

source

of

compensation

for

labor

or

personal

services

from

selfemployment

on

the

basis

that

most

correctly

reflects

the

proper

source

of

that

income

under

the

facts

and

circumstances

of

your

particular

case

In

many

cases

the

facts

and

circumstances

will

call

for

an

apportionment

on

a

time

basis

as

explained

next

Time

Basis

Use

a

time

basis

to

figure

your

US

source

compensation

other

than

the

fringe

benefits

discussed

later

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

The

time

period

for

which

the

compensation

is

made

does

not

have

to

be

a

year

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

Example

Christina

Brooks

a

resident

of

the

Netherlands

worked

days

for

a

US

company

during

the

tax

year

She

received

in

compensation

of

it

was

for

fringe

benefits

Christina

performed

services

in

the

United

States

for

days

and

performed

services

in

the

Netherlands

for

days

Using

the

time

basis

for

determining

the

source

of

compensation

is

her

US

source

income

Example

Rob

Waters

a

resident

of

South

Africa

is

employed

by

a

corporation

His

annual

salary

is

of

it

is

for

fringe

benefits

During

the

first

quarter

of

the

year

he

worked

entirely

within

the

United

States

On

April

Rob

was

transferred

to

Singapore

for

the

remainder

of

the

year

Rob

is

able

to

establish

that

the

first

quarter

of

the

year

and

the

last

quarters

of

the

year

are

two

separate

distinct

and

continuous

periods

of

time

Accordingly

of

Robs

annual

salary

is

attributable

to

the

first

quarter

of

the

year

All

of

is

US

source

income

Multiyear

compensation

The

source

of

multiyear

compensation

is

generally

determined

on

a

time

basis

over

the

period

to

which

the

compensation

is

attributable

Multiyear

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

You

determine

the

period

to

which

the

compensation

is

attributable

based

on

the

facts

and

circumstances

of

your

case

For

example

an

amount

of

compensation

that

specifically

relates

to

a

period

of

time

that

includes

several

calendar

years

is

attributable

to

the

entire

multiyear

period

The

amount

of

compensation

treated

as

from

US

sources

is

figured

by

multiplying

the

total

multiyear

compensation

by

a

fraction

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

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

Geographical

Basis

Compensation

you

receive

as

an

employee

in

the

form

of

the

following

fringe

benefits

is

sourced

on

a

geographical

basis

Housing

Education

Local

transportation

Tax

reimbursement

Hazardous

or

hardship

duty

pay

as

defined

in

Regulations

section

Moving

expense

reimbursement

The

amount

of

fringe

benefits

must

be

reasonable

and

you

must

substantiate

them

by

adequate

records

or

by

sufficient

evidence

Principal

place

of

work

The

above

fringe

benefits

except

for

tax

reimbursement

and

hazardous

or

hardship

duty

pay

are

sourced

based

on

your

principal

place

of

work

Your

principal

place

of

work

is

usually

the

place

where

you

spend

most

of

your

working

time

This

could

be

your

office

plant

store

shop

or

other

location

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

If

you

have

more

than

one

job

at

any

time

your

main

job

location

depends

on

the

facts

in

each

case

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

Housing

The

source

of

a

housing

fringe

benefit

is

determined

based

on

the

location

of

your

principal

place

of

work

A

housing

fringe

benefit

includes

payments

to

you

or

on

your

behalf

and

your

familys

if

your

family

resides

with

you

only

for

the

following

Rent

Utilities

except

telephone

charges

Real

and

personal

property

insurance

Occupancy

taxes

not

deductible

under

section

or

Nonrefundable

fees

for

securing

a

leasehold

Rental

of

furniture

and

accessories

Household

repairs

Residential

parking

Fair

rental

value

of

housing

provided

in

kind

by

your

employer

A

housing

fringe

benefit

does

not

include

Deductible

interest

and

taxes

including

deductible

interest

and

taxes

of

a

tenantstockholder

in

a

cooperative

housing

corporation

The

cost

of

buying

property

including

principal

payments

on

a

mortgage

The

cost

of

domestic

labor

maids

gardeners

etc

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

Education

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

An

education

fringe

benefit

includes

payments

only

for

the

following

expenses

for

education

at

an

elementary

or

secondary

school

Tuition

fees

academic

tutoring

special

needs

services

for

a

special

needs

student

books

supplies

and

other

equipment

Room

and

board

and

uniforms

that

are

required

or

provided

by

the

school

in

connection

with

enrollment

or

attendance

Local

transportation

The

source

of

a

local

transportation

fringe

benefit

is

determined

based

on

the

location

of

your

principal

place

of

work

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

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

employerprovided

vehicle

used

predominantly

by

you

your

spouse

or

your

dependents

for

local

transportation

Actual

expenses

do

not

include

the

cost

including

interest

Tax

reimbursement

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

Moving

expense

reimbursement

The

source

of

a

moving

expense

reimbursement

is

generally

based

on

the

location

of

your

new

principal

place

of

work

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

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

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

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

Also

if

your

total

compensation

from

all

sources

is

or

more

check

Yes

to

both

questions

on

line

Your

name

and

social

security

number

written

across

the

top

of

the

statement

The

specific

compensation

income

or

the

specific

fringe

benefit

for

which

you

are

using

the

alternative

basis

For

each

item

in

the

alternative

basis

of

allocation

of

source

used

For

each

item

in

a

computation

showing

how

the

alternative

allocation

was

computed

A

comparison

of

the

dollar

amount

of

the

US

compensation

and

foreign

compensation

sourced

under

both

the

alternative

basis

and

the

time

or

geographical

basis

discussed

earlier

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

This

is

true

whether

the

vessel

or

aircraft

is

owned

hired

or

leased

The

term

vessel

or

aircraft

includes

any

container

used

in

connection

with

a

vessel

or

aircraft

All

income

from

transportation

that

begins

and

ends

in

the

United

States

is

treated

as

derived

from

sources

in

the

United

States

If

the

transportation

begins

or

ends

in

the

United

States

of

the

transportation

income

is

treated

as

derived

from

sources

in

the

United

States

For

transportation

income

from

personal

services

of

the

income

is

US

source

income

if

the

transportation

is

between

the

United

States

and

a

US

possession

For

nonresident

aliens

this

only

applies

to

income

derived

from

or

in

connection

with

an

aircraft

For

information

on

how

US

source

transportation

income

is

taxed

see

chapter

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

However

see

Activities

to

be

performed

outside

the

United

States

later

For

example

payments

for

research

or

study

in

the

United

States

made

by

the

United

States

a

noncorporate

US

resident

or

a

domestic

corporation

are

from

US

sources

Similar

payments

from

a

foreign

government

or

foreign

corporation

are

foreign

source

payments

even

though

the

funds

may

be

disbursed

through

a

US

agent

Payments

made

by

an

entity

designated

as

a

public

international

organization

under

the

International

Organizations

Immunities

Act

are

from

foreign

sources

Activities

to

be

performed

outside

the

United

States

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

US

source

income

These

rules

do

not

apply

to

amounts

paid

as

salary

or

other

compensation

for

services

See

Personal

Services

earlier

for

the

source

rules

that

apply

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

US

sources

That

part

is

the

amount

attributable

to

earnings

of

the

pension

plan

and

the

employer

contributions

made

for

services

performed

in

the

United

States

This

applies

whether

the

distribution

is

made

under

a

qualified

or

nonqualified

stock

bonus

pension

profitsharing

or

annuity

plan

whether

or

not

funded

If

you

performed

services

as

an

employee

of

the

United

States

you

may

receive

a

distribution

from

the

US

government

under

a

plan

such

as

the

Civil

Service

Retirement

System

that

is

treated

as

a

qualified

pension

plan

Your

US

source

income

is

the

otherwise

taxable

amount

of

the

distribution

that

is

attributable

to

your

total

US

government

basic

pay

other

than

taxexempt

pay

for

services

performed

outside

the

United

States

Rents

or

Royalties

Your

US

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

US

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

Real

Property

Real

property

is

land

and

buildings

and

generally

anything

built

on

growing

on

or

attached

to

land

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

Natural

resources

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

For

information

on

determining

that

part

see

section

of

the

regulations

Table

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

inventorypurchased

Where

sold

Sale

of

inventoryproduced

Allocation

Interest

Residence

of

payer

Dividends

Whether

a

US

or

foreign

corporation

Rents

Location

of

property

Royalties

Natural

resources

Location

of

property

Patents

copyrights

etc

Where

property

is

used

Sale

of

real

property

Location

of

property

Sale

of

personal

property

Sellers

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

For

more

information

see

section

of

the

regulations

Exceptions

include

a

Dividends

paid

by

a

US

corporation

are

foreign

source

if

the

corporation

elects

the

American

Samoa

economic

development

credit

b

Part

of

a

dividend

paid

by

a

foreign

corporation

is

US

source

if

at

least

of

the

corporations

gross

income

is

effectively

connected

with

a

US

trade

or

business

for

the

tax

years

before

the

year

in

which

the

dividends

are

declared

Personal

Property

Personal

property

is

property

such

as

machinery

equipment

or

furniture

that

is

not

real

property

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

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

Tax

home

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

Your

tax

home

is

the

place

where

you

permanently

or

indefinitely

work

as

an

employee

or

a

selfemployed

individual

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

If

you

do

not

fit

either

of

these

categories

you

are

considered

an

itinerant

and

your

tax

home

is

wherever

you

work

Inventory

property

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

Income

from

the

sale

of

inventory

that

you

purchased

is

sourced

where

the

property

is

sold

Generally

this

is

where

title

to

the

property

passes

to

the

buyer

For

example

income

from

the

sale

of

inventory

in

the

United

States

is

US

source

income

whether

you

purchased

it

in

the

United

States

or

in

a

foreign

country

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

For

information

on

making

this

allocation

see

section

of

the

regulations

These

rules

apply

even

if

your

tax

home

is

not

in

the

United

States

Depreciable

property

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

You

allocate

this

part

of

the

gain

to

sources

in

the

United

States

based

on

the

ratio

of

US

depreciation

adjustments

to

total

depreciation

adjustments

The

rest

of

this

part

of

the

gain

is

considered

to

be

from

sources

outside

the

United

States

For

this

purpose

US

depreciation

adjustments

are

the

depreciation

adjustments

to

the

basis

of

the

property

that

are

allowable

in

figuring

taxable

income

from

US

sources

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

US

depreciation

adjustments

But

there

are

some

exceptions

for

certain

transportation

communications

and

other

property

used

internationally

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

A

loss

is

sourced

in

the

same

way

as

the

depreciation

deductions

were

sourced

However

if

the

property

was

used

predominantly

in

the

United

States

the

entire

loss

reduces

US

source

income

The

basis

of

property

usually

means

the

cost

money

plus

the

fair

market

value

of

other

property

or

services

of

property

you

acquire

Depreciation

is

an

amount

deducted

to

recover

the

cost

or

other

basis

of

a

trade

or

business

asset

The

amount

you

can

deduct

depends

on

the

propertys

cost

when

you

began

using

the

property

how

long

it

will

take

to

recover

your

cost

and

which

depreciation

method

you

use

A

depreciation

deduction

is

any

deduction

for

depreciation

or

amortization

or

any

other

allowable

deduction

that

treats

a

capital

expenditure

as

a

deductible

expense

Intangible

property

Intangible

property

includes

patents

copyrights

secret

processes

or

formulas

goodwill

trademarks

trade

names

or

other

like

property

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

This

is

the

same

as

the

source

rule

for

gain

from

the

sale

of

depreciable

property

See

Depreciable

property

earlier

for

details

on

how

to

apply

this

rule

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

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

If

payments

for

goodwill

do

not

depend

on

its

productivity

use

or

disposition

their

source

is

the

country

in

which

the

goodwill

was

generated

Sales

through

offices

or

fixed

places

of

business

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

US

source

income

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

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

US

source

income

The

income

is

treated

as

US

source

income

if

an

income

tax

of

less

than

of

the

income

from

the

sale

is

paid

to

a

foreign

country

This

rule

also

applies

to

losses

if

the

foreign

country

would

have

imposed

an

income

tax

of

Community

Income

If

you

are

married

and

you

or

your

spouse

is

subject

to

the

community

property

laws

of

a

foreign

country

a

US

state

or

a

US

possession

you

generally

must

follow

those

laws

to

determine

the

income

of

yourself

and

your

spouse

for

US

tax

purposes

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

US

citizen

or

resident

and

you

do

not

both

choose

to

be

treated

as

US

residents

as

explained

in

chapter

In

these

cases

you

and

your

spouse

must

report

community

income

as

explained

later

Earned

income

Earned

income

of

a

spouse

other

than

trade

or

business

income

and

a

partners

distributive

share

of

partnership

income

is

treated

as

the

income

of

the

spouse

whose

services

produced

the

income

That

spouse

must

report

all

of

it

on

his

or

her

separate

return

Trade

or

business

income

Trade

or

business

income

other

than

a

partners

distributive

share

of

partnership

income

is

treated

as

the

income

of

the

spouse

carrying

on

the

trade

or

business

That

spouse

must

report

all

of

it

on

his

or

her

separate

return

Partnership

income

or

loss

A

partners

distributive

share

of

partnership

income

or

loss

is

treated

as

the

income

or

loss

of

the

partner

The

partner

must

report

all

of

it

on

his

or

her

separate

return

Separate

property

income

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

That

spouse

must

report

all

of

it

on

his

or

her

separate

return

Use

the

appropriate

community

property

law

to

determine

what

is

separate

property

Other

community

income

All

other

community

income

is

treated

as

provided

by

the

applicable

community

property

laws

Exclusions

From

Gross

Income

Introduction

Resident

and

nonresident

aliens

are

allowed

exclusions

from

gross

income

if

they

meet

certain

conditions

An

exclusion

from

gross

income

is

generally

income

you

receive

that

is

not

included

in

your

US

income

and

is

not

subject

to

US

tax

This

chapter

covers

some

of

the

more

common

exclusions

allowed

to

resident

and

nonresident

aliens

Topics

This

chapter

discusses

Nontaxable

interest

Nontaxable

dividends

Certain

compensation

paid

by

a

foreign

employer

Gain

from

sale

of

home

and

Scholarships

and

fellowship

grants

Useful

Items

You

may

want

to

see

Publication

Tax

Guide

for

US

Citizens

and

Resident

Aliens

Abroad

Selling

Your

Home

See

chapter

for

information

about

getting

these

publications

Resident

Aliens

Resident

aliens

may

be

able

to

exclude

the

following

items

from

their

gross

income

Foreign

Earned

Income

and

Housing

Amount

If

you

are

physically

present

in

a

foreign

country

or

countries

for

at

least

full

days

during

any

period

of

consecutive

months

you

may

qualify

for

the

foreign

earned

income

exclusion

The

exclusion

is

in

In

addition

you

may

be

able

to

exclude

or

deduct

certain

foreign

housing

amounts

You

may

also

qualify

if

you

are

a

bona

fide

resident

of

a

foreign

country

and

you

are

a

citizen

or

national

of

a

country

with

which

the

United

States

has

an

income

tax

treaty

For

more

information

see

Pub

Foreign

country

A

foreign

country

is

any

territory

under

the

sovereignty

of

a

government

other

than

that

of

the

United

States

The

term

foreign

country

includes

the

countrys

territorial

waters

and

airspace

but

not

international

waters

and

the

airspace

above

them

It

also

includes

the

seabed

and

subsoil

of

those

submarine

areas

adjacent

to

the

countrys

territorial

waters

over

which

it

has

exclusive

rights

under

international

law

to

explore

and

exploit

the

natural

resources

The

term

foreign

country

does

not

include

US

possessions

or

territories

It

does

not

include

the

Antarctic

region

Nonresident

Aliens

Nonresident

aliens

can

exclude

the

following

items

from

their

gross

income

Interest

Income

Interest

income

that

is

not

connected

with

a

US

trade

or

business

is

excluded

from

income

if

it

is

from

Deposits

including

certificates

of

deposit

with

persons

in

the

banking

business

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

and

Amounts

held

by

an

insurance

company

under

an

agreement

to

pay

interest

on

them

State

and

local

government

obligations

Interest

on

obligations

of

a

state

or

political

subdivision

the

District

of

Columbia

or

a

US

possession

generally

is

not

included

in

income

However

interest

on

certain

private

activity

bonds

arbitrage

bonds

and

certain

bonds

not

in

registered

form

is

included

in

income

Portfolio

interest

Interest

and

original

issue

discount

that

qualifies

as

portfolio

interest

is

not

subject

to

chapter

withholding

under

sections

through

of

the

Internal

Revenue

Code

However

such

interest

may

be

subject

to

withholding

if

it

is

a

withholdable

payment

and

there

is

no

exception

under

chapter

sections

through

of

the

Internal

Revenue

Code

For

more

information

see

the

discussion

of

portfolio

interest

under

Withholding

on

Specific

Income

in

Pub

To

qualify

as

portfolio

interest

the

interest

must

be

paid

on

obligations

issued

after

July

and

otherwise

subject

to

withholding

For

obligations

issued

after

March

portfolio

interest

does

not

include

interest

paid

on

debt

that

is

not

in

registered

form

Before

March

portfolio

interest

included

interest

on

certain

registered

and

nonregistered

bearer

bonds

if

the

obligations

meet

the

requirements

described

below

Obligations

in

registered

form

Portfolio

interest

includes

interest

paid

on

an

obligation

that

is

in

registered

form

and

for

which

you

have

received

documentation

that

the

beneficial

owner

of

the

obligation

is

not

a

United

States

person

Generally

an

obligation

is

in

registered

form

if

i

the

obligation

is

registered

as

to

both

principal

and

any

stated

interest

with

the

issuer

or

its

agent

and

any

transfer

of

the

obligation

may

be

effected

only

by

surrender

of

the

old

obligation

and

reissuance

to

the

new

holder

ii

the

right

to

principal

and

stated

interest

with

respect

to

the

obligation

may

be

transferred

only

through

a

book

entry

system

maintained

by

the

issuer

or

its

agent

or

iii

the

obligation

is

registered

as

to

both

principal

and

stated

interest

with

the

issuer

or

its

agent

and

can

be

An

obligation

that

would

otherwise

be

considered

to

be

in

registered

form

is

not

considered

to

be

in

registered

form

as

of

a

particular

time

if

it

can

be

converted

at

any

time

in

the

future

into

an

obligation

that

is

not

in

registered

form

For

more

information

on

whether

obligations

are

considered

to

be

in

registered

form

see

the

discussion

of

portfolio

interest

under

Withholding

on

Specific

Income

in

Pub

Obligations

not

in

registered

form

For

obligations

issued

before

March

interest

on

an

obligation

that

is

not

in

registered

form

bearer

obligation

is

portfolio

interest

if

the

obligation

is

foreign

targeted

A

bearer

obligation

is

foreign

targeted

if

There

are

arrangements

to

ensure

that

the

obligation

will

be

sold

or

resold

in

connection

with

the

original

issue

only

to

a

person

who

is

not

a

US

person

Interest

on

the

obligation

is

payable

only

outside

the

United

States

and

its

possessions

and

The

face

of

the

obligation

contains

a

statement

that

any

US

person

who

holds

the

obligation

will

be

subject

to

limits

under

the

US

income

tax

laws

Documentation

is

not

required

for

interest

on

bearer

obligations

to

qualify

as

portfolio

interest

In

some

cases

however

you

may

need

documentation

for

purposes

of

Form

reporting

and

backup

withholding

Interest

that

does

not

qualify

as

portfolio

interest

Payments

to

certain

persons

and

payments

of

contingent

interest

do

not

qualify

as

portfolio

interest

You

must

withhold

at

the

statutory

rate

on

such

payments

unless

some

other

exception

such

as

a

treaty

provision

applies

Contingent

interest

Portfolio

interest

does

not

include

contingent

interest

Contingent

interest

is

either

of

the

following

Interest

that

is

determined

by

reference

to

Any

receipts

sales

or

other

cash

flow

of

the

debtor

or

related

person

Income

or

profits

of

the

debtor

or

related

person

Any

change

in

value

of

any

property

of

the

debtor

or

a

related

person

or

Any

dividend

partnership

distributions

or

similar

payments

made

by

the

debtor

or

a

related

person

For

exceptions

see

Internal

Revenue

Code

section

Any

other

type

of

contingent

interest

that

is

identified

by

the

Secretary

of

the

Treasury

in

regulations

Related

persons

Related

persons

include

the

following

Members

of

a

family

including

only

brothers

sisters

half

brothers

half

sisters

spouse

ancestors

parents

grandparents

etc

and

lineal

descendants

children

grandchildren

etc

Any

person

who

is

a

party

to

any

arrangement

undertaken

for

the

purpose

of

avoiding

the

contingent

interest

rules

Certain

corporations

partnerships

and

other

entities

For

details

see

Nondeductible

Loss

in

chapter

of

Pub

Exception

for

existing

debt

Contingent

interest

does

not

include

interest

paid

or

accrued

on

any

debt

with

a

fixed

term

that

was

issued

On

or

before

April

or

After

April

pursuant

to

a

written

binding

contract

in

effect

on

that

date

and

at

all

times

thereafter

before

that

debt

was

issued

Dividend

Income

The

following

dividend

income

is

exempt

from

the

tax

Certain

dividends

paid

by

foreign

corporations

There

is

no

tax

on

US

source

dividends

you

receive

from

a

foreign

corporation

See

Second

exception

under

Dividends

in

chapter

for

how

to

figure

the

amount

of

US

source

dividends

Certain

interestrelated

dividends

There

is

no

tax

on

interestrelated

dividends

from

sources

within

the

United

States

that

you

receive

from

a

mutual

fund

or

other

regulated

investment

company

in

The

mutual

fund

will

designate

in

writing

which

dividends

are

interestrelated

dividends

Certain

shortterm

capital

gain

dividends

There

may

not

be

any

tax

on

certain

shortterm

capital

gain

dividends

from

sources

within

the

United

States

that

you

receive

from

a

mutual

fund

or

other

regulated

investment

company

The

mutual

fund

will

designate

in

writing

which

dividends

are

shortterm

capital

gain

dividends

This

tax

relief

will

not

apply

to

you

if

you

are

present

in

the

United

States

for

days

or

more

during

your

tax

year

Services

Performed

for

Foreign

Employer

If

you

were

paid

by

a

foreign

employer

your

US

source

income

may

be

exempt

from

US

tax

but

only

if

you

meet

one

of

the

situations

discussed

next

Employees

of

foreign

persons

organizations

or

offices

Income

for

personal

services

performed

in

the

United

States

as

a

nonresident

alien

is

not

considered

to

be

from

US

sources

and

is

tax

exempt

if

you

meet

all

three

of

the

following

conditions

You

perform

personal

services

as

an

employee

of

or

under

a

contract

with

a

nonresident

alien

individual

foreign

partnership

or

foreign

corporation

not

engaged

in

a

trade

or

business

in

the

United

States

or

you

work

for

an

office

or

place

of

business

maintained

in

a

foreign

country

or

possession

of

the

United

States

by

a

US

corporation

a

US

partnership

or

a

US

citizen

or

resident

You

perform

these

services

while

you

are

a

nonresident

alien

temporarily

present

in

the

United

States

for

a

period

or

periods

of

not

more

than

a

total

of

days

during

the

tax

year

Your

pay

for

these

services

is

not

more

than

If

you

do

not

meet

all

three

conditions

your

income

from

personal

services

performed

in

the

United

States

is

US

source

income

and

is

taxed

according

to

the

rules

in

chapter

If

your

pay

for

these

services

is

more

than

the

entire

amount

is

income

from

a

trade

or

business

within

the

United

States

To

find

if

your

pay

is

more

than

do

not

include

any

amounts

you

get

from

your

employer

for

advances

or

reimbursements

of

business

travel

expenses

if

you

were

required

to

and

did

account

to

your

employer

for

those

expenses

If

the

advances

or

reimbursements

are

more

than

your

expenses

include

the

excess

in

your

pay

for

these

services

A

day

means

a

calendar

day

during

any

part

of

which

you

are

physically

present

in

the

United

States

Example

During

Henry

Smythe

a

nonresident

alien

from

a

nontreaty

country

worked

for

an

overseas

office

of

a

US

partnership

Henry

who

uses

the

calendar

year

as

his

tax

year

was

temporarily

present

in

the

United

States

for

days

during

performing

personal

services

for

the

overseas

office

of

the

partnership

That

office

paid

him

a

total

gross

salary

of

for

those

services

During

he

was

not

engaged

in

a

trade

or

business

in

the

United

States

The

salary

is

not

considered

US

source

income

and

is

exempt

from

US

tax

Example

The

facts

are

the

same

as

in

Example

except

that

Henrys

total

gross

salary

for

the

services

performed

in

the

United

States

during

was

He

received

in

and

in

During

he

was

engaged

in

a

trade

or

business

in

the

United

States

because

the

compensation

for

his

personal

services

in

the

United

States

was

more

than

Henrys

salary

is

US

source

income

and

is

taxed

under

the

rules

in

chapter

Crew

members

Compensation

for

services

performed

by

a

nonresident

alien

in

connection

with

the

individuals

temporary

presence

in

the

United

States

as

a

regular

crew

member

of

a

foreign

vessel

for

example

a

boat

or

ship

engaged

in

transportation

between

the

United

States

and

a

foreign

country

or

US

possession

is

not

US

source

income

and

is

exempt

from

US

tax

This

exemption

does

not

apply

to

compensation

for

services

performed

on

foreign

aircraft

Students

and

exchange

visitors

Nonresident

alien

students

and

exchange

visitors

present

in

the

United

States

under

F

J

or

Q

visas

can

exclude

from

gross

income

pay

received

from

a

foreign

employer

This

group

includes

bona

fide

students

scholars

trainees

teachers

professors

research

assistants

specialists

or

leaders

in

a

field

of

specialized

knowledge

or

skill

or

persons

of

similar

description

It

also

includes

the

aliens

spouse

and

minor

children

if

they

come

with

the

alien

or

come

later

to

join

the

alien

A

nonresident

alien

temporarily

present

in

the

United

States

under

a

J

visa

includes

an

alien

individual

entering

the

United

States

as

an

exchange

visitor

under

the

Mutual

Educational

and

Cultural

Exchange

Act

of

Foreign

employer

A

foreign

employer

is

A

nonresident

alien

individual

foreign

partnership

or

foreign

corporation

or

An

office

or

place

of

business

maintained

in

a

foreign

country

or

in

a

US

possession

by

a

US

corporation

a

US

partnership

or

an

individual

who

is

a

US

citizen

or

resident

The

term

foreign

employer

does

not

include

a

foreign

government

Pay

from

a

foreign

government

that

is

exempt

from

US

income

tax

is

discussed

in

chapter

Income

from

certain

annuities

Do

not

include

in

income

any

annuity

received

under

a

qualified

annuity

plan

or

from

a

qualified

trust

exempt

from

US

income

tax

if

you

meet

both

of

the

following

conditions

You

receive

the

annuity

only

because

You

performed

personal

services

outside

the

United

States

while

you

were

a

nonresident

alien

or

You

performed

personal

services

inside

the

United

States

while

you

were

a

nonresident

alien

and

you

met

the

three

conditions

described

earlier

under

Employees

of

foreign

persons

organizations

or

offices

At

the

time

the

first

amount

is

paid

as

an

annuity

under

the

plan

or

by

the

trust

or

more

of

the

employees

for

whom

contributions

or

benefits

are

provided

under

the

annuity

plan

or

under

the

plan

of

which

the

trust

is

a

part

are

US

citizens

or

residents

If

the

annuity

qualifies

under

condition

but

not

condition

above

you

do

not

have

to

include

the

amount

in

income

if

You

are

a

resident

of

a

country

that

gives

a

substantially

equal

exclusion

to

US

citizens

and

residents

or

You

are

a

resident

of

a

beneficiary

developing

country

under

Title

V

of

the

Trade

Act

of

If

you

are

not

sure

whether

the

annuity

is

from

a

qualified

annuity

plan

or

qualified

trust

ask

the

person

who

made

the

payment

Income

affected

by

treaties

Income

of

any

kind

that

is

exempt

from

US

tax

under

a

treaty

to

which

the

United

States

is

a

party

is

excluded

from

your

gross

income

Income

on

which

the

tax

is

only

limited

by

treaty

however

is

included

in

gross

income

See

chapter

Gambling

Winnings

From

Dog

or

Horse

Racing

You

can

exclude

from

your

gross

income

winnings

from

legal

wagers

initiated

outside

the

United

States

in

a

parimutuel

pool

with

respect

to

a

live

horse

or

dog

race

in

the

United

States

Gain

From

the

Sale

of

Your

Main

Home

If

you

sold

your

main

home

you

may

be

able

to

exclude

up

to

of

the

gain

on

the

sale

of

your

home

If

you

are

married

and

file

a

joint

return

you

may

be

able

to

exclude

up

to

For

information

on

the

requirements

for

this

exclusion

see

Pub

This

exclusion

does

not

apply

to

nonresident

aliens

who

are

subject

to

the

expatriation

tax

rules

discussed

in

chapter

Scholarships

and

Fellowship

Grants

If

you

are

a

candidate

for

a

degree

you

may

be

able

to

exclude

from

your

income

part

or

all

of

the

amounts

you

receive

as

a

qualified

scholarship

The

rules

discussed

here

apply

to

both

resident

and

nonresident

aliens

If

a

nonresident

alien

receives

a

grant

that

is

not

from

US

sources

it

is

not

subject

to

US

tax

See

Scholarships

Grants

Prizes

and

Awards

in

chapter

to

determine

whether

your

grant

is

from

US

sources

A

scholarship

or

fellowship

is

excludable

from

income

only

if

You

are

a

candidate

for

a

degree

at

an

eligible

educational

institution

and

You

use

the

scholarship

or

fellowship

to

pay

qualified

education

expenses

Candidate

for

a

degree

You

are

a

candidate

for

a

degree

if

you

Attend

a

primary

or

secondary

school

or

are

pursuing

a

degree

at

a

college

or

university

or

Attend

an

accredited

educational

institution

that

is

authorized

to

provide

A

program

that

is

acceptable

for

full

credit

toward

a

bachelors

or

higher

degree

or

A

program

of

training

to

prepare

students

for

gainful

employment

in

a

recognized

occupation

Eligible

educational

institution

An

eligible

educational

institution

is

one

that

maintains

a

regular

faculty

and

curriculum

and

normally

has

a

regularly

enrolled

body

of

students

in

attendance

at

the

place

where

it

carries

on

its

educational

activities

Qualified

education

expenses

These

are

expenses

for

Tuition

and

fees

required

to

enroll

at

or

attend

an

eligible

educational

institution

and

Courserelated

expenses

such

as

fees

books

supplies

and

equipment

that

are

required

for

the

courses

at

the

eligible

educational

institution

These

items

must

be

required

of

all

students

in

your

course

of

instruction

However

in

order

for

these

to

be

qualified

education

expenses

the

terms

of

the

scholarship

or

fellowship

can

not

require

that

it

be

used

for

other

purposes

such

as

room

and

board

or

specify

that

it

can

not

be

used

for

tuition

or

courserelated

expenses

Expenses

that

do

not

qualify

Qualified

education

expenses

do

not

include

the

cost

of

Room

and

board

Travel

Research

Clerical

help

or

Equipment

and

other

expenses

that

are

not

required

for

enrollment

in

or

attendance

at

an

eligible

educational

institution

This

is

true

even

if

the

fee

must

be

paid

to

the

institution

as

a

condition

of

enrollment

or

attendance

Scholarship

or

fellowship

amounts

used

to

pay

these

costs

are

taxable

Amounts

used

to

pay

expenses

that

do

not

qualify

A

scholarship

amount

used

to

pay

any

expense

that

does

not

qualify

is

taxable

even

if

the

expense

is

a

fee

that

must

be

paid

to

the

institution

as

a

condition

of

enrollment

or

attendance

Payment

for

services

You

can

not

exclude

from

income

the

portion

of

any

scholarship

fellowship

or

tuition

reduction

that

represents

payment

for

past

present

or

future

teaching

research

or

other

services

This

is

true

even

if

all

candidates

for

a

degree

are

required

to

perform

the

services

as

a

condition

for

receiving

the

degree

Example

On

January

Maria

Gomez

is

notified

of

a

scholarship

of

for

the

spring

semester

As

a

condition

for

receiving

the

scholarship

Maria

must

serve

as

a

parttime

teaching

assistant

Of

the

scholarship

represents

payment

for

her

services

Assuming

that

Maria

meets

all

other

conditions

she

can

exclude

no

more

than

from

income

as

a

qualified

scholarship

How

Income

of

Aliens

Is

Taxed

Introduction

Resident

and

nonresident

aliens

are

taxed

in

different

ways

Resident

aliens

are

generally

taxed

in

the

same

way

as

US

citizens

Nonresident

aliens

are

taxed

based

on

the

source

of

their

income

and

whether

or

not

their

income

is

effectively

connected

with

a

US

trade

or

business

The

following

discussions

will

help

you

determine

if

income

you

receive

during

the

tax

year

is

effectively

connected

with

a

US

trade

or

business

and

how

it

is

taxed

Topics

This

chapter

discusses

Income

that

is

effectively

connected

with

a

US

trade

or

business

Income

that

is

not

effectively

connected

with

a

US

trade

or

business

Interrupted

period

of

residence

Expatriation

tax

Useful

Items

You

may

want

to

see

Publication

Sales

and

Other

Dispositions

of

Assets

List

of

Original

Issue

Discount

Instruments

Form

and

Instructions

Alternative

Minimum

TaxIndividuals

Schedule

D

Form

Capital

Gains

and

Losses

See

chapter

for

information

about

getting

these

publications

and

forms

Resident

Aliens

Resident

aliens

are

generally

taxed

in

the

same

way

as

US

citizens

This

means

that

their

worldwide

income

is

subject

to

US

tax

and

must

be

reported

on

their

US

tax

return

Income

of

resident

aliens

is

subject

to

the

graduated

tax

rates

that

apply

to

US

citizens

Resident

aliens

use

the

Tax

Table

or

Tax

Computation

Worksheets

located

in

the

Form

instructions

which

apply

to

US

citizens

Nonresident

Aliens

A

nonresident

aliens

income

that

is

subject

to

US

income

tax

must

be

divided

into

two

categories

Income

that

is

effectively

connected

with

a

trade

or

business

in

the

United

States

and

Income

that

is

not

effectively

connected

with

a

trade

or

business

in

the

United

States

discussed

under

The

Tax

later

The

difference

between

these

two

categories

is

that

effectively

connected

income

after

allowable

deductions

is

taxed

at

graduated

rates

These

are

the

same

rates

that

apply

to

US

citizens

and

residents

Income

that

is

not

effectively

connected

is

taxed

at

a

flat

or

lower

treaty

rate

If

you

were

formerly

a

US

citizen

or

resident

alien

these

rules

may

not

apply

See

Expatriation

Tax

later

in

this

chapter

Trade

or

Business

in

the

United

States

Generally

you

must

be

engaged

in

a

trade

or

business

during

the

tax

year

to

be

able

to

treat

income

received

in

that

year

as

effectively

connected

with

that

trade

or

business

Whether

you

are

engaged

in

a

trade

or

business

in

the

United

States

depends

on

the

nature

of

your

activities

The

discussions

that

follow

will

help

you

determine

whether

you

are

engaged

in

a

trade

or

business

in

the

United

States

Personal

Services

If

you

perform

personal

services

in

the

United

States

at

any

time

during

the

tax

year

you

usually

are

considered

engaged

in

a

trade

or

business

in

the

United

States

Certain

compensation

paid

to

a

nonresident

alien

by

a

foreign

employer

is

not

included

in

gross

income

For

more

information

see

Services

Performed

for

Foreign

Employer

in

chapter

Other

Trade

or

Business

Activities

Other

examples

of

being

engaged

in

a

trade

or

business

in

the

United

States

follow

Students

and

trainees

If

you

are

temporarily

present

in

the

United

States

as

a

nonimmigrant

under

an

F

J

M

or

Q

visa

and

not

otherwise

engaged

in

a

trade

or

business

you

are

considered

to

be

engaged

in

a

trade

or

business

in

the

United

States

if

you

have

taxable

income

from

participation

in

a

scholarship

or

fellowship

described

in

section

The

taxable

part

of

any

scholarship

or

fellowship

grant

that

is

US

source

income

is

treated

as

effectively

connected

with

a

trade

or

business

in

the

United

States

Note

A

nonresident

alien

temporarily

present

in

the

United

States

under

a

J

visa

includes

a

nonresident

alien

individual

admitted

to

the

United

States

as

an

exchange

visitor

under

the

Mutual

Educational

and

Cultural

Exchange

Act

of

Business

operations

If

you

own

and

operate

a

business

in

the

United

States

selling

services

products

or

merchandise

you

are

with

certain

exceptions

engaged

in

a

trade

or

business

in

the

United

States

Partnerships

If

you

are

a

member

of

a

partnership

that

at

any

time

during

the

tax

year

is

engaged

in

a

trade

or

business

in

the

United

States

you

are

considered

to

be

engaged

in

a

trade

or

business

in

the

United

States

Beneficiary

of

an

estate

or

trust

If

you

are

the

beneficiary

of

an

estate

or

trust

that

is

engaged

in

a

trade

or

business

in

the

United

States

you

are

treated

as

being

engaged

in

the

same

trade

or

business

Trading

in

stocks

securities

and

commodities

If

your

only

US

business

activity

is

trading

in

stocks

securities

or

commodities

including

hedging

transactions

through

a

US

resident

broker

or

other

agent

you

are

not

engaged

in

a

trade

or

business

in

the

United

States

For

transactions

in

stocks

or

securities

this

applies

to

any

nonresident

alien

including

a

dealer

or

broker

in

stocks

and

securities

For

transactions

in

commodities

this

applies

to

commodities

that

are

usually

traded

on

an

organized

commodity

exchange

and

to

transactions

that

are

usually

carried

out

at

such

an

exchange

This

discussion

does

not

apply

if

you

have

a

US

office

or

other

fixed

place

of

business

at

any

time

during

the

tax

year

through

which

or

by

the

direction

of

which

you

carry

out

your

transactions

in

stocks

securities

or

commodities

Trading

for

a

nonresident

aliens

own

account

You

are

not

engaged

in

a

trade

or

business

in

the

United

States

if

trading

for

your

own

account

in

stocks

securities

or

commodities

is

your

only

US

business

activity

This

applies

even

if

the

trading

takes

place

while

you

are

present

in

the

United

States

or

is

done

by

your

employee

or

your

broker

or

other

agent

This

does

not

apply

to

trading

for

your

own

account

if

you

are

a

dealer

in

stocks

securities

or

commodities

This

does

not

necessarily

mean

however

that

as

a

dealer

you

are

considered

to

be

engaged

in

a

trade

or

business

in

the

United

States

Determine

that

based

on

the

facts

and

circumstances

in

each

case

or

under

the

rules

given

above

in

Trading

in

stocks

securities

and

commodities

Effectively

Connected

Income

If

you

are

engaged

in

a

US

trade

or

business

all

income

gain

or

loss

for

the

tax

year

that

you

get

from

sources

within

the

United

States

other

than

certain

investment

income

is

treated

as

effectively

connected

income

This

applies

whether

or

not

there

is

any

connection

between

the

income

and

the

trade

or

business

being

carried

on

in

the

United

States

during

the

tax

year

Two

tests

described

next

under

Investment

Income

determine

whether

certain

items

of

investment

income

such

as

interest

dividends

and

royalties

are

treated

as

effectively

connected

with

that

business

In

limited

circumstances

some

kinds

of

foreign

source

income

may

be

treated

as

effectively

connected

with

a

trade

or

business

in

the

United

States

For

a

discussion

of

these

rules

see

Foreign

Income

later

Investment

Income

Investment

income

from

US

sources

that

may

or

may

not

be

treated

as

effectively

connected

with

a

US

trade

or

business

generally

falls

into

the

following

three

categories

Fixed

or

determinable

income

interest

dividends

rents

royalties

premiums

annuities

etc

Gains

some

of

which

are

considered

capital

gains

from

the

sale

or

exchange

of

the

following

types

of

property

Timber

coal

or

domestic

iron

ore

with

a

retained

economic

interest

Patents

copyrights

and

similar

property

on

which

you

receive

contingent

payments

after

October

Patents

transferred

before

October

Original

issue

discount

obligations

Capital

gains

and

losses

Use

the

two

tests

described

next

to

determine

whether

an

item

of

US

source

income

falling

in

one

of

the

three

categories

above

and

received

during

the

tax

year

is

effectively

connected

with

your

US

trade

or

business

If

the

tests

indicate

that

the

item

of

income

is

effectively

connected

you

must

include

it

with

your

other

effectively

connected

income

If

the

item

of

income

is

not

effectively

connected

include

it

with

all

other

income

discussed

under

The

Tax

later

in

this

chapter

Assetuse

test

This

test

usually

applies

to

income

that

is

not

directly

produced

by

trade

or

business

activities

Under

this

test

if

an

item

of

income

is

from

assets

property

used

in

or

held

for

use

in

the

trade

or

business

in

the

United

States

it

is

considered

effectively

connected

An

asset

is

used

in

or

held

for

use

in

the

trade

or

business

in

the

United

States

if

the

asset

is

Held

for

the

principal

purpose

of

promoting

the

conduct

of

a

trade

or

business

in

the

United

States

Acquired

and

held

in

the

ordinary

course

of

the

trade

or

business

conducted

in

the

United

States

for

example

an

account

receivable

or

note

receivable

arising

from

that

trade

or

business

or

Otherwise

held

to

meet

the

present

needs

of

the

trade

or

business

in

the

United

States

and

not

its

anticipated

future

needs

Generally

stock

of

a

corporation

is

not

treated

as

an

asset

used

in

or

held

for

use

in

a

trade

or

business

in

the

United

States

Businessactivities

test

This

test

usually

applies

when

income

gain

or

loss

comes

directly

from

the

active

conduct

of

the

trade

or

business

The

businessactivities

test

is

most

important

when

Dividends

or

interest

are

received

by

a

dealer

in

stocks

or

securities

Royalties

are

received

in

the

trade

or

business

of

licensing

patents

or

similar

property

or

Service

fees

are

earned

by

a

servicing

business

Under

this

test

if

the

conduct

of

the

US

trade

or

business

was

a

material

factor

in

producing

the

income

the

income

is

considered

effectively

connected

Personal

Service

Income

You

usually

are

engaged

in

a

US

trade

or

business

when

you

perform

personal

services

in

the

United

States

Personal

service

income

you

receive

in

a

tax

year

in

which

you

are

engaged

in

a

US

trade

or

business

is

effectively

connected

with

a

US

trade

or

business

Income

received

in

a

year

other

than

the

year

you

performed

the

services

is

also

effectively

connected

if

it

would

have

been

effectively

connected

if

received

in

the

year

you

performed

the

services

Personal

service

income

includes

wages

salaries

commissions

fees

per

diem

allowances

and

employee

allowances

and

bonuses

The

income

may

If

you

are

engaged

in

a

US

trade

or

business

only

because

you

perform

personal

services

in

the

United

States

during

the

tax

year

income

and

gains

from

assets

and

gains

and

losses

from

the

sale

or

exchange

of

capital

assets

are

generally

not

effectively

connected

with

your

trade

or

business

However

if

there

is

a

direct

economic

relationship

between

your

holding

of

the

asset

and

your

trade

or

business

of

performing

personal

services

the

income

gain

or

loss

is

effectively

connected

Pensions

If

you

were

a

nonresident

alien

engaged

in

a

US

trade

or

business

after

because

you

performed

personal

services

in

the

United

States

and

you

later

receive

a

pension

or

retirement

pay

attributable

to

these

services

such

payments

are

effectively

connected

income

in

each

year

you

receive

them

This

is

true

whether

or

not

you

are

engaged

in

a

US

trade

or

business

in

the

year

you

receive

the

retirement

pay

Transportation

Income

Transportation

income

defined

in

chapter

is

effectively

connected

if

you

meet

both

of

the

following

conditions

You

had

a

fixed

place

of

business

in

the

United

States

involved

in

earning

the

income

At

least

of

your

US

source

transportation

income

is

attributable

to

regularly

scheduled

transportation

Fixed

place

of

business

generally

means

a

place

site

structure

or

other

similar

facility

through

which

you

engage

in

a

trade

or

business

Regularly

scheduled

transportation

means

that

a

ship

or

aircraft

follows

a

published

schedule

with

repeated

sailings

or

flights

at

regular

intervals

between

the

same

points

for

voyages

or

flights

that

begin

or

end

in

the

United

States

This

definition

applies

to

both

scheduled

and

chartered

air

transportation

If

you

do

not

meet

the

two

conditions

above

the

income

is

not

effectively

connected

and

is

taxed

at

a

rate

See

Transportation

Tax

later

in

this

chapter

Business

Profits

and

Losses

and

Sales

Transactions

All

profits

or

losses

from

US

sources

that

are

from

the

operation

of

a

business

in

the

United

States

are

effectively

connected

with

a

trade

or

business

in

the

United

States

For

example

profit

from

the

sale

in

the

United

States

of

inventory

property

purchased

either

in

this

country

or

in

a

foreign

country

is

effectively

connected

trade

or

business

income

A

share

of

US

source

profits

or

losses

of

a

partnership

that

is

engaged

in

a

trade

or

business

in

the

United

States

is

also

effectively

connected

with

a

trade

or

business

in

the

United

States

Real

Property

Gain

or

Loss

Gains

and

losses

from

the

sale

or

exchange

of

US

real

property

interests

whether

or

not

they

are

capital

assets

are

taxed

as

if

you

are

engaged

in

a

trade

or

business

in

the

United

States

You

must

treat

the

gain

or

loss

as

effectively

connected

with

that

trade

or

business

US

real

property

interest

This

is

any

interest

in

real

property

located

in

the

United

States

or

the

US

Virgin

Islands

or

any

interest

other

than

as

a

creditor

in

a

domestic

corporation

that

is

a

US

real

property

holding

corporation

Real

property

includes

the

following

Land

and

unsevered

natural

products

of

the

land

such

as

growing

crops

and

timber

and

mines

wells

and

other

natural

deposits

Improvements

on

land

including

buildings

other

permanent

structures

and

their

structural

components

Personal

property

associated

with

the

use

of

real

property

such

as

equipment

used

in

farming

mining

forestry

or

construction

or

property

used

in

lodging

facilities

or

rented

office

space

unless

the

personal

property

is

Disposed

of

more

than

one

year

before

or

after

the

disposition

of

the

real

property

or

Separately

sold

to

persons

unrelated

either

to

the

seller

or

to

the

buyer

of

the

real

property

US

real

property

holding

corporation

A

corporation

is

a

US

real

property

holding

corporation

if

the

fair

market

value

of

the

corporations

US

real

property

interests

are

at

least

of

the

total

fair

market

value

of

The

corporations

US

real

property

interests

plus

The

corporations

interests

in

real

property

located

outside

the

United

States

plus

The

corporations

other

assets

that

are

used

in

or

held

for

use

in

a

trade

or

business

Gain

or

loss

on

the

sale

of

the

stock

in

any

domestic

corporation

is

taxed

as

if

you

are

engaged

in

a

US

trade

or

business

unless

you

establish

that

the

corporation

is

not

a

US

real

property

holding

corporation

Publicly

traded

exception

A

US

real

property

interest

does

not

include

a

class

of

stock

of

a

corporation

that

is

regularly

traded

on

an

established

securities

market

unless

you

hold

more

than

of

the

fair

market

value

of

that

class

of

stock

or

for

dispositions

after

December

more

than

of

that

stock

in

the

case

of

real

estate

investment

trusts

An

interest

in

a

foreign

corporation

owning

US

real

property

generally

is

not

a

US

real

property

interest

unless

the

corporation

chooses

to

be

treated

as

a

domestic

corporation

Qualified

investment

entities

Special

rules

apply

to

qualified

investment

entities

QIEs

A

QIE

is

any

real

estate

investment

trust

REIT

or

any

regulated

investment

company

RIC

that

is

treated

as

a

US

real

property

holding

corporation

after

applying

certain

rules

in

section

See

US

Real

Property

Interest

in

Pub

for

more

information

Lookthrough

rule

for

QIEs

In

most

cases

any

distribution

from

a

QIE

to

a

nonresident

alien

foreign

corporation

or

other

QIE

that

is

attributable

to

the

QIEs

gain

from

the

sale

or

exchange

of

a

US

real

property

interest

is

treated

as

gain

recognized

by

the

nonresident

alien

foreign

corporation

or

other

QIE

from

the

sale

or

exchange

of

a

US

real

property

interest

Certain

exceptions

apply

to

the

lookthrough

rule

for

distributions

by

QIEs

A

distribution

by

a

QIE

with

respect

to

stock

regularly

traded

on

an

established

securities

market

in

the

United

States

is

not

treated

as

gain

from

the

sale

or

exchange

of

a

US

real

property

interest

if

the

shareholder

owns

or

less

of

that

stock

or

for

distributions

after

December

the

shareholder

owns

or

less

of

that

stock

in

the

case

of

real

estate

investment

trusts

at

any

time

during

the

period

ending

on

the

date

of

the

distribution

A

distribution

made

after

December

by

a

REIT

generally

is

not

treated

as

gain

from

the

sale

or

exchange

of

a

US

real

property

interest

if

the

shareholder

is

a

qualified

shareholder

as

described

in

section

A

distribution

that

you

do

not

treat

as

gain

from

the

sale

or

exchange

of

a

US

real

property

interest

may

be

included

in

your

gross

income

as

a

regular

dividend

Disposition

of

REIT

stock

Dispositions

of

stock

in

a

REIT

after

December

that

is

held

directly

or

indirectly

through

one

or

more

partnerships

by

a

qualified

shareholder

will

not

be

treated

as

a

US

real

property

interest

See

sections

through

for

more

information

Domestically

controlled

QIE

The

sale

of

an

interest

in

a

domestically

controlled

QIE

is

not

the

sale

of

a

US

real

property

interest

The

entity

is

domestically

controlled

if

at

all

times

during

the

testing

period

less

than

in

value

of

its

stock

was

held

directly

or

indirectly

by

foreign

persons

The

testing

period

is

the

shorter

of

a

the

period

ending

on

the

date

of

disposition

or

b

the

period

during

which

the

entity

was

in

existence

For

the

purpose

of

determining

whether

a

QIE

is

domestically

controlled

the

following

rules

apply

beginning

on

December

A

person

holding

less

than

of

any

class

of

stock

of

the

QIE

which

is

regularly

traded

on

an

established

securities

market

in

the

United

States

at

all

times

during

the

testing

period

would

be

treated

as

a

US

person

unless

the

QIE

has

actual

knowledge

that

such

person

is

not

a

US

person

Any

stock

in

a

QIE

that

is

held

by

another

QIE

will

be

treated

as

held

by

a

foreign

person

if

Any

class

of

stock

of

such

other

QIE

is

regularly

traded

on

an

established

securities

market

or

Such

other

QIE

is

a

RIC

that

issues

certain

redeemable

securities

Notwithstanding

the

above

the

stock

of

the

QIE

will

be

treated

as

held

by

a

US

person

if

such

other

QIE

is

domestically

controlled

Stock

in

a

QIE

held

by

any

other

QIE

not

described

above

will

be

treated

as

held

by

a

US

person

in

proportion

to

the

stock

of

such

other

QIE

that

is

or

is

treated

as

held

by

a

US

person

Wash

sale

If

you

dispose

of

an

interest

in

a

domestically

controlled

QIE

in

an

applicable

wash

sale

transaction

special

rules

apply

An

applicable

wash

sale

transaction

is

one

in

which

you

Dispose

of

an

interest

in

the

domestically

controlled

QIE

during

the

period

before

the

exdividend

date

of

a

distribution

that

you

would

but

for

the

disposition

have

treated

as

gain

from

the

sale

or

exchange

of

a

US

real

property

interest

and

Acquire

or

enter

into

a

contract

or

option

to

acquire

a

substantially

identical

interest

in

that

entity

during

the

period

that

began

on

the

first

day

of

the

period

If

this

occurs

you

are

treated

as

having

a

gain

from

the

sale

or

exchange

of

a

US

real

property

interest

in

an

amount

equal

to

the

distribution

made

after

June

that

would

have

been

treated

as

such

gain

This

also

applies

to

any

substitute

dividend

payment

A

transaction

is

not

treated

as

an

applicable

wash

sale

transaction

if

You

actually

receive

the

distribution

from

the

domestically

controlled

QIE

related

to

the

interest

disposed

of

or

acquired

in

the

transaction

or

You

dispose

of

any

class

of

stock

in

a

QIE

that

is

regularly

traded

on

an

established

securities

market

in

the

United

States

but

only

if

you

did

not

own

more

than

of

that

class

of

stock

at

any

time

during

the

period

ending

on

the

date

of

the

distribution

Alternative

minimum

tax

There

may

be

a

minimum

tax

on

your

net

gain

from

the

disposition

of

US

real

property

interests

Figure

the

amount

of

this

tax

if

any

on

Form

Withholding

of

tax

If

you

dispose

of

a

US

real

property

interest

the

buyer

may

have

to

withhold

tax

See

the

discussion

of

Tax

Withheld

on

Real

Property

Sales

in

chapter

Foreign

Income

You

must

treat

three

kinds

of

foreign

source

income

as

effectively

connected

with

a

trade

or

business

in

the

United

States

if

You

have

an

office

or

other

fixed

place

of

business

in

the

United

States

to

which

the

income

can

be

attributed

That

office

or

place

of

business

is

a

material

factor

in

producing

the

income

and

The

income

is

produced

in

the

ordinary

course

of

the

trade

or

business

carried

on

through

that

office

or

other

fixed

place

of

business

An

office

or

other

fixed

place

of

business

is

a

material

factor

if

it

significantly

contributes

to

and

is

an

essential

economic

element

in

the

earning

of

the

income

The

three

kinds

of

foreign

source

income

are

listed

below

Rents

and

royalties

for

the

use

of

or

for

the

privilege

of

using

intangible

personal

property

located

outside

the

United

States

or

from

any

interest

in

such

property

Included

are

rents

or

royalties

for

the

use

or

for

the

privilege

of

using

outside

the

United

States

patents

copyrights

secret

processes

and

formulas

goodwill

trademarks

trade

brands

franchises

and

similar

properties

if

the

rents

or

royalties

are

from

the

active

conduct

of

a

trade

or

business

in

the

United

States

Dividends

interest

or

amounts

received

for

the

provision

of

a

guarantee

of

indebtedness

issued

after

September

from

the

active

conduct

of

a

banking

financing

or

similar

business

in

the

United

States

A

substitute

dividend

or

interest

payment

received

under

a

securities

lending

transaction

or

a

salerepurchase

transaction

is

treated

the

same

as

the

amounts

received

on

the

transferred

security

Income

gain

or

loss

from

the

sale

outside

the

United

States

through

the

US

office

or

other

fixed

place

of

business

of

Stock

in

trade

Property

that

would

be

included

in

inventory

if

on

hand

at

the

end

of

the

tax

year

or

Property

held

primarily

for

sale

to

customers

in

the

ordinary

course

of

business

Item

will

not

apply

if

you

sold

the

property

for

use

consumption

or

disposition

outside

the

United

States

and

an

office

or

other

fixed

place

of

business

in

a

foreign

country

was

a

material

factor

in

the

sale

Any

foreign

source

income

that

is

equivalent

to

any

item

of

income

described

above

is

treated

as

effectively

connected

with

a

US

trade

or

business

For

example

foreign

source

interest

and

dividend

equivalents

are

treated

as

US

effectively

connected

income

if

the

income

is

derived

by

a

foreign

person

in

the

active

conduct

of

a

banking

financing

or

similar

business

within

the

United

States

Tax

on

Effectively

Connected

Income

Income

you

receive

during

the

tax

year

that

is

effectively

connected

with

your

trade

or

business

in

the

United

States

is

after

allowable

deductions

taxed

at

the

rates

that

apply

to

US

citizens

and

residents

Generally

you

can

receive

effectively

connected

income

only

if

you

are

a

nonresident

alien

engaged

in

trade

or

business

in

the

United

States

during

the

tax

year

However

income

you

receive

from

the

sale

or

exchange

of

property

the

performance

of

services

or

any

other

transaction

in

another

tax

year

is

treated

as

effectively

connected

in

that

year

if

it

would

have

been

effectively

connected

in

the

year

the

transaction

took

place

or

you

performed

the

services

Example

Ted

Richards

a

nonresident

alien

entered

the

United

States

in

August

to

perform

personal

services

in

the

US

office

of

his

overseas

employer

He

worked

in

the

US

office

until

December

but

did

not

leave

this

country

until

January

On

January

he

received

his

final

paycheck

for

services

performed

in

the

United

States

during

All

of

Teds

income

during

his

stay

here

is

US

source

income

During

Ted

was

engaged

in

the

trade

or

business

of

performing

personal

services

in

the

United

States

Therefore

all

amounts

paid

to

him

in

for

services

performed

in

the

United

States

during

are

effectively

connected

with

that

trade

or

business

during

The

salary

payment

Ted

received

in

January

is

US

source

income

to

him

in

It

is

effectively

connected

with

a

trade

or

business

in

the

United

States

because

he

was

engaged

in

a

trade

or

business

in

the

United

States

during

when

he

performed

the

services

that

earned

the

income

Real

property

income

You

may

be

able

to

choose

to

treat

all

income

from

real

property

as

effectively

connected

See

Income

From

Real

Property

later

in

this

chapter

The

Tax

Tax

at

a

or

lower

treaty

rate

applies

to

certain

items

of

income

or

gains

from

US

sources

but

only

if

the

items

are

not

effectively

connected

with

your

US

trade

or

business

Fixed

or

Determinable

Income

The

or

lower

treaty

rate

applies

to

the

gross

amount

of

US

source

fixed

or

determinable

annual

or

periodic

gains

profits

or

income

Income

is

fixed

when

it

is

paid

in

amounts

known

ahead

of

time

Income

is

determinable

whenever

there

is

a

basis

for

figuring

the

amount

to

be

paid

Income

can

be

periodic

if

it

is

paid

from

time

to

time

It

does

not

have

to

be

paid

annually

or

at

regular

intervals

Income

can

be

determinable

or

periodic

even

if

the

length

of

time

during

which

the

payments

are

made

is

increased

or

decreased

Items

specifically

included

as

fixed

or

determinable

income

are

interest

other

than

original

issue

discount

dividends

dividend

equivalent

payments

defined

in

chapter

rents

premiums

annuities

salaries

wages

and

other

compensation

A

substitute

dividend

or

interest

payment

received

under

a

securities

lending

transaction

or

a

salerepurchase

transaction

is

treated

the

same

as

the

amounts

received

on

the

transferred

security

Other

items

of

income

such

as

royalties

also

may

be

subject

to

the

tax

Some

fixed

or

determinable

income

may

be

exempt

from

US

tax

See

chapter

if

you

are

not

sure

whether

the

income

is

taxable

Original

issue

discount

OID

If

you

sold

exchanged

or

received

a

payment

on

a

bond

or

other

debt

instrument

that

was

issued

at

a

discount

all

or

part

of

the

original

issue

discount

OID

other

than

portfolio

interest

may

be

subject

to

the

tax

The

amount

of

OID

is

the

difference

between

the

stated

redemption

price

at

maturity

and

the

issue

price

of

the

debt

instrument

The

tax

applies

in

the

following

circumstances

You

received

a

payment

on

a

debt

instrument

In

this

case

the

amount

of

OID

subject

to

tax

is

the

OID

that

accrued

while

you

held

the

debt

instrument

minus

the

OID

previously

taken

into

account

But

the

tax

on

the

OID

can

not

be

more

than

the

payment

minus

the

tax

on

the

interest

payment

on

the

debt

instrument

You

sold

or

exchanged

the

debt

instrument

The

amount

of

OID

subject

to

tax

is

the

OID

that

accrued

while

you

held

the

debt

instrument

minus

the

amount

already

taxed

in

above

Report

on

your

return

the

amount

of

OID

shown

on

Form

if

you

bought

the

debt

instrument

at

original

issue

However

you

must

recompute

your

proper

share

of

OID

shown

on

Form

if

any

of

the

following

apply

You

bought

the

debt

instrument

at

a

premium

or

paid

an

acquisition

premium

The

debt

instrument

is

a

stripped

bond

or

a

stripped

coupon

including

zero

coupon

instruments

backed

by

US

Treasury

securities

The

debt

instrument

is

a

contingent

payment

or

inflationindexed

debt

instrument

For

the

definition

of

premium

and

acquisition

premium

and

instructions

on

how

to

recompute

OID

see

Pub

Gambling

Winnings

In

general

nonresident

aliens

are

subject

to

the

tax

on

the

gross

proceeds

from

gambling

won

in

the

United

States

if

that

income

is

not

effectively

connected

with

a

US

trade

or

business

and

is

not

exempted

by

treaty

However

no

tax

is

imposed

on

nonbusiness

gambling

income

a

nonresident

alien

wins

playing

blackjack

baccarat

craps

roulette

or

wheel

in

the

United

States

Nonresident

aliens

are

taxed

at

graduated

rates

on

net

gambling

income

won

in

the

United

States

that

is

effectively

connected

with

a

US

trade

or

business

Social

Security

Benefits

A

nonresident

alien

must

include

of

any

US

social

security

benefit

and

the

social

security

equivalent

part

of

a

tier

railroad

retirement

benefit

in

US

source

fixed

or

determinable

annual

or

periodic

income

Social

security

benefits

include

monthly

retirement

survivor

and

disability

benefits

This

income

is

exempt

under

some

tax

treaties

See

Table

in

Pub

for

a

list

of

tax

treaties

that

exempt

US

social

security

benefits

from

US

tax

Sales

or

Exchanges

of

Capital

Assets

These

rules

apply

only

to

those

capital

gains

and

losses

from

sources

in

the

United

States

that

are

not

effectively

connected

with

a

trade

or

business

in

the

United

States

They

apply

even

if

you

are

engaged

in

a

trade

or

business

in

the

United

States

These

rules

do

not

apply

to

the

sale

or

exchange

of

a

US

real

property

interest

or

to

the

sale

of

any

property

that

is

effectively

connected

with

a

trade

or

business

in

the

United

States

See

Real

Property

Gain

or

Loss

earlier

under

Effectively

Connected

Income

A

capital

asset

is

everything

you

own

except

Inventory

Business

accounts

or

notes

receivable

Depreciable

property

used

in

a

trade

or

business

Real

property

used

in

a

trade

or

business

Supplies

regularly

used

in

a

trade

or

business

Certain

copyrights

literary

or

musical

or

artistic

compositions

letters

or

memoranda

or

similar

property

Certain

US

government

publications

Certain

commodities

derivative

financial

instruments

held

by

a

commodities

derivatives

dealer

Hedging

transactions

A

capital

gain

is

a

gain

on

the

sale

or

exchange

of

a

capital

asset

A

capital

loss

is

a

loss

on

the

sale

or

exchange

of

a

capital

asset

If

the

sale

is

in

foreign

currency

for

the

purpose

of

determining

gain

the

cost

and

selling

price

of

the

property

should

be

expressed

in

US

currency

at

the

rate

of

exchange

prevailing

as

of

the

date

of

the

purchase

and

date

of

the

sale

respectively

You

can

use

Pub

to

determine

what

is

a

sale

or

exchange

of

a

capital

asset

or

what

is

treated

as

such

Specific

tax

treatment

that

applies

to

US

citizens

or

residents

generally

does

not

apply

to

you

The

following

gains

are

subject

to

the

or

lower

treaty

rate

without

regard

to

the

rule

discussed

later

Gains

on

the

disposal

of

timber

coal

or

domestic

iron

ore

with

a

retained

economic

interest

Gains

on

contingent

payments

received

from

the

sale

or

exchange

of

patents

copyrights

and

similar

property

after

October

Gains

on

certain

transfers

of

all

substantial

rights

to

or

an

undivided

interest

in

patents

if

the

transfers

were

made

before

October

Gains

on

the

sale

or

exchange

of

original

issue

discount

obligations

Gains

in

are

not

subject

to

the

or

lower

treaty

rate

if

you

choose

to

treat

the

gains

as

effectively

connected

with

a

US

trade

or

business

See

Income

From

Real

Property

later

rule

If

you

were

in

the

United

States

for

days

or

more

during

the

tax

year

your

net

gain

from

sales

or

exchanges

of

capital

assets

is

taxed

at

a

or

lower

treaty

rate

For

purposes

of

the

or

lower

treaty

rate

net

gain

is

the

excess

of

your

capital

gains

from

US

sources

over

your

capital

losses

from

US

sources

This

rule

applies

even

if

any

of

the

transactions

occurred

while

you

were

not

in

the

United

States

To

determine

your

net

gain

consider

the

amount

of

your

gains

and

losses

that

would

be

recognized

and

taken

into

account

only

if

and

to

the

extent

that

they

would

be

recognized

and

taken

into

account

if

you

were

in

a

US

trade

or

business

during

the

year

and

the

gains

and

losses

were

effectively

connected

with

that

trade

or

business

during

the

tax

year

In

arriving

at

your

net

gain

do

not

take

the

following

into

consideration

The

four

types

of

gains

listed

earlier

The

deduction

for

a

capital

loss

carryover

Capital

losses

in

excess

of

capital

gains

Exclusion

for

gain

from

the

sale

or

exchange

of

qualified

small

business

stock

section

exclusion

Losses

from

the

sale

or

exchange

of

property

held

for

personal

use

However

losses

resulting

from

casualties

or

thefts

may

be

deductible

on

Schedule

A

Form

See

Itemized

Deductions

in

chapter

If

you

are

not

engaged

in

a

trade

or

business

in

the

United

States

and

have

not

established

a

tax

year

for

a

prior

period

your

tax

year

will

be

the

calendar

year

for

purposes

of

the

rule

Also

you

must

file

your

tax

return

on

a

calendaryear

basis

If

you

were

in

the

United

States

for

less

than

days

during

the

tax

year

capital

gains

other

than

gains

listed

earlier

are

tax

exempt

unless

they

are

effectively

connected

with

a

trade

or

business

in

the

United

States

during

your

tax

year

Reporting

Report

your

gains

and

losses

from

the

sales

or

exchanges

of

capital

assets

that

are

not

effectively

connected

with

a

trade

or

business

in

the

United

States

on

page

of

Form

Report

gains

and

losses

from

sales

or

exchanges

of

capital

assets

including

real

property

that

are

effectively

connected

with

a

trade

or

business

in

the

United

States

on

a

separate

Schedule

D

Form

Form

or

both

Attach

them

to

Form

Income

From

Real

Property

If

you

have

income

from

real

property

located

in

the

United

States

that

you

own

or

have

an

interest

in

and

hold

for

the

production

of

income

you

can

choose

to

treat

all

income

from

that

property

as

income

effectively

connected

with

a

trade

or

business

in

the

United

States

The

choice

applies

to

all

income

from

real

property

located

in

the

United

States

and

held

for

the

production

of

income

and

to

all

income

from

any

interest

in

such

property

This

includes

income

from

rents

royalties

from

mines

oil

or

gas

wells

or

other

natural

resources

It

also

includes

You

can

make

this

choice

only

for

real

property

income

that

is

not

otherwise

effectively

connected

with

your

US

trade

or

business

If

you

make

the

choice

you

can

claim

deductions

attributable

to

the

real

property

income

and

only

your

net

income

from

real

property

is

taxed

This

choice

does

not

treat

a

nonresident

alien

who

is

not

otherwise

engaged

in

a

US

trade

or

business

as

being

engaged

in

a

trade

or

business

in

the

United

States

during

the

year

Example

You

are

a

nonresident

alien

and

are

not

engaged

in

a

US

trade

or

business

You

own

a

singlefamily

house

in

the

United

States

that

you

rent

out

Your

rental

income

for

the

year

is

This

is

your

only

US

source

income

As

discussed

earlier

under

The

Tax

the

rental

income

is

subject

to

a

tax

at

a

or

lower

treaty

rate

You

received

a

Form

showing

that

your

tenants

properly

withheld

this

tax

from

the

rental

income

You

do

not

have

to

file

a

US

tax

return

Form

because

your

US

tax

liability

is

satisfied

by

the

withholding

of

tax

If

you

make

the

choice

discussed

earlier

you

can

offset

the

income

by

certain

rental

expenses

See

Pub

Any

resulting

net

income

is

taxed

at

graduated

rates

If

you

make

this

choice

report

the

rental

income

and

expenses

on

Schedule

E

Form

and

attach

the

schedule

to

Form

For

the

first

year

you

make

the

choice

also

attach

the

statement

discussed

next

Making

the

choice

Make

the

initial

choice

by

attaching

a

statement

to

your

return

or

amended

return

for

the

year

of

the

choice

Include

the

following

in

your

statement

That

you

are

making

the

choice

Whether

the

choice

is

under

Internal

Revenue

Code

section

explained

earlier

or

a

tax

treaty

A

complete

list

of

all

your

real

property

or

any

interest

in

real

property

located

in

the

United

States

Give

the

legal

identification

of

US

timber

coal

or

iron

ore

in

which

you

have

an

interest

The

extent

of

your

ownership

in

the

property

The

location

of

the

property

A

description

of

any

major

improvements

to

the

property

The

dates

you

owned

the

property

Your

income

from

the

property

Details

of

any

previous

choices

and

revocations

of

the

real

property

income

choice

This

choice

stays

in

effect

for

all

later

tax

years

unless

you

revoke

it

Revoking

the

choice

You

can

revoke

the

choice

without

IRS

approval

by

filing

Form

for

the

year

you

made

the

choice

and

for

later

tax

years

You

must

file

Form

within

years

from

the

date

your

return

was

filed

or

years

from

the

time

the

tax

was

paid

whichever

is

later

If

this

time

period

has

expired

for

the

year

of

choice

you

can

not

revoke

the

choice

for

that

year

However

you

may

revoke

the

choice

for

later

tax

years

only

if

you

have

IRS

approval

For

information

on

how

to

get

IRS

approval

see

Regulations

section

Transportation

Tax

A

tax

rate

applies

to

transportation

income

that

is

not

effectively

connected

because

it

does

not

meet

the

two

conditions

listed

earlier

under

Transportation

Income

If

you

receive

transportation

income

subject

to

the

tax

you

should

figure

the

tax

and

show

it

on

line

of

Form

Attach

a

statement

to

your

return

that

includes

the

following

information

if

applicable

Your

name

taxpayer

identification

number

and

tax

year

A

description

of

the

types

of

services

performed

whether

on

or

off

board

Names

of

vessels

or

registration

numbers

of

aircraft

on

which

you

performed

the

services

Amount

of

US

source

transportation

income

derived

from

each

type

of

service

for

each

vessel

or

aircraft

for

the

calendar

year

Total

amount

of

US

source

transportation

income

derived

from

all

types

of

services

for

the

calendar

year

This

tax

applies

to

your

US

source

gross

transportation

income

This

only

includes

transportation

income

that

is

treated

as

derived

from

sources

in

the

United

States

if

the

transportation

begins

or

ends

in

the

United

States

For

transportation

income

from

personal

services

the

transportation

must

be

between

the

United

States

and

a

US

possession

For

personal

services

of

a

nonresident

alien

this

only

applies

to

income

derived

from

or

in

connection

with

an

aircraft

Interrupted

Period

of

Residence

You

are

subject

to

tax

under

a

special

rule

if

you

interrupt

your

period

of

US

residence

with

a

period

of

nonresidence

The

special

rule

applies

if

you

meet

all

of

the

following

conditions

You

were

a

US

resident

for

a

period

that

includes

at

least

consecutive

calendar

years

You

were

a

US

resident

for

at

least

days

in

each

of

those

years

You

ceased

to

be

treated

as

a

US

resident

You

then

again

became

a

US

resident

before

the

end

of

the

third

calendar

year

after

the

end

of

the

period

described

in

above

Under

this

special

rule

you

are

subject

to

tax

on

your

US

source

gross

income

and

gains

on

a

net

basis

at

the

graduated

rates

applicable

to

individuals

with

allowable

deductions

for

the

period

you

were

a

nonresident

alien

unless

you

would

be

subject

to

a

higher

tax

under

the

tax

discussed

earlier

on

income

not

connected

with

a

US

trade

or

business

For

information

on

how

to

figure

the

special

tax

see

Expatriation

Tax

below

Example

John

Willow

a

citizen

of

New

Zealand

entered

the

United

States

on

April

as

a

lawful

permanent

resident

On

August

John

ceased

to

be

a

lawful

permanent

resident

and

returned

to

New

Zealand

During

his

period

of

residence

he

was

present

in

the

United

States

for

at

least

days

in

each

of

consecutive

years

and

He

returned

to

the

United

States

on

October

as

a

lawful

permanent

resident

He

became

a

resident

before

the

close

of

the

third

calendar

year

beginning

after

the

end

of

his

first

period

Reporting

requirements

If

you

are

subject

to

this

tax

for

any

year

in

the

period

you

were

a

nonresident

alien

you

must

file

Form

for

that

year

The

return

is

due

by

the

due

date

including

extensions

for

filing

your

US

income

tax

return

for

the

year

that

you

again

become

a

US

resident

If

you

already

filed

returns

for

that

period

you

must

file

amended

returns

You

must

attach

a

statement

to

your

return

that

identifies

the

source

of

all

of

your

US

and

foreign

gross

income

and

the

items

of

income

subject

to

this

special

rule

Expatriation

Tax

The

expatriation

tax

provisions

apply

to

US

citizens

who

have

renounced

their

citizenship

and

longterm

residents

LTRs

who

have

ended

their

residency

The

rules

that

apply

are

based

on

the

dates

of

expatriation

which

are

described

in

the

following

sections

Expatriation

After

June

and

Before

June

Expatriation

After

June

Longterm

resident

LTR

defined

You

are

an

LTR

if

you

were

a

lawful

permanent

resident

of

the

United

States

in

at

least

of

the

last

tax

years

ending

with

the

year

your

residency

ends

In

determining

if

you

meet

the

requirement

do

not

count

any

year

that

you

are

treated

as

a

resident

of

a

foreign

country

under

a

tax

treaty

and

do

not

waive

treaty

benefits

Expatriation

After

June

and

Before

June

If

you

expatriated

after

June

and

before

June

the

expatriation

rules

under

section

apply

to

you

if

any

of

the

following

statements

apply

Your

average

annual

net

income

tax

for

the

tax

years

ending

before

the

date

of

expatriation

or

termination

of

residency

is

more

than

if

you

expatriated

or

terminated

residency

in

if

you

expatriated

or

terminated

residency

in

if

you

expatriated

or

terminated

residency

in

if

you

expatriated

or

terminated

residency

in

if

you

expatriated

or

terminated

residency

in

Your

net

worth

is

million

or

more

on

the

date

of

your

expatriation

or

termination

of

residency

You

fail

to

certify

on

Form

that

you

have

complied

with

all

US

federal

tax

obligations

for

the

tax

years

preceding

the

date

of

your

expatriation

or

termination

of

residency

Exception

for

dualcitizens

and

certain

minors

Certain

dualcitizens

and

certain

minors

defined

next

are

not

subject

to

the

expatriation

tax

even

if

they

meet

or

earlier

However

they

still

must

provide

the

certification

required

in

Certain

dualcitizens

You

may

qualify

for

the

exception

described

above

if

all

of

the

following

apply

You

became

at

birth

a

US

citizen

and

a

citizen

of

another

country

and

you

continue

to

be

a

citizen

of

that

other

country

You

were

never

a

resident

alien

of

the

United

States

as

defined

in

chapter

You

never

held

a

US

passport

You

were

present

in

the

United

States

for

no

more

than

days

during

any

calendar

year

that

is

of

the

calendar

years

preceding

your

loss

of

US

citizenship

Certain

minors

You

may

qualify

for

the

exception

described

above

if

you

meet

all

of

the

following

requirements

You

became

a

US

citizen

at

birth

Neither

of

your

parents

was

a

US

citizen

at

the

time

of

your

birth

You

expatriated

before

you

were

You

were

present

in

the

United

States

for

not

more

than

days

during

any

calendar

year

that

is

of

the

calendar

years

preceding

your

expatriation

Tax

consequences

of

presence

in

the

United

States

The

following

rules

apply

if

you

do

not

meet

the

exception

above

for

dualcitizens

and

certain

minors

and

the

expatriation

rules

would

otherwise

apply

to

you

The

expatriation

tax

does

not

apply

to

any

tax

year

during

the

period

if

you

are

physically

present

in

the

United

States

for

more

than

days

during

the

calendar

year

ending

in

that

year

Instead

you

are

treated

as

a

US

citizen

or

resident

and

taxed

on

your

worldwide

income

for

that

tax

year

You

must

file

Form

or

and

figure

your

tax

as

prescribed

in

the

instructions

for

those

forms

When

counting

the

number

of

days

of

presence

during

a

calendar

year

count

any

day

you

were

physically

present

in

the

United

States

at

any

time

during

the

day

However

do

not

count

any

days

up

to

a

limit

of

days

on

which

you

performed

personal

services

in

the

United

States

for

an

employer

who

is

not

related

to

you

if

either

of

the

following

apply

You

have

ties

with

other

countries

You

have

ties

with

other

countries

if

You

became

within

a

reasonable

period

after

your

expatriation

or

termination

of

residency

a

citizen

or

resident

of

the

country

in

which

you

your

spouse

or

either

of

your

parents

were

born

and

You

became

fully

liable

for

income

tax

in

that

country

You

were

physically

present

in

the

United

States

for

days

or

less

during

each

year

in

the

period

ending

on

the

date

of

expatriation

or

termination

of

residency

Do

not

count

any

day

you

were

an

exempt

individual

or

were

unable

to

leave

the

United

States

because

of

a

medical

condition

that

arose

while

you

were

in

the

United

States

See

Exempt

individual

and

Medical

condition

in

chapter

under

Substantial

Presence

Test

but

disregard

the

information

about

Form

Related

employer

If

your

employer

in

the

United

States

is

any

of

the

following

then

your

employer

is

related

to

you

You

must

count

any

days

you

performed

services

in

the

United

States

for

that

employer

as

days

of

presence

in

the

United

States

Members

of

your

family

This

includes

only

your

brothers

and

sisters

half

brothers

and

half

sisters

spouse

ancestors

parents

grandparents

etc

and

lineal

descendants

children

grandchildren

etc

A

partnership

in

which

you

directly

or

indirectly

own

more

than

of

the

capital

interest

or

the

profits

interest

A

corporation

in

which

you

directly

or

indirectly

own

more

than

in

value

of

the

outstanding

stock

See

Pub

chapter

Constructive

ownership

of

stock

for

how

to

determine

whether

you

directly

or

indirectly

own

outstanding

stock

A

taxexempt

charitable

or

educational

organization

that

is

directly

or

indirectly

controlled

in

any

manner

or

by

any

method

by

you

or

by

a

member

of

your

family

whether

or

not

this

control

is

legally

enforceable

Date

of

tax

expatriation

For

purposes

of

US

tax

rules

the

date

of

your

expatriation

or

termination

of

residency

is

the

later

of

the

dates

on

which

you

perform

the

following

actions

You

notify

either

the

Department

of

State

or

the

Department

of

Homeland

Security

whichever

is

appropriate

of

your

expatriating

act

or

termination

of

residency

You

file

Form

in

accordance

with

the

form

instructions

Annual

return

If

the

expatriation

tax

applies

to

you

you

must

file

Form

each

year

during

the

period

following

the

date

of

expatriation

You

must

file

this

form

even

if

you

owe

no

US

tax

Penalty

If

you

fail

to

file

Form

for

any

tax

year

fail

to

include

all

information

required

to

be

shown

on

the

form

or

include

incorrect

information

you

may

have

to

pay

a

penalty

of

You

will

not

have

to

pay

a

penalty

if

you

show

that

the

failure

is

due

to

reasonable

cause

and

not

to

willful

neglect

How

To

Figure

the

Expatriation

Tax

If

You

Expatriated

Before

June

If

the

expatriation

tax

applies

to

you

for

a

period

beginning

on

the

date

of

your

expatriation

you

are

generally

subject

to

tax

on

your

US

source

gross

income

and

gains

on

a

net

basis

at

the

graduated

rates

applicable

to

individuals

with

allowable

deductions

unless

you

would

be

subject

to

a

higher

tax

under

the

tax

discussed

earlier

on

income

not

connected

with

a

US

trade

or

business

For

this

purpose

US

source

gross

income

defined

in

chapter

includes

gains

from

the

sale

or

exchange

of

Property

other

than

stock

or

debt

obligations

located

in

the

United

States

Stock

issued

by

a

US

domestic

corporation

and

Debt

obligations

of

US

persons

or

of

the

United

States

a

state

or

political

subdivision

thereof

or

the

District

of

Columbia

US

source

income

also

includes

any

income

or

gain

derived

from

stock

in

certain

controlled

foreign

corporations

if

you

owned

or

were

considered

to

own

at

any

time

during

the

period

ending

on

the

date

of

expatriation

more

than

of

The

total

combined

voting

power

of

all

classes

of

that

corporations

stock

or

The

total

value

of

the

stock

The

income

or

gain

is

considered

US

source

income

only

to

the

extent

of

your

share

of

earnings

and

profits

earned

or

accumulated

before

the

date

of

expatriation

and

during

the

periods

you

met

the

ownership

requirements

discussed

above

Any

exchange

of

property

is

treated

as

a

sale

of

the

property

at

its

fair

market

value

on

the

date

of

the

exchange

and

any

gain

is

treated

as

US

source

gross

income

in

the

tax

year

of

the

exchange

unless

you

enter

into

a

gain

recognition

agreement

under

Notice

Other

information

For

more

information

on

the

expatriation

tax

provisions

including

exceptions

to

the

tax

and

special

US

source

rules

see

section

of

the

Internal

Revenue

Code

Expatriation

Tax

Return

If

you

expatriated

or

terminated

your

US

residency

or

you

are

subject

to

the

expatriation

tax

you

must

file

Form

Initial

and

Annual

Expatriation

Statement

Attach

it

to

Form

if

you

are

required

to

file

that

form

If

you

are

present

in

the

United

States

following

your

expatriation

and

are

subject

to

tax

as

a

US

citizen

or

resident

file

Form

with

Form

Expatriation

After

June

If

you

expatriated

after

June

the

expatriation

rules

under

section

apply

to

you

if

you

meet

any

of

the

following

conditions

Your

average

annual

net

income

tax

for

the

years

ending

before

the

date

of

expatriation

or

termination

of

residency

is

more

than

if

you

expatriated

or

terminated

residency

in

if

you

expatriated

or

terminated

residency

in

or

if

you

expatriated

or

terminated

residency

in

if

you

expatriated

or

terminated

residency

in

if

you

expatriated

or

terminated

residency

in

if

you

expatriated

or

terminated

residency

in