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1040nr Filing

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1040nr Filing

1040nr filing 3. 1040nr filing   Investment Expenses Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Limits on DeductionsPassive activity. 1040nr filing Other income (nonpassive income). 1040nr filing Expenses. 1040nr filing Additional information. 1040nr filing Interest ExpensesInvestment Interest Limit on Deduction Bond Premium AmortizationSpecial rules to determine amounts payable on a bond. 1040nr filing Basis. 1040nr filing How To Figure Amortization Choosing To Amortize How To Report Amortization Expenses of Producing IncomeFees to buy or sell. 1040nr filing Including mutual fund or REMIC expenses in income. 1040nr filing Nondeductible ExpensesUsed as collateral. 1040nr filing Short-sale expenses. 1040nr filing Expenses for both tax-exempt and taxable income. 1040nr filing State income taxes. 1040nr filing Nondeductible amount. 1040nr filing Basis adjustment. 1040nr filing How To Report Investment Expenses When To Report Investment Expenses Topics - This chapter discusses: Limits on Deductions , Interest Expenses , Bond Premium Amortization , Expenses of Producing Income , Nondeductible Expenses , How To Report Investment Expenses , and When To Report Investment Expenses . 1040nr filing Useful Items - You may want to see: Publication 535 Business Expenses 925 Passive Activity and At-Risk Rules 929 Tax Rules for Children and Dependents Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 4952 Investment Interest Expense Deduction See chapter 5, How To Get Tax Help , for information about getting these publications and forms. 1040nr filing Limits on Deductions Your deductions for investment expenses may be limited by: The at-risk rules, The passive activity loss limits, The limit on investment interest, or The 2% limit on certain miscellaneous itemized deductions. 1040nr filing The at-risk rules and passive activity rules are explained briefly in this section. 1040nr filing The limit on investment interest is explained later in this chapter under Interest Expenses . 1040nr filing The 2% limit is explained later in this chapter under Expenses of Producing Income . 1040nr filing At-risk rules. 1040nr filing   Special at-risk rules apply to most income-producing activities. 1040nr filing These rules limit the amount of loss you can deduct to the amount you risk losing in the activity. 1040nr filing Generally, this is the cash and the adjusted basis of property you contribute to the activity. 1040nr filing It also includes money you borrow for use in the activity if you are personally liable for repayment or if you use property not used in the activity as security for the loan. 1040nr filing For more information, see Publication 925. 1040nr filing Passive activity losses and credits. 1040nr filing   The amount of losses and tax credits you can claim from passive activities is limited. 1040nr filing Generally, you are allowed to deduct passive activity losses only up to the amount of your passive activity income. 1040nr filing Also, you can use credits from passive activities only against tax on the income from passive activities. 1040nr filing There are exceptions for certain activities, such as rental real estate activities. 1040nr filing Passive activity. 1040nr filing   A passive activity generally is any activity involving the conduct of any trade or business in which you do not materially participate and any rental activity. 1040nr filing However, if you are involved in renting real estate, the activity is not a passive activity if both of the following are true. 1040nr filing More than one-half of the personal services you perform during the year in all trades or businesses are performed in real property trades or businesses in which you materially participate. 1040nr filing You perform more than 750 hours of services during the year in real property trades or businesses in which you materially participate. 1040nr filing  The term “trade or business” generally means any activity that involves the conduct of a trade or business, is conducted in anticipation of starting a trade or business, or involves certain research or experimental expenditures. 1040nr filing However, it does not include rental activities or certain activities treated as incidental to holding property for investment. 1040nr filing   You are considered to materially participate in an activity if you are involved on a regular, continuous, and substantial basis in the operations of the activity. 1040nr filing Other income (nonpassive income). 1040nr filing    Generally, you can use losses from passive activities only to offset income from passive activities. 1040nr filing You cannot use passive activity losses to offset your other income, such as your wages or your portfolio income. 1040nr filing Portfolio income includes gross income from interest, dividends, annuities, or royalties that is not derived in the ordinary course of a trade or business. 1040nr filing It also includes gains or losses (not derived in the ordinary course of a trade or business) from the sale or trade of property (other than an interest in a passive activity) producing portfolio income or held for investment. 1040nr filing This includes capital gain distributions from mutual funds (and other regulated investment companies) and real estate investment trusts. 1040nr filing   You cannot use passive activity losses to offset Alaska Permanent Fund dividends. 1040nr filing Expenses. 1040nr filing   Do not include in the computation of your passive activity income or loss: Expenses (other than interest) that are clearly and directly allocable to your portfolio income, or Interest expense properly allocable to portfolio income. 1040nr filing However, this interest and other expenses may be subject to other limits. 1040nr filing These limits are explained in the rest of this chapter. 1040nr filing Additional information. 1040nr filing   For more information about determining and reporting income and losses from passive activities, see Publication 925. 1040nr filing Interest Expenses This section discusses interest expenses you may be able to deduct as an investor. 1040nr filing For information on business interest, see chapter 4 of Publication 535. 1040nr filing You cannot deduct personal interest expenses other than qualified home mortgage interest, as explained in Publication 936, Home Mortgage Interest Deduction, and interest on certain student loans, as explained in Publication 970. 1040nr filing Investment Interest If you borrow money to buy property you hold for investment, the interest you pay is investment interest. 1040nr filing You can deduct investment interest subject to the limit discussed later. 1040nr filing However, you cannot deduct interest you incurred to produce tax-exempt income. 1040nr filing See Tax-exempt income under Nondeductible Expenses, later. 1040nr filing You also cannot deduct interest expenses on straddles discussed under Interest expense and carrying charges on straddles , later. 1040nr filing Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. 1040nr filing Investment property. 1040nr filing   Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. 1040nr filing It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). 1040nr filing Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). 1040nr filing Partners, shareholders, and beneficiaries. 1040nr filing   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. 1040nr filing Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. 1040nr filing Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. 1040nr filing The allocation is not affected by the use of property that secures the debt. 1040nr filing Example 1. 1040nr filing You borrow $10,000 and use $8,000 to buy stock. 1040nr filing You use the other $2,000 to buy items for your home. 1040nr filing Since 80% of the debt is used for, and allocated to, investment purposes, 80% of the interest on that debt is investment interest. 1040nr filing The other 20% is nondeductible personal interest. 1040nr filing Debt proceeds received in cash. 1040nr filing   If you receive debt proceeds in cash, the proceeds are generally not treated as investment property. 1040nr filing Debt proceeds deposited in account. 1040nr filing   If you deposit debt proceeds in an account, that deposit is treated as investment property, regardless of whether the account bears interest. 1040nr filing But, if you withdraw the funds and use them for another purpose, you must reallocate the debt to determine the amount considered to be for investment purposes. 1040nr filing Example 2. 1040nr filing Assume in Example 1 that you borrowed the money on March 1 and immediately bought the stock for $8,000. 1040nr filing You did not buy the household items until June 1. 1040nr filing You had deposited the $2,000 in the bank. 1040nr filing You had no other transactions on the bank account until June. 1040nr filing You did not sell the stock, and you made no principal payments on the debt. 1040nr filing You paid interest from another account. 1040nr filing The $8,000 is treated as being used for an investment purpose. 1040nr filing The $2,000 is treated as being used for an investment purpose for the 3-month period. 1040nr filing Your total interest expense for 3 months on this debt is investment interest. 1040nr filing In June, when you spend the $2,000 for household items, you must begin to allocate 80% of the debt and the interest expense to investment purposes and 20% to personal purposes. 1040nr filing Amounts paid within 30 days. 1040nr filing   If you receive loan proceeds in cash or if the loan proceeds are deposited in an account, you can treat any payment (up to the amount of the proceeds) made from any account you own, or from cash, as made from those proceeds. 1040nr filing This applies to any payment made within 30 days before or after the proceeds are received in cash or deposited in your account. 1040nr filing   If you received the loan proceeds in cash, you can treat the payment as made on the date you received the cash instead of the date you actually made the payment. 1040nr filing Payments on debt may require new allocation. 1040nr filing   As you repay a debt used for more than one purpose, you must reallocate the balance. 1040nr filing You must first reduce the amount allocated to personal purposes by the repayment. 1040nr filing You then reallocate the rest of the debt to find what part is for investment purposes. 1040nr filing Example 3. 1040nr filing If, in Example 2 , you repay $500 on November 1, the entire repayment is applied against the amount allocated to personal purposes. 1040nr filing The debt balance is now allocated as $8,000 for investment purposes and $1,500 for personal purposes. 1040nr filing Until the next reallocation is necessary, 84% ($8,000 ÷ $9,500) of the debt and the interest expense is allocated to investment. 1040nr filing Pass-through entities. 1040nr filing   If you use borrowed funds to buy an interest in a partnership or S corporation, then the interest on those funds must be allocated based on the assets of the entity. 1040nr filing If you contribute to the capital of the entity, you can make the allocation using any reasonable method. 1040nr filing Additional allocation rules. 1040nr filing   For more information about allocating interest expense, see chapter 4 of Publication 535. 1040nr filing When To Deduct Investment Interest If you use the cash method of accounting, you must pay the interest before you can deduct it. 1040nr filing If you use an accrual method of accounting, you can deduct interest over the period it accrues, regardless of when you pay it. 1040nr filing For an exception, see Unpaid expenses owed to related party under When To Report Investment Expenses, later in this chapter. 1040nr filing Example. 1040nr filing You borrowed $1,000 on August 26, 2013, payable in 90 days at 12% interest. 1040nr filing On November 26, 2013, you paid this with a new note for $1,030, due on February 26, 2014. 1040nr filing If you use the cash method of accounting, you cannot deduct any part of the $30 interest on your return for 2013 because you did not actually pay it. 1040nr filing If you use an accrual method, you may be able to deduct a portion of the interest on the loans through December 31, 2013, on your return for 2013. 1040nr filing Interest paid in advance. 1040nr filing   Generally, if you pay interest in advance for a period that goes beyond the end of the tax year, you must spread the interest over the tax years to which it belongs under the OID rules discussed in chapter 1. 1040nr filing You can deduct in each year only the interest for that year. 1040nr filing Interest on margin accounts. 1040nr filing   If you are a cash method taxpayer, you can deduct interest on margin accounts to buy taxable securities as investment interest in the year you paid it. 1040nr filing You are considered to have paid interest on these accounts only when you actually pay the broker or when payment becomes available to the broker through your account. 1040nr filing Payment may become available to the broker through your account when the broker collects dividends or interest for your account, or sells securities held for you or received from you. 1040nr filing   You cannot deduct any interest on money borrowed for personal reasons. 1040nr filing Limit on interest deduction for market discount bonds. 1040nr filing   The amount you can deduct for interest expense you paid or accrued during the year to buy or carry a market discount bond may be limited. 1040nr filing This limit does not apply if you accrue the market discount and include it in your income currently. 1040nr filing   Under this limit, the interest is deductible only to the extent it is more than: The total interest and OID includible in gross income for the bond for the year, plus The market discount for the number of days you held the bond during the year. 1040nr filing Figure the amount in (2) above using the rules for figuring accrued market discount in chapter 1 under Market Discount Bonds . 1040nr filing Interest not deducted due to limit. 1040nr filing   In the year you dispose of the bond, you can deduct any interest expense you were not allowed to deduct in earlier years because of the limit. 1040nr filing Choosing to deduct disallowed interest expense before the year of disposition. 1040nr filing   You can choose to deduct disallowed interest expense in any year before the year you dispose of the bond, up to your net interest income from the bond during the year. 1040nr filing The rest of the disallowed interest expense remains deductible in the year you dispose of the bond. 1040nr filing Net interest income. 1040nr filing   This is the interest income (including OID) from the bond that you include in income for the year, minus the interest expense paid or accrued during the year to purchase or carry the bond. 1040nr filing Limit on interest deduction for short-term obligations. 1040nr filing   If the current income inclusion rules discussed in chapter 1 under Discount on Short-Term Obligations do not apply to you, the amount you can deduct for interest expense you paid or accrued during the year to buy or carry a short-term obligation is limited. 1040nr filing   The interest is deductible only to the extent it is more than: The amount of acquisition discount or OID on the obligation for the tax year, plus The amount of any interest payable on the obligation for the year that is not included in income because of your accounting method (other than interest taken into account in determining the amount of acquisition discount or OID). 1040nr filing The method of determining acquisition discount and OID for short-term obligations is discussed in chapter 1 under Discount on Short-Term Obligations . 1040nr filing Interest not deducted due to limit. 1040nr filing   In the year you dispose of the obligation, or, if you choose, in another year in which you have net interest income from the obligation, you can deduct any interest expense you were not allowed to deduct for an earlier year because of the limit. 1040nr filing Follow the same rules provided in the earlier discussion under Limit on interest deduction for market discount bonds , earlier. 1040nr filing Limit on Deduction Generally, your deduction for investment interest expense is limited to your net investment income. 1040nr filing You can carry over the amount of investment interest you could not deduct because of this limit to the next tax year. 1040nr filing The interest carried over is treated as investment interest paid or accrued in that next year. 1040nr filing You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. 1040nr filing Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. 1040nr filing Investment income. 1040nr filing   This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). 1040nr filing Investment income does not include Alaska Permanent Fund dividends. 1040nr filing It also does not include qualified dividends or net capital gain unless you choose to include them. 1040nr filing Choosing to include qualified dividends. 1040nr filing   Investment income generally does not include qualified dividends, discussed in chapter 1. 1040nr filing However, you can choose to include all or part of your qualified dividends in investment income. 1040nr filing   You make this choice by completing Form 4952, line 4g, according to its instructions. 1040nr filing   If you choose to include any of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. 1040nr filing Choosing to include net capital gain. 1040nr filing    Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). 1040nr filing However, you can choose to include all or part of your net capital gain in investment income. 1040nr filing   You make this choice by completing Form 4952, line 4g, according to its instructions. 1040nr filing   If you choose to include any of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. 1040nr filing   For more information about the capital gains rates, see Capital Gain Tax Rates in chapter 4. 1040nr filing    Before making either choice, consider the overall effect on your tax liability. 1040nr filing Compare your tax if you make one or both of these choices with your tax if you do not. 1040nr filing Investment income of child reported on parent's return. 1040nr filing   Investment income includes the part of your child's interest and dividend income you choose to report on your return. 1040nr filing If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814. 1040nr filing Include it on line 4a of Form 4952. 1040nr filing Example. 1040nr filing Your 8-year-old son has interest income of $2,200, which you choose to report on your own return. 1040nr filing You enter $2,200 on Form 8814, lines 1a and 4, and $200 on lines 6 and 12 and complete Part II. 1040nr filing Also enter $200 on Form 1040, line 21. 1040nr filing Your investment income includes this $200. 1040nr filing Child's qualified dividends. 1040nr filing   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. 1040nr filing However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. 1040nr filing   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). 1040nr filing Child's Alaska Permanent Fund dividends. 1040nr filing   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. 1040nr filing To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. 1040nr filing Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. 1040nr filing Subtract the result from the amount on Form 8814, line 12. 1040nr filing Example. 1040nr filing Your 10-year-old child has taxable interest income of $4,000 and Alaska Permanent Fund dividends of $2,000. 1040nr filing You choose to report this on your return. 1040nr filing You enter $4,000 on Form 8814, line 1a, $2,000 on line 2a, and $6,000 on line 4. 1040nr filing You then enter $4,000 on Form 8814, lines 6 and 12, and Form 1040, line 21. 1040nr filing You figure the amount of your child's income that you can consider your investment income as follows: $4,000 − ($4,000 × ($2,000 ÷ $6,000)) = $2,667 You include the result, $2,667, on Form 4952, line 4a. 1040nr filing Child's capital gain distributions. 1040nr filing   If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D (Form 1040), line 13, or Form 1040, line 13) generally does not count as investment income. 1040nr filing However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. 1040nr filing   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). 1040nr filing Investment expenses. 1040nr filing   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. 1040nr filing Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. 1040nr filing Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A (Form 1040), line 27. 1040nr filing See Expenses of Producing Income , later, for a discussion of the 2% limit. 1040nr filing Losses from passive activities. 1040nr filing   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). 1040nr filing See Publication 925 for information about passive activities. 1040nr filing Example. 1040nr filing Ted is a partner in a partnership that operates a business. 1040nr filing However, he does not materially participate in the partnership's business. 1040nr filing Ted's interest in the partnership is considered a passive activity. 1040nr filing Ted's investment income from interest and dividends (other than qualified dividends) is $10,000. 1040nr filing His investment expenses (other than interest) are $3,200 after taking into account the 2% limit on miscellaneous itemized deductions. 1040nr filing His investment interest expense is $8,000. 1040nr filing Ted also has income from the partnership of $2,000. 1040nr filing Ted figures his net investment income and the limit on his investment interest expense deduction in the following way: Total investment income $10,000 Minus: Investment expenses (other than interest) 3,200 Net investment income $6,800 Deductible investment interest expense for the year $6,800 The $2,000 of income from the passive activity is not used in determining Ted's net investment income. 1040nr filing His investment interest deduction for the year is limited to $6,800, the amount of his net investment income. 1040nr filing Form 4952 Use Form 4952 to figure your deduction for investment interest. 1040nr filing See Form 4952 for more information. 1040nr filing Exception to use of Form 4952. 1040nr filing   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. 1040nr filing Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. 1040nr filing You do not have any other deductible investment expenses. 1040nr filing You have no carryover of investment interest expense from 2012. 1040nr filing   If you meet all of these tests, you can deduct all of your investment interest. 1040nr filing    Bond Premium Amortization If you pay a premium to buy a bond, the premium is part of your basis in the bond. 1040nr filing If the bond yields taxable interest, you can choose to amortize the premium. 1040nr filing This generally means that each year, over the life of the bond, you use a part of the premium to reduce the amount of interest includible in your income. 1040nr filing If you make this choice, you must reduce your basis in the bond by the amortization for the year. 1040nr filing If the bond yields tax-exempt interest, you must amortize the premium. 1040nr filing This amortized amount is not deductible in determining taxable income. 1040nr filing However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year. 1040nr filing Bond premium. 1040nr filing   Bond premium is the amount by which your basis in the bond right after you get it is more than the total of all amounts payable on the bond after you get it (other than payments of qualified stated interest). 1040nr filing For example, a bond with a maturity value of $1,000 generally would have a $50 premium if you buy it for $1,050. 1040nr filing Special rules to determine amounts payable on a bond. 1040nr filing   For special rules that apply to determine the amounts payable on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. 1040nr filing 171-3. 1040nr filing Basis. 1040nr filing   In general, your basis for figuring bond premium amortization is the same as your basis for figuring any loss on the sale of the bond. 1040nr filing However, you may need to use a different basis for: Convertible bonds, Bonds you got in a trade, and Bonds whose basis has to be determined using the basis of the person who transferred the bond to you. 1040nr filing See Regulations section 1. 1040nr filing 171-1(e). 1040nr filing Dealers. 1040nr filing   A dealer in taxable bonds (or anyone who holds them mainly for sale to customers in the ordinary course of a trade or business or who would properly include bonds in inventory at the close of the tax year) cannot claim a deduction for amortizable bond premium. 1040nr filing   See section 75 of the Internal Revenue Code for the treatment of bond premium by a dealer in tax-exempt bonds. 1040nr filing How To Figure Amortization For bonds issued after September 27, 1985, you must amortize bond premium using a constant yield method on the basis of the bond's yield to maturity, determined by using the bond's basis and compounding at the close of each accrual period. 1040nr filing Constant yield method. 1040nr filing   Figure the bond premium amortization for each accrual period as follows. 1040nr filing Step 1: Determine your yield. 1040nr filing   Your yield is the discount rate that, when used in figuring the present value of all remaining payments to be made on the bond (including payments of qualified stated interest), produces an amount equal to your basis in the bond. 1040nr filing Figure the yield as of the date you got the bond. 1040nr filing It must be constant over the term of the bond and must be figured to at least two decimal places when expressed as a percentage. 1040nr filing   If you do not know the yield, consult your broker or tax advisor. 1040nr filing Databases available to them are likely to show the yield at the date of purchase. 1040nr filing Step 2: Determine the accrual periods. 1040nr filing   You can choose the accrual periods to use. 1040nr filing They may be of any length and may vary in length over the term of the bond, but each accrual period can be no longer than 1 year and each scheduled payment of principal or interest must occur either on the first or the final day of an accrual period. 1040nr filing The computation is simplest if accrual periods are the same as the intervals between interest payment dates. 1040nr filing Step 3: Determine the bond premium for the accrual period. 1040nr filing   To do this, multiply your adjusted acquisition price at the beginning of the accrual period by your yield. 1040nr filing Then subtract the result from the qualified stated interest for the period. 1040nr filing   Your adjusted acquisition price at the beginning of the first accrual period is the same as your basis. 1040nr filing After that, it is your basis decreased by the amount of bond premium amortized for earlier periods and the amount of any payment previously made on the bond other than a payment of qualified stated interest. 1040nr filing Example. 1040nr filing On February 1, 2012, you bought a taxable bond for $110,000. 1040nr filing The bond has a stated principal amount of $100,000, payable at maturity on February 1, 2019, making your premium $10,000 ($110,000 − $100,000). 1040nr filing The bond pays qualified stated interest of $10,000 on February 1 of each year. 1040nr filing Your yield is 8. 1040nr filing 07439% compounded annually. 1040nr filing You choose to use annual accrual periods ending on February 1 of each year. 1040nr filing To find your bond premium amortization for the accrual period ending on February 1, 2013, you multiply the adjusted acquisition price at the beginning of the period ($110,000) by your yield. 1040nr filing When you subtract the result ($8,881. 1040nr filing 83) from the qualified stated interest for the period ($10,000), you find that your bond premium amortization for the period is $1,118. 1040nr filing 17. 1040nr filing Special rules to figure amortization. 1040nr filing   For special rules to figure the bond premium amortization on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. 1040nr filing 171-3. 1040nr filing Bonds Issued Before September 28, 1985 For these bonds, you can amortize bond premium using any reasonable method. 1040nr filing Reasonable methods include: The straight-line method, and The Revenue Ruling 82-10 method. 1040nr filing Straight-line method. 1040nr filing   Under this method, the amount of your bond premium amortization is the same each month. 1040nr filing Divide the number of months you held the bond during the year by the number of months from the beginning of the tax year (or, if later, the date of acquisition) to the date of maturity or earlier call date. 1040nr filing Then multiply the result by the bond premium (reduced by any bond premium amortization claimed in earlier years). 1040nr filing This gives you your bond premium amortization for the year. 1040nr filing Revenue Ruling 82-10 method. 1040nr filing   Under this method, the amount of your bond premium amortization increases each month over the life of the bond. 1040nr filing This method is explained in Revenue Ruling 82-10, 1982-1 C. 1040nr filing B. 1040nr filing 46. 1040nr filing Choosing To Amortize You choose to amortize the premium on taxable bonds by reporting the amortization for the year on your income tax return for the first tax year you want the choice to apply. 1040nr filing You should attach a statement to your return that you are making this choice under section 171. 1040nr filing See How To Report Amortization, next. 1040nr filing This choice is binding for the year you make it and for later tax years. 1040nr filing It applies to all taxable bonds you own in the year you make the choice and also to those you acquire in later years. 1040nr filing You can change your decision to amortize bond premium only with the written approval of the IRS. 1040nr filing To request approval, use Form 3115. 1040nr filing For more information on requesting approval, see section 5 of the Appendix to Revenue Procedure 2011-14 in Internal Revenue Bulletin 2011-4. 1040nr filing You can find Revenue Procedure 2011-14 at www. 1040nr filing irs. 1040nr filing gov/irb/2011-04_IRB/ar08. 1040nr filing html. 1040nr filing How To Report Amortization Subtract the bond premium amortization from your interest income from these bonds. 1040nr filing Report the bond's interest on Schedule B (Form 1040A or 1040), line 1. 1040nr filing Under your last entry on line 1, put a subtotal of all interest listed on line 1. 1040nr filing Below this subtotal, print “ABP Adjustment,” and the total interest you received. 1040nr filing Subtract this amount from the subtotal, and enter the result on line 2. 1040nr filing Bond premium amortization more than interest. 1040nr filing   If the amount of your bond premium amortization for an accrual period is more than the qualified stated interest for the period, you can deduct the difference as a miscellaneous itemized deduction on Schedule A (Form 1040), line 28. 1040nr filing    But your deduction is limited to the amount by which your total interest inclusions on the bond in prior accrual periods is more than your total bond premium deductions on the bond in prior periods. 1040nr filing Any amount you cannot deduct because of this limit can be carried forward to the next accrual period. 1040nr filing Pre-1998 election to amortize bond premium. 1040nr filing   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. 1040nr filing Bonds acquired before October 23, 1986. 1040nr filing   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit. 1040nr filing Bonds acquired after October 22, 1986, but before 1988. 1040nr filing    The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you choose to treat it as an offset to interest income on the bond. 1040nr filing Expenses of Producing Income You deduct investment expenses (other than interest expenses) as miscellaneous itemized deductions on Schedule A (Form 1040). 1040nr filing To be deductible, these expenses must be ordinary and necessary expenses paid or incurred: To produce or collect income, or To manage property held for producing income. 1040nr filing The expenses must be directly related to the income or income-producing property, and the income must be taxable to you. 1040nr filing The deduction for most income-producing expenses is subject to a 2% limit that also applies to certain other miscellaneous itemized deductions. 1040nr filing The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of your adjusted gross income. 1040nr filing For information on how to report expenses of producing income, see How To Report Investment Expenses , later. 1040nr filing Attorney or accounting fees. 1040nr filing   You can deduct attorney or accounting fees that are necessary to produce or collect taxable income. 1040nr filing However, in some cases, attorney or accounting fees are part of the basis of property. 1040nr filing See Basis of Investment Property in chapter 4. 1040nr filing Automatic investment service and dividend reinvestment plans. 1040nr filing   A bank may offer its checking account customers an automatic investment service so that, for a charge, each customer can choose to invest a part of the checking account each month in common stock. 1040nr filing Or a bank that is a dividend disbursing agent for a number of publicly-owned corporations may set up an automatic dividend reinvestment service. 1040nr filing Through that service, cash dividends are reinvested in more shares of stock after the bank deducts a service charge. 1040nr filing   A corporation in which you own stock also may have a dividend reinvestment plan. 1040nr filing This plan lets you choose to use your dividends to buy more shares of stock in the corporation instead of receiving the dividends in cash. 1040nr filing   You can deduct the monthly service charge you pay to a bank to participate in an automatic investment service. 1040nr filing If you participate in a dividend reinvestment plan, you can deduct any service charge subtracted from your cash dividends before the dividends are used to buy more shares of stock. 1040nr filing Deduct the charges in the year you pay them. 1040nr filing Clerical help and office rent. 1040nr filing   You can deduct office expenses, such as rent and clerical help, you incurred in connection with your investments and collecting the taxable income on your investments. 1040nr filing Cost of replacing missing securities. 1040nr filing   To replace your taxable securities that are mislaid, lost, stolen, or destroyed, you may have to post an indemnity bond. 1040nr filing You can deduct the premium you pay to buy the indemnity bond and the related incidental expenses. 1040nr filing   You may, however, get a refund of part of the bond premium if the missing securities are recovered within a specified time. 1040nr filing Under certain types of insurance policies, you can recover some of the expenses. 1040nr filing   If you receive the refund in the tax year you pay the amounts, you can deduct only the difference between the expenses paid and the amount refunded. 1040nr filing If the refund is made in a later tax year, you must include the refund in income in the year you received it, but only to the extent that the expenses decreased your tax in the year you deducted them. 1040nr filing Fees to collect income. 1040nr filing   You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect investment income, such as your taxable bond or mortgage interest, or your dividends on shares of stock. 1040nr filing Fees to buy or sell. 1040nr filing   You cannot deduct a fee you pay to a broker to acquire investment property, such as stocks or bonds. 1040nr filing You must add the fee to the cost of the property. 1040nr filing See Basis of Investment Property in chapter 4. 1040nr filing    You cannot deduct any broker's fees, commissions, or option premiums you pay (or that were netted out) in connection with the sale of investment property. 1040nr filing They can be used only to figure gain or loss from the sale. 1040nr filing See Reporting Capital Gains and Losses , in chapter 4, for more information about the treatment of these sale expenses. 1040nr filing Investment counsel and advice. 1040nr filing   You can deduct fees you pay for counsel and advice about investments that produce taxable income. 1040nr filing This includes amounts you pay for investment advisory services. 1040nr filing Safe deposit box rent. 1040nr filing   You can deduct rent you pay for a safe deposit box if you use the box to store taxable income-producing stocks, bonds, or other investment-related papers and documents. 1040nr filing If you also use the box to store tax-exempt securities or personal items, you can deduct only part of the rent. 1040nr filing See Tax-exempt income under Nondeductible Expenses, later, to figure what part you can deduct. 1040nr filing State and local transfer taxes. 1040nr filing   You cannot deduct the state and local transfer taxes you pay when you buy or sell securities. 1040nr filing If you pay these transfer taxes when you buy securities, you must treat them as part of the cost of the property. 1040nr filing If you pay these transfer taxes when you sell securities, you must treat them as a reduction in the amount realized. 1040nr filing Trustee's commissions for revocable trust. 1040nr filing   If you set up a revocable trust and have its income distributed to you, you can deduct the commission you pay the trustee for managing the trust to the extent it is to produce or collect taxable income or to manage property. 1040nr filing However, you cannot deduct any part of the commission used for producing or collecting tax-exempt income or for managing property that produces tax-exempt income. 1040nr filing   If you are a cash-basis taxpayer and pay the commissions for several years in advance, you must deduct a part of the commission each year. 1040nr filing You cannot deduct the entire amount in the year you pay it. 1040nr filing Investment expenses from pass-through entities. 1040nr filing   If you hold an interest in a partnership, S corporation, real estate mortgage investment conduit (REMIC), or a nonpublicly offered mutual fund, you can deduct your share of that entity's investment expenses. 1040nr filing A partnership or S corporation will show your share of these expenses on your Schedule K-1 (Form 1065) or Schedule K-1 (Form 1120S). 1040nr filing A nonpublicly offered mutual fund will indicate your share of these expenses in box 5 of Form 1099-DIV (or substitute statement). 1040nr filing Publicly-offered mutual funds are discussed later. 1040nr filing   If you hold an interest in a REMIC, any expenses relating to your residual interest investment will be shown on Schedule Q (Form 1066), line 3b. 1040nr filing Any expenses relating to your regular interest investment will appear in box 5 of Form 1099-INT (or substitute statement) or box 9 of Form 1099-OID (or substitute statement). 1040nr filing   Report your share of these investment expenses on Schedule A (Form 1040), subject to the 2% limit, in the same manner as your other investment expenses. 1040nr filing Including mutual fund or REMIC expenses in income. 1040nr filing   Your share of the investment expenses of a REMIC or a nonpublicly offered mutual fund, as described above, are considered to be indirect deductions through that pass-through entity. 1040nr filing You must include in your gross income an amount equal to the expenses allocated to you, whether or not you are able to claim a deduction for those expenses. 1040nr filing If you are a shareholder in a nonpublicly offered mutual fund, you must include on your return the full amount of ordinary dividends or other distributions of stock, as shown in box 1a of Form 1099-DIV (or substitute statement). 1040nr filing If you are a residual interest holder in a REMIC, you must report as ordinary income on Schedule E (Form 1040) the total amounts shown on Schedule Q (Form 1066), lines 1b and 3b. 1040nr filing If you are a REMIC regular interest holder, you must include the amount of any expense allocation you received on Form 1040, line 8a. 1040nr filing Publicly-offered mutual funds. 1040nr filing   Most mutual funds are publicly offered. 1040nr filing These mutual funds, generally, are traded on an established securities exchange. 1040nr filing These funds do not pass investment expenses through to you. 1040nr filing Instead, the dividend income they report to you in box 1a of Form 1099-DIV (or substitute statement) is already reduced by your share of investment expenses. 1040nr filing As a result, you cannot deduct the expenses on your return. 1040nr filing   Include the amount from box 1a of Form 1099-DIV (or substitute statement) in your income. 1040nr filing    A publicly offered mutual fund is one that: Is continuously offered pursuant to a public offering, Is regularly traded on an established securities market, and Is held by or for no fewer than 500 persons at any time during the year. 1040nr filing Contact your mutual fund if you are not sure whether it is publicly offered. 1040nr filing Nondeductible Expenses Some expenses that you incur as an investor are not deductible. 1040nr filing Stockholders' meetings. 1040nr filing   You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you have no interest other than owning stock. 1040nr filing This is true even if your purpose in attending is to get information that would be useful in making further investments. 1040nr filing Investment-related seminar. 1040nr filing   You cannot deduct expenses for attending a convention, seminar, or similar meeting for investment purposes. 1040nr filing Single-premium life insurance, endowment, and annuity contracts. 1040nr filing   You cannot deduct interest on money you borrow to buy or carry a single-premium life insurance, endowment, or annuity contract. 1040nr filing Used as collateral. 1040nr filing   If you use a single premium annuity contract as collateral to obtain or continue a mortgage loan, you cannot deduct any interest on the loan that is collateralized by the annuity contract. 1040nr filing Figure the amount of interest expense disallowed by multiplying the current interest rate on the mortgage loan by the lesser of the amount of the annuity contract used as collateral or the amount of the loan. 1040nr filing Borrowing on insurance. 1040nr filing   Generally, you cannot deduct interest on money you borrow to buy or carry a life insurance, endowment, or annuity contract if you plan to systematically borrow part or all of the increases in the cash value of the contract. 1040nr filing This rule applies to the interest on the total amount borrowed to buy or carry the contract, not just the interest on the borrowed increases in the cash value. 1040nr filing Tax-exempt income. 1040nr filing   You cannot deduct expenses you incur to produce tax-exempt income. 1040nr filing Nor can you deduct interest on money you borrow to buy tax-exempt securities or shares in a mutual fund or other regulated investment company that distributes only exempt-interest dividends. 1040nr filing Short-sale expenses. 1040nr filing   The rule disallowing a deduction for interest expenses on tax-exempt securities applies to amounts you pay in connection with personal property used in a short sale or amounts paid by others for the use of any collateral in connection with the short sale. 1040nr filing However, it does not apply to the expenses you incur if you deposit cash as collateral for the property used in the short sale and the cash does not earn a material return during the period of the sale. 1040nr filing Short sales are discussed in Short Sales in chapter 4. 1040nr filing Expenses for both tax-exempt and taxable income. 1040nr filing   You may have expenses that are for both tax-exempt and taxable income. 1040nr filing If you cannot specifically identify what part of the expenses is for each type of income, you can divide the expenses, using reasonable proportions based on facts and circumstances. 1040nr filing You must attach a statement to your return showing how you divided the expenses and stating that each deduction claimed is not based on tax-exempt income. 1040nr filing   One accepted method for dividing expenses is to do it in the same proportion that each type of income is to the total income. 1040nr filing If the expenses relate in part to capital gains and losses, include the gains, but not the losses, in figuring this proportion. 1040nr filing To find the part of the expenses that is for the tax-exempt income, divide your tax-exempt income by the total income and multiply your expenses by the result. 1040nr filing Example. 1040nr filing You received $6,000 interest; $4,800 was tax-exempt and $1,200 was taxable. 1040nr filing In earning this income, you had $500 of expenses. 1040nr filing You cannot specifically identify the amount of each expense item that is for each income item, so you must divide your expenses. 1040nr filing 80% ($4,800 tax-exempt interest divided by $6,000 total interest) of your expenses is for the tax-exempt income. 1040nr filing You cannot deduct $400 (80% of $500) of the expenses. 1040nr filing You can deduct $100 (the rest of the expenses) because they are for the taxable interest. 1040nr filing State income taxes. 1040nr filing   If you itemize your deductions, you can deduct, as taxes, state income taxes on interest income that is exempt from federal income tax. 1040nr filing But you cannot deduct, as either taxes or investment expenses, state income taxes on other exempt income. 1040nr filing Interest expense and carrying charges on straddles. 1040nr filing   You cannot deduct interest and carrying charges allocable to personal property that is part of a straddle. 1040nr filing The nondeductible interest and carrying charges are added to the basis of the straddle property. 1040nr filing However, this treatment does not apply if: All the offsetting positions making up the straddle either consist of one or more qualified covered call options and the optioned stock, or consist of section 1256 contracts (and the straddle is not part of a larger straddle); or The straddle is a hedging transaction. 1040nr filing  For information about straddles, including definitions of the terms used in this discussion, see Straddles in chapter 4. 1040nr filing   Interest includes any amount you pay or incur in connection with personal property used in a short sale. 1040nr filing However, you must first apply the rules discussed in Payments in lieu of dividends under Short Sales in chapter 4. 1040nr filing   To determine the interest on market discount bonds and short-term obligations that are part of a straddle, you must first apply the rules discussed under Limit on interest deduction for market discount bonds and Limit on interest deduction for short-term obligations (both under Interest Expenses, earlier). 1040nr filing Nondeductible amount. 1040nr filing   Figure the nondeductible interest and carrying charges on straddle property as follows. 1040nr filing Add: Interest on indebtedness incurred or continued to buy or carry the personal property, and All other amounts (including charges to insure, store, or transport the personal property) paid or incurred to carry the personal property. 1040nr filing Subtract from the amount in (1): Interest (including OID) includible in gross income for the year on the personal property, Any income from the personal property treated as ordinary income on the disposition of short-term government obligations or as ordinary income under the market discount and short-term bond provisions — see Discount on Debt Instruments in chapter 1, The dividends includible in gross income for the year from the personal property, and Any payment on a loan of the personal property for use in a short sale that is includible in gross income. 1040nr filing Basis adjustment. 1040nr filing   Add the nondeductible amount to the basis of your straddle property. 1040nr filing How To Report Investment Expenses To deduct your investment expenses, you must itemize deductions on Schedule A (Form 1040). 1040nr filing Enter your deductible investment interest expense on Schedule A (Form1040), line 14. 1040nr filing Include any deductible short sale expenses. 1040nr filing (See Short Sales in chapter 4 for information on these expenses. 1040nr filing ) Also attach a completed Form 4952 if you used that form to figure your investment interest expense. 1040nr filing Enter the total amount of your other investment expenses (other than interest expenses) on Schedule A (Form 1040), line 23. 1040nr filing List the type and amount of each expense on the dotted lines next to line 23. 1040nr filing (If necessary, you can show the required information on an attached statement. 1040nr filing ) For information on how to report amortizable bond premium, see Bond Premium Amortization , earlier in this chapter. 1040nr filing When To Report Investment Expenses If you use the cash method to report income and expenses, you generally deduct your expenses, except for certain prepaid interest, in the year you pay them. 1040nr filing If you use an accrual method, you generally deduct your expenses when you incur a liability for them, rather than when you pay them. 1040nr filing Also see When To Deduct Investment Interest , earlier in this chapter. 1040nr filing Unpaid expenses owed to related party. 1040nr filing   If you use an accrual method, you cannot deduct interest and other expenses owed to a related cash-basis person until payment is made and the amount is includible in the gross income of that person. 1040nr filing The relationship, for purposes of this rule, is determined as of the end of the tax year for which the interest or expense would otherwise be deductible. 1040nr filing If a deduction is denied under this rule, this rule will continue to apply even if your relationship with the person ceases to exist before the amount is includible in the gross income of that person. 1040nr filing   This rule generally applies to those relationships listed in chapter 4 under Related Party Transactions . 1040nr filing It also applies to accruals by partnerships to partners, partners to partnerships, shareholders to S corporations, and S corporations to shareholders. 1040nr filing   The postponement of deductions for unpaid expenses and interest under the related party rule does not apply to OID, regardless of when payment is made. 1040nr filing This rule also does not apply to loans with below-market interest rates or to certain payments for the use of property and services when the lender or recipient has to include payments periodically in income, even if a payment has not been made. 1040nr filing Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in Florida

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City Street Address Days/Hours of Service Telephone*
Daytona Beach/
Holly Hill
149 S. Ridgewood Ave
Daytona Beach, FL 32114

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(386) 254-7360
Fort Myers 4210 Metro Parkway
Ft Myers, FL 33916

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(239) 938-7601
Gainesville 104 N. Main St.
Gainesville, FL 32601

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**


Services Provided

(352) 395-6197
Jacksonville 400 West Bay St.
Jacksonville, FL 32202

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(904) 665-1040
Lakeland 2133 Harden Blvd
Lakeland, FL 33803

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(863) 904-3399
Maitland/Orlando 850 Trafalgar Ct.
Maitland, FL 32751

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(407) 660-5830
Melbourne 431 N. Wickham Road
Melbourne, FL 32935

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(321) 253-7700
 
Miami 51 S.W. First Ave.
Miami, FL 33130

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(305) 982-5077
Ocala 3300 SW 34th Ave
Ocala, FL. 34474

Monday-Friday - 8:30 a.m.-4:30 p.m.
 

Services Provided

(352) 401-0010 
Panama City  651-F West 14th St.
Panama City, FL 32401 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.) 

 

Services Provided

(850)481-4016
 
Pensacola  7180 9th Ave North
Pensacola, FL. 32504 

Monday-Friday - 8:30 a.m.-4:30 p.m.
 

Services Provided

(850) 435-8468
 
Plantation/
Fort Lauderdale 
7850 S.W. 6th Court
Plantation, FL 33324 

Monday-Friday - 8:30 a.m.-4:30 p.m.


Services Provided

(954) 423-7300 
Port St. Lucie  7410 South US Hwy. 1
Port St. Lucie, FL 34952 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(772) 340-5606 
Saint Petersburg  9450 Koger Blvd.
Saint Petersburg, FL 33702 

Monday-Friday - 8:30 a.m.-4:30 p.m.  

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**
 

Services Provided

(727) 568-2459 
Sarasota 5971 Cattle Ridge Blvd.
Sarasota, FL 34232

Monday-Friday - 8:30 a.m.-4:30 p.m. 

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**


Services Provided

(941) 378-6448
Tallahassee   1211 Governor's Square Blvd.
Tallahassee, FL 32301

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.) 

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**


Services Provided

(850) 942-8995 
Tampa 3848 W. Columbus Dr. 
Tampa, FL 33607

Monday-Friday - 8:30 a.m.-4:30 p.m. 

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**
 

Services Provided

(813) 348-1831
West Palm Beach  1700 Palm Beach Lakes Blvd.
West Palm Beach, FL 33401 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**
 

Services Provided

(561) 616-2002 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Within Florida call:

 Jacksonville  (904) 665-1000
 Plantation  (954) 423-7677

 Call 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
400 West Bay Street, Stop 1200
Jacksonville, FL 32202

Internal Revenue Service
7850 SW 6th Court, Stop 6030
Plantation, FL 33324

Internal Revenue Service
9450 Koger Blvd, Room 101
St. Petersburg, FL 33702

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The 1040nr Filing

1040nr filing 2. 1040nr filing   Source of Income Table of Contents Introduction Topics - This chapter discusses: Resident Aliens Nonresident AliensInterest Income Dividends Guarantee of Indebtedness Personal Services Transportation Income Scholarships, Grants, Prizes, and Awards Pensions and Annuities Rents or Royalties Real Property Personal Property Community Income Introduction After you have determined your alien status, you must determine the source of your income. 1040nr filing This chapter will help you determine the source of different types of income you may receive during the tax year. 1040nr filing This chapter also discusses special rules for married individuals who are domiciled in a country with community property laws. 1040nr filing Topics - This chapter discusses: Income source rules, and Community income. 1040nr filing Resident Aliens A resident alien's income is generally subject to tax in the same manner as a U. 1040nr filing S. 1040nr filing citizen. 1040nr filing If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U. 1040nr filing S. 1040nr filing tax return. 1040nr filing You must report these amounts from sources within and outside the United States. 1040nr filing Nonresident Aliens A nonresident alien usually is subject to U. 1040nr filing S. 1040nr filing income tax only on U. 1040nr filing S. 1040nr filing source income. 1040nr filing Under limited circumstances, certain foreign source income is subject to U. 1040nr filing S. 1040nr filing tax. 1040nr filing See Foreign Income in chapter 4. 1040nr filing The general rules for determining U. 1040nr filing S. 1040nr filing source income that apply to most nonresident aliens are shown in Table 2-1. 1040nr filing The following discussions cover the general rules as well as the exceptions to these rules. 1040nr filing Not all items of U. 1040nr filing S. 1040nr filing source income are taxable. 1040nr filing See chapter 3. 1040nr filing Interest Income Generally, U. 1040nr filing S. 1040nr filing source interest income includes the following items. 1040nr filing Interest on bonds, notes, or other interest-bearing obligations of U. 1040nr filing S. 1040nr filing residents or domestic corporations. 1040nr filing Interest paid by a domestic or foreign partnership or foreign corporation engaged in a U. 1040nr filing S. 1040nr filing trade or business at any time during the tax year. 1040nr filing Original issue discount. 1040nr filing Interest from a state, the District of Columbia, or the U. 1040nr filing S. 1040nr filing Government. 1040nr filing The place or manner of payment is immaterial in determining the source of the income. 1040nr filing A substitute interest payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as the interest on the transferred security. 1040nr filing Exceptions. 1040nr filing   U. 1040nr filing S. 1040nr filing source interest income does not include the following items. 1040nr filing Interest paid by a resident alien or a domestic corporation on obligations issued before August 10, 2010, if for the 3-year period ending with the close of the payer's tax year preceding the interest payment, at least 80% of the payer's total gross income: Is from sources outside the United States, and Is attributable to the active conduct of a trade or business by the individual or corporation in a foreign country or a U. 1040nr filing S. 1040nr filing possession. 1040nr filing However, the interest will be considered U. 1040nr filing S. 1040nr filing source interest income if either of the following apply. 1040nr filing The recipient of the interest is related to the resident alien or domestic corporation. 1040nr filing See section 954(d)(3) for the definition of related person. 1040nr filing The terms of the obligation are significantly modified after August 9, 2010. 1040nr filing Any extension of the term of the obligation is considered a significant modification. 1040nr filing 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. 1040nr filing 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. 1040nr filing Dividends In most cases, dividend income received from domestic corporations is U. 1040nr filing S. 1040nr filing source income. 1040nr filing Dividend income from foreign corporations is usually foreign source income. 1040nr filing Exceptions to both of these rules are discussed below. 1040nr filing A substitute dividend payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as a distribution on the transferred security. 1040nr filing Dividend equivalent payments. 1040nr filing   U. 1040nr filing S. 1040nr filing source dividends also include all dividend equivalent payments. 1040nr filing Dividend equivalent payments include substitute dividends, payments made pursuant to a specified notional principal contract, and all similar payments that, directly or indirectly, are contingent on or determined by reference to, the payment of a dividend from U. 1040nr filing S. 1040nr filing sources. 1040nr filing    The Internal Revenue Service has issued final regulations that would affect the treatment of dividend equivalent payments and specified notional principal contracts. 1040nr filing You can view this regulation at www. 1040nr filing irs. 1040nr filing gov/irb/2013-52_IRB/ar08. 1040nr filing html. 1040nr filing First exception. 1040nr filing   Dividends received from a domestic corporation are not U. 1040nr filing S. 1040nr filing source income if the corporation elects to take the American Samoa economic development credit. 1040nr filing Second exception. 1040nr filing   Part of the dividends received from a foreign corporation is U. 1040nr filing S. 1040nr filing source income if 25% or more of its total gross income for the 3-year period ending with the close of its tax year preceding the declaration of dividends was effectively connected with a trade or business in the United States. 1040nr filing If the corporation was formed less than 3 years before the declaration, use its total gross income from the time it was formed. 1040nr filing Determine the part that is U. 1040nr filing S. 1040nr filing source income by multiplying the dividend by the following fraction. 1040nr filing   Foreign corporation's gross income connected with a U. 1040nr filing S. 1040nr filing trade or business for the 3-year period     Foreign corporation's gross income from all sources for that period   Guarantee of Indebtedness Certain amounts received directly or indirectly, for the provision of a guarantee of indebtedness issued after September 27, 2010, are U. 1040nr filing S. 1040nr filing source income. 1040nr filing They must be paid by a noncorporate resident or U. 1040nr filing S. 1040nr filing corporation or by any foreign person if the amounts are effectively connected with the conduct of a U. 1040nr filing S. 1040nr filing trade or business. 1040nr filing For more information, see Internal Revenue Code sections 861(a)(9) and 862(a)(9). 1040nr filing 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. 1040nr filing The only exceptions to this rule are discussed in chapter 3 under Employees of foreign persons, organizations, or offices, and under Crew members. 1040nr filing 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. 1040nr filing Compensation (other than certain fringe benefits) is sourced on a time basis. 1040nr filing Certain fringe benefits (such as housing and education) are sourced on a geographical basis. 1040nr filing Or, you may be permitted to use an alternative basis to determine the source of compensation. 1040nr filing See Alternative Basis , later. 1040nr filing Multi-level marketing. 1040nr filing   Certain companies sell products through a multi-level marketing arrangement, such that an upper-tier distributor, who has sponsored a lower-tier distributor, is entitled to a payment from the company based on certain activities of that lower-tier distributor. 1040nr filing Generally, depending on the facts, payments from such multi-level marketing companies to independent (non-employee) distributors (upper-tier distributors) that are based on the sales or purchases of persons whom they have sponsored (lower-tier distributors) constitute income for the performance of personal services in recruiting, training, and supporting the lower-tier distributors. 1040nr filing The source of such income is generally based on where the services of the upper-tier distributor are performed, and may, depending on the facts, be considered multi-year compensation, with the source of income determined over the period to which such compensation is attributable. 1040nr filing Self-employed individuals. 1040nr filing   If you are self-employed, you determine the source of compensation for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. 1040nr filing In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. 1040nr filing Time Basis Use a time basis to figure your U. 1040nr filing S. 1040nr filing source compensation (other than the fringe benefits discussed later). 1040nr filing 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. 1040nr filing The time period for which the compensation is made does not have to be a year. 1040nr filing 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. 1040nr filing Example 1. 1040nr filing Christina Brooks, a resident of the Netherlands, worked 240 days for a U. 1040nr filing S. 1040nr filing company during the tax year. 1040nr filing She received $80,000 in compensation. 1040nr filing None of it was for fringe benefits. 1040nr filing Christina performed services in the United States for 60 days and performed services in the Netherlands for 180 days. 1040nr filing Using the time basis for determining the source of compensation, $20,000 ($80,000 × 60/240) is her U. 1040nr filing S. 1040nr filing source income. 1040nr filing Example 2. 1040nr filing Rob Waters, a resident of South Africa, is employed by a corporation. 1040nr filing His annual salary is $100,000. 1040nr filing None of it is for fringe benefits. 1040nr filing During the first quarter of the year he worked entirely within the United States. 1040nr filing On April 1, Rob was transferred to Singapore for the remainder of the year. 1040nr filing Rob is able to establish that the first quarter of the year and the last 3 quarters of the year are two separate, distinct, and continuous periods of time. 1040nr filing Accordingly, $25,000 of Rob's annual salary is attributable to the first quarter of the year (. 1040nr filing 25 × $100,000). 1040nr filing All of it is U. 1040nr filing S. 1040nr filing source income because he worked entirely within the United States during that quarter. 1040nr filing The remaining $75,000 is attributable to the last three quarters of the year. 1040nr filing During those quarters, he worked 150 days in Singapore and 30 days in the United States. 1040nr filing His periodic performance of services in the United States did not result in distinct, separate, and continuous periods of time. 1040nr filing Of this $75,000, $12,500 ($75,000 × 30/180) is U. 1040nr filing S. 1040nr filing source income. 1040nr filing Multi-year compensation. 1040nr filing   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. 1040nr filing Multi-year compensation is compensation that is included in your income in one tax year but that is attributable to a period that includes two or more tax years. 1040nr filing   You determine the period to which the compensation is attributable based on the facts and circumstances of your case. 1040nr filing For example, an amount of compensation that specifically relates to a period of time that includes several calendar years is attributable to the entire multi-year period. 1040nr filing   The amount of compensation treated as from U. 1040nr filing S. 1040nr filing sources is figured by multiplying the total multi-year compensation by a fraction. 1040nr filing 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. 1040nr filing 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. 1040nr filing Geographical Basis Compensation you receive as an employee in the form of the following fringe benefits is sourced on a geographical basis. 1040nr filing Housing. 1040nr filing Education. 1040nr filing Local transportation. 1040nr filing Tax reimbursement. 1040nr filing Hazardous or hardship duty pay as defined in Regulations section 1. 1040nr filing 861-4(b)(2)(ii)(D)(5). 1040nr filing Moving expense reimbursement. 1040nr filing The amount of fringe benefits must be reasonable and you must substantiate them by adequate records or by sufficient evidence. 1040nr filing Principal place of work. 1040nr filing   The above fringe benefits, except for tax reimbursement and hazardous or hardship duty pay, are sourced based on your principal place of work. 1040nr filing Your principal place of work is usually the place where you spend most of your working time. 1040nr filing This could be your office, plant, store, shop, or other location. 1040nr filing 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. 1040nr filing   If you have more than one job at any time, your main job location depends on the facts in each case. 1040nr filing 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. 1040nr filing Housing. 1040nr filing   The source of a housing fringe benefit is determined based on the location of your principal place of work. 1040nr filing A housing fringe benefit includes payments to you or on your behalf (and your family's if your family resides with you) only for the following. 1040nr filing Rent. 1040nr filing Utilities (except telephone charges). 1040nr filing Real and personal property insurance. 1040nr filing Occupancy taxes not deductible under section 164 or 216(a). 1040nr filing Nonrefundable fees for securing a leasehold. 1040nr filing Rental of furniture and accessories. 1040nr filing Household repairs. 1040nr filing Residential parking. 1040nr filing Fair rental value of housing provided in kind by your employer. 1040nr filing   A housing fringe benefit does not include: Deductible interest and taxes (including deductible interest and taxes of a tenant-stockholder in a cooperative housing corporation), The cost of buying property, including principal payments on a mortgage, The cost of domestic labor (maids, gardeners, etc. 1040nr filing ), 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. 1040nr filing Education. 1040nr filing   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. 1040nr filing An education fringe benefit includes payments only for the following expenses for education at an elementary or secondary school. 1040nr filing Tuition, fees, academic tutoring, special needs services for a special needs student, books, supplies, and other equipment. 1040nr filing Room and board and uniforms that are required or provided by the school in connection with enrollment or attendance. 1040nr filing Local transportation. 1040nr filing   The source of a local transportation fringe benefit is determined based on the location of your principal place of work. 1040nr filing 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. 1040nr filing The amount treated as a local transportation fringe benefit is limited to actual expenses incurred for local transportation and the fair rental value of any employer-provided vehicle used predominantly by you, your spouse, or your dependents for local transportation. 1040nr filing Actual expenses do not include the cost (including interest) of any vehicle purchased by you or on your behalf. 1040nr filing Tax reimbursement. 1040nr filing   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. 1040nr filing Moving expense reimbursement. 1040nr filing   The source of a moving expense reimbursement is generally based on the location of your new principal place of work. 1040nr filing 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. 1040nr filing Sufficient evidence generally requires an agreement between you and your employer, or a written statement of company policy, which is reduced to writing before the move and which is entered into or established to induce you or other employees to move to another country. 1040nr filing The written statement or agreement must state that your employer will reimburse you for moving expenses that you incur to return to your former principal place of work regardless of whether you continue to work for your employer after returning to that location. 1040nr filing It may contain certain conditions upon which the right to reimbursement is determined as long as those conditions set forth standards that are definitely ascertainable and can only be fulfilled prior to, or through completion of, your return move to your former principal place of work. 1040nr filing 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. 1040nr filing 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. 1040nr filing Also, if your total compensation from all sources is $250,000 or more, check “Yes” to both questions on line K on page 5 of Form 1040NR, and attach a written statement to your tax return that sets forth all of the following. 1040nr filing Your name and social security number (written across the top of the statement). 1040nr filing The specific compensation income, or the specific fringe benefit, for which you are using the alternative basis. 1040nr filing For each item in (2), the alternative basis of allocation of source used. 1040nr filing For each item in (2), a computation showing how the alternative allocation was computed. 1040nr filing A comparison of the dollar amount of the U. 1040nr filing S. 1040nr filing compensation and foreign compensation sourced under both the alternative basis and the time or geographical basis discussed earlier. 1040nr filing 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. 1040nr filing This is true whether the vessel or aircraft is owned, hired, or leased. 1040nr filing The term “vessel or aircraft” includes any container used in connection with a vessel or aircraft. 1040nr filing All income from transportation that begins and ends in the United States is treated as derived from sources in the United States. 1040nr filing If the transportation begins or ends in the United States, 50% of the transportation income is treated as derived from sources in the United States. 1040nr filing For transportation income from personal services, 50% of the income is U. 1040nr filing S. 1040nr filing source income if the transportation is between the United States and a U. 1040nr filing S. 1040nr filing possession. 1040nr filing For nonresident aliens, this only applies to income derived from, or in connection with, an aircraft. 1040nr filing For information on how U. 1040nr filing S. 1040nr filing source transportation income is taxed, see chapter 4. 1040nr filing 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. 1040nr filing However, see Activities to be performed outside the United States , later. 1040nr filing For example, payments for research or study in the United States made by the United States, a noncorporate U. 1040nr filing S. 1040nr filing resident, or a domestic corporation, are from U. 1040nr filing S. 1040nr filing sources. 1040nr filing Similar payments from a foreign government or foreign corporation are foreign source payments even though the funds may be disbursed through a U. 1040nr filing S. 1040nr filing agent. 1040nr filing Payments made by an entity designated as a public international organization under the International Organizations Immunities Act are from foreign sources. 1040nr filing Activities to be performed outside the United States. 1040nr filing   Scholarships, fellowship grants, targeted grants, and achievement awards received by nonresident aliens for activities performed, or to be performed, outside the United States are not U. 1040nr filing S. 1040nr filing source income. 1040nr filing    These rules do not apply to amounts paid as salary or other compensation for services. 1040nr filing See Personal Services, earlier, for the source rules that apply. 1040nr filing Pensions and Annuities If you receive a pension from a domestic trust for services performed both in and outside the United States, part of the pension payment is from U. 1040nr filing S. 1040nr filing sources. 1040nr filing That part is the amount attributable to earnings of the pension plan and the employer contributions made for services performed in the United States. 1040nr filing This applies whether the distribution is made under a qualified or nonqualified stock bonus, pension, profit-sharing, or annuity plan (whether or not funded). 1040nr filing If you performed services as an employee of the United States, you may receive a distribution from the U. 1040nr filing S. 1040nr filing Government under a plan, such as the Civil Service Retirement System, that is treated as a qualified pension plan. 1040nr filing Your U. 1040nr filing S. 1040nr filing source income is the otherwise taxable amount of the distribution that is attributable to your total U. 1040nr filing S. 1040nr filing Government basic pay other than tax-exempt pay for services performed outside the United States. 1040nr filing Rents or Royalties Your U. 1040nr filing S. 1040nr filing 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. 1040nr filing U. 1040nr filing S. 1040nr filing 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. 1040nr filing Real Property Real property is land and buildings and generally anything built on, growing on, or attached to land. 1040nr filing 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. 1040nr filing Natural resources. 1040nr filing   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. 1040nr filing For information on determining that part, see section 1. 1040nr filing 863-1(b) of the regulations. 1040nr filing Table 2-1. 1040nr filing Summary of Source Rules for Income of Nonresident Aliens Item of income Factor determining source Salaries, wages, other compensation Where services performed Business income:   Personal services Where services performed Sale of inventory—purchased Where sold Sale of inventory—produced Allocation Interest Residence of payer Dividends Whether a U. 1040nr filing S. 1040nr filing or foreign corporation* Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. 1040nr filing Where property is used Sale of real property Location of property Sale of personal property Seller's tax home (but see Personal Property , later, for exceptions) Pension distributions attributable to contributions Where services were performed that earned the pension Investment earnings on pension contributions Location of pension trust Sale of natural resources Allocation based on fair market value of product at export terminal. 1040nr filing For more information, see section 1. 1040nr filing 863-1(b) of the regulations. 1040nr filing *Exceptions include: a) Dividends paid by a U. 1040nr filing S. 1040nr filing corporation are foreign source if the corporation elects the  American Samoa economic development credit. 1040nr filing  b) Part of a dividend paid by a foreign corporation is U. 1040nr filing S. 1040nr filing source if at least 25% of the  corporation's gross income is effectively connected with a U. 1040nr filing S. 1040nr filing trade or business for the  3 tax years before the year in which the dividends are declared. 1040nr filing Personal Property Personal property is property, such as machinery, equipment, or furniture, that is not real property. 1040nr filing 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. 1040nr filing 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. 1040nr filing Tax home. 1040nr filing   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. 1040nr filing Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. 1040nr filing 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. 1040nr filing If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. 1040nr filing Inventory property. 1040nr filing   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. 1040nr filing Income from the sale of inventory that you purchased is sourced where the property is sold. 1040nr filing Generally, this is where title to the property passes to the buyer. 1040nr filing For example, income from the sale of inventory in the United States is U. 1040nr filing S. 1040nr filing source income, whether you purchased it in the United States or in a foreign country. 1040nr filing   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. 1040nr filing For information on making this allocation, see section 1. 1040nr filing 863-3 of the regulations. 1040nr filing   These rules apply even if your tax home is not in the United States. 1040nr filing Depreciable property. 1040nr filing   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. 1040nr filing You allocate this part of the gain to sources in the United States based on the ratio of U. 1040nr filing S. 1040nr filing depreciation adjustments to total depreciation adjustments. 1040nr filing The rest of this part of the gain is considered to be from sources outside the United States. 1040nr filing   For this purpose, “U. 1040nr filing S. 1040nr filing depreciation adjustments” are the depreciation adjustments to the basis of the property that are allowable in figuring taxable income from U. 1040nr filing S. 1040nr filing sources. 1040nr filing However, if the property is used predominantly in the United States during a tax year, all depreciation deductions allowable for that year are treated as U. 1040nr filing S. 1040nr filing depreciation adjustments. 1040nr filing But there are some exceptions for certain transportation, communications, and other property used internationally. 1040nr filing   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. 1040nr filing   A loss is sourced in the same way as the depreciation deductions were sourced. 1040nr filing However, if the property was used predominantly in the United States, the entire loss reduces U. 1040nr filing S. 1040nr filing source income. 1040nr filing   The basis of property usually means the cost (money plus the fair market value of other property or services) of property you acquire. 1040nr filing Depreciation is an amount deducted to recover the cost or other basis of a trade or business asset. 1040nr filing The amount you can deduct depends on the property's cost, when you began using the property, how long it will take to recover your cost, and which depreciation method you use. 1040nr filing A depreciation deduction is any deduction for depreciation or amortization or any other allowable deduction that treats a capital expenditure as a deductible expense. 1040nr filing Intangible property. 1040nr filing   Intangible property includes patents, copyrights, secret processes or formulas, goodwill, trademarks, trade names, or other like property. 1040nr filing 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. 1040nr filing This is the same as the source rule for gain from the sale of depreciable property. 1040nr filing See Depreciable property , earlier, for details on how to apply this rule. 1040nr filing   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. 1040nr filing 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. 1040nr filing If payments for goodwill do not depend on its productivity, use, or disposition, their source is the country in which the goodwill was generated. 1040nr filing Sales through offices or fixed places of business. 1040nr filing   Despite any of the earlier rules, if you do not have a tax home in the United States, but you maintain an office or other fixed place of business in the United States, treat the income from any sale of personal property (including inventory property) that is attributable to that office or place of business as U. 1040nr filing S. 1040nr filing source income. 1040nr filing 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. 1040nr filing   If you have a tax home in the United States but maintain an office or other fixed place of business outside the United States, income from sales of personal property, other than inventory, depreciable property, or intangibles, that is attributable to that foreign office or place of business may be treated as U. 1040nr filing S. 1040nr filing source income. 1040nr filing The income is treated as U. 1040nr filing S. 1040nr filing source income if an income tax of less than 10% of the income from the sale is paid to a foreign country. 1040nr filing This rule also applies to losses if the foreign country would have imposed an income tax of less than 10% had the sale resulted in a gain. 1040nr filing Community Income If you are married and you or your spouse is subject to the community property laws of a foreign country, a U. 1040nr filing S. 1040nr filing state, or a U. 1040nr filing S. 1040nr filing possession, you generally must follow those laws to determine the income of yourself and your spouse for U. 1040nr filing S. 1040nr filing tax purposes. 1040nr filing But you must disregard certain community property laws if: Both you and your spouse are nonresident aliens, or One of you is a nonresident alien and the other is a U. 1040nr filing S. 1040nr filing citizen or resident and you do not both choose to be treated as U. 1040nr filing S. 1040nr filing residents as explained in chapter 1. 1040nr filing In these cases, you and your spouse must report community income as explained later. 1040nr filing Earned income. 1040nr filing   Earned income of a spouse, other than trade or business income and a partner's distributive share of partnership income, is treated as the income of the spouse whose services produced the income. 1040nr filing That spouse must report all of it on his or her separate return. 1040nr filing Trade or business income. 1040nr filing   Trade or business income, other than a partner's distributive share of partnership income, is treated as the income of the spouse carrying on the trade or business. 1040nr filing That spouse must report all of it on his or her separate return. 1040nr filing Partnership income (or loss). 1040nr filing   A partner's distributive share of partnership income (or loss) is treated as the income (or loss) of the partner. 1040nr filing The partner must report all of it on his or her separate return. 1040nr filing Separate property income. 1040nr filing   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. 1040nr filing That spouse must report all of it on his or her separate return. 1040nr filing Use the appropriate community property law to determine what is separate property. 1040nr filing Other community income. 1040nr filing   All other community income is treated as provided by the applicable community property laws. 1040nr filing Prev  Up  Next   Home   More Online Publications