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2010 Tax Act Online Login

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2010 Tax Act Online Login

2010 tax act online login 4. 2010 tax act online login   How Income of Aliens Is Taxed Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident Aliens Nonresident AliensTrade or Business in the United States Effectively Connected Income The 30% Tax Income From Real Property Transportation Tax Interrupted Period of Residence Expatriation TaxExpatriation Before June 4, 2004 Expatriation After June 3, 2004, and Before June 17, 2008 Expatriation After June 16, 2008 Introduction Resident and nonresident aliens are taxed in different ways. 2010 tax act online login Resident aliens are generally taxed in the same way as U. 2010 tax act online login S. 2010 tax act online login citizens. 2010 tax act online login Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business and how it is taxed. 2010 tax act online login Topics - This chapter discusses: Income that is effectively connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login Income that is not effectively connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login Interrupted period of residence. 2010 tax act online login Expatriation tax. 2010 tax act online login Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 1212 List of Original Issue Discount Instruments Form (and Instructions) 6251 Alternative Minimum Tax—Individuals Schedule D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting these publications and forms. 2010 tax act online login Resident Aliens Resident aliens are generally taxed in the same way as U. 2010 tax act online login S. 2010 tax act online login citizens. 2010 tax act online login This means that their worldwide income is subject to U. 2010 tax act online login S. 2010 tax act online login tax and must be reported on their U. 2010 tax act online login S. 2010 tax act online login tax return. 2010 tax act online login Income of resident aliens is subject to the graduated tax rates that apply to U. 2010 tax act online login S. 2010 tax act online login citizens. 2010 tax act online login Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. 2010 tax act online login S. 2010 tax act online login citizens. 2010 tax act online login Nonresident Aliens A nonresident alien's income that is subject to U. 2010 tax act online login S. 2010 tax act online login income tax must be divided into two categories: Income that is effectively connected with a trade or business in the United States, and Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later). 2010 tax act online login The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. 2010 tax act online login These are the same rates that apply to U. 2010 tax act online login S. 2010 tax act online login citizens and residents. 2010 tax act online login Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. 2010 tax act online login If you were formerly a U. 2010 tax act online login S. 2010 tax act online login citizen or resident alien, these rules may not apply. 2010 tax act online login See Expatriation Tax, later, in this chapter. 2010 tax act online login Trade or Business in the United States Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. 2010 tax act online login Whether you are engaged in a trade or business in the United States depends on the nature of your activities. 2010 tax act online login The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. 2010 tax act online login Personal Services If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States. 2010 tax act online login Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. 2010 tax act online login For more information, see Services Performed for Foreign Employer in chapter 3. 2010 tax act online login Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. 2010 tax act online login Students and trainees. 2010 tax act online login   You are considered engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant under an “F,” “J,” “M,” or “Q” visa. 2010 tax act online login A nonresident alien temporarily present in the United States under a “J” visa includes a nonresident alien individual admitted to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. 2010 tax act online login The taxable part of any scholarship or fellowship grant that is U. 2010 tax act online login S. 2010 tax act online login source income is treated as effectively connected with a trade or business in the United States. 2010 tax act online login Business operations. 2010 tax act online login   If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. 2010 tax act online login Partnerships. 2010 tax act online login   If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. 2010 tax act online login Beneficiary of an estate or trust. 2010 tax act online login   If you are the beneficiary of an estate or trust that is engaged in a trade or business in the United States, you are treated as being engaged in the same trade or business. 2010 tax act online login Trading in stocks, securities, and commodities. 2010 tax act online login   If your only U. 2010 tax act online login S. 2010 tax act online login business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. 2010 tax act online login S. 2010 tax act online login resident broker or other agent, you are not engaged in a trade or business in the United States. 2010 tax act online login   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. 2010 tax act online login   For transactions in commodities, this applies to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange. 2010 tax act online login   This discussion does not apply if you have a U. 2010 tax act online login S. 2010 tax act online login office or other fixed place of business at any time during the tax year through which, or by the direction of which, you carry out your transactions in stocks, securities, or commodities. 2010 tax act online login Trading for a nonresident alien's own account. 2010 tax act online login   You are not engaged in a trade or business in the United States if trading for your own account in stocks, securities, or commodities is your only U. 2010 tax act online login S. 2010 tax act online login business activity. 2010 tax act online login This applies even if the trading takes place while you are present in the United States or is done by your employee or your broker or other agent. 2010 tax act online login   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. 2010 tax act online login This does not necessarily mean, however, that as a dealer you are considered to be engaged in a trade or business in the United States. 2010 tax act online login Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . 2010 tax act online login Effectively Connected Income If you are engaged in a U. 2010 tax act online login S. 2010 tax act online login trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income. 2010 tax act online login This applies whether or not there is any connection between the income and the trade or business being carried on in the United States during the tax year. 2010 tax act online login Two tests, described next under Investment Income, determine whether certain items of investment income (such as interest, dividends, and royalties) are treated as effectively connected with that business. 2010 tax act online login In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. 2010 tax act online login For a discussion of these rules, see Foreign Income , later. 2010 tax act online login Investment Income Investment income from U. 2010 tax act online login S. 2010 tax act online login sources that may or may not be treated as effectively connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business generally falls into the following three categories. 2010 tax act online login Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. 2010 tax act online login ). 2010 tax act online login Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. 2010 tax act online login Timber, coal, or domestic iron ore with a retained economic interest. 2010 tax act online login Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. 2010 tax act online login Patents transferred before October 5, 1966. 2010 tax act online login Original issue discount obligations. 2010 tax act online login Capital gains (and losses). 2010 tax act online login Use the two tests, described next, to determine whether an item of U. 2010 tax act online login S. 2010 tax act online login source income falling in one of the three categories above and received during the tax year is effectively connected with your U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. 2010 tax act online login If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. 2010 tax act online login Asset-use test. 2010 tax act online login   This test usually applies to income that is not directly produced by trade or business activities. 2010 tax act online login Under this test, if an item of income is from assets (property) used in, or held for use in, the trade or business in the United States, it is considered effectively connected. 2010 tax act online login   An asset is used in, or held for use in, the trade or business in the United States if the asset is: Held for the principal purpose of promoting the conduct of a trade or business in the United States, Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs. 2010 tax act online login Generally, stock of a corporation is not treated as an asset used in, or held for use in, a trade or business in the United States. 2010 tax act online login Business-activities test. 2010 tax act online login   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. 2010 tax act online login The business-activities test is most important when: Dividends or interest are received by a dealer in stocks or securities, Royalties are received in the trade or business of licensing patents or similar property, or Service fees are earned by a servicing business. 2010 tax act online login Under this test, if the conduct of the U. 2010 tax act online login S. 2010 tax act online login trade or business was a material factor in producing the income, the income is considered effectively connected. 2010 tax act online login Personal Service Income You usually are engaged in a U. 2010 tax act online login S. 2010 tax act online login trade or business when you perform personal services in the United States. 2010 tax act online login Personal service income you receive in a tax year in which you are engaged in a U. 2010 tax act online login S. 2010 tax act online login trade or business is effectively connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. 2010 tax act online login Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. 2010 tax act online login The income may be paid to you in the form of cash, services, or property. 2010 tax act online login If you are engaged in a U. 2010 tax act online login S. 2010 tax act online login trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. 2010 tax act online login However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected. 2010 tax act online login Pensions. 2010 tax act online login   If you were a nonresident alien engaged in a U. 2010 tax act online login S. 2010 tax act online login trade or business after 1986 because you performed personal services in the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected income in each year you receive them. 2010 tax act online login This is true whether or not you are engaged in a U. 2010 tax act online login S. 2010 tax act online login trade or business in the year you receive the retirement pay. 2010 tax act online login Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. 2010 tax act online login You had a fixed place of business in the United States involved in earning the income. 2010 tax act online login At least 90% of your U. 2010 tax act online login S. 2010 tax act online login source transportation income is attributable to regularly scheduled transportation. 2010 tax act online login “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. 2010 tax act online login “Regularly scheduled transportation” means that a ship or aircraft follows a published schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United States. 2010 tax act online login This definition applies to both scheduled and chartered air transportation. 2010 tax act online login If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. 2010 tax act online login See Transportation Tax, later, in this chapter. 2010 tax act online login Business Profits and Losses and Sales Transactions All profits or losses from U. 2010 tax act online login S. 2010 tax act online login sources that are from the operation of a business in the United States are effectively connected with a trade or business in the United States. 2010 tax act online login For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. 2010 tax act online login A share of U. 2010 tax act online login S. 2010 tax act online login source profits or losses of a partnership that is engaged in a trade or business in the United States is also effectively connected with a trade or business in the United States. 2010 tax act online login Real Property Gain or Loss Gains and losses from the sale or exchange of U. 2010 tax act online login S. 2010 tax act online login real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. 2010 tax act online login You must treat the gain or loss as effectively connected with that trade or business. 2010 tax act online login U. 2010 tax act online login S. 2010 tax act online login real property interest. 2010 tax act online login   This is any interest in real property located in the United States or the U. 2010 tax act online login S. 2010 tax act online login Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. 2010 tax act online login S. 2010 tax act online login real property holding corporation. 2010 tax act online login Real property includes the following. 2010 tax act online login Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. 2010 tax act online login Improvements on land, including buildings, other permanent structures, and their structural components. 2010 tax act online login Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is: Disposed of more than one year before or after the disposition of the real property, or Separately sold to persons unrelated either to the seller or to the buyer of the real property. 2010 tax act online login U. 2010 tax act online login S. 2010 tax act online login real property holding corporation. 2010 tax act online login   A corporation is a U. 2010 tax act online login S. 2010 tax act online login real property holding corporation if the fair market value of the corporation's U. 2010 tax act online login S. 2010 tax act online login real property interests are at least 50% of the total fair market value of: The corporation's U. 2010 tax act online login S. 2010 tax act online login real property interests, plus The corporation's interests in real property located outside the United States, plus The corporation's other assets that are used in, or held for use in, a trade or business. 2010 tax act online login   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. 2010 tax act online login S. 2010 tax act online login trade or business unless you establish that the corporation is not a U. 2010 tax act online login S. 2010 tax act online login real property holding corporation. 2010 tax act online login   A U. 2010 tax act online login S. 2010 tax act online login real property interest does not include a class of stock of a corporation that is regularly traded on an established securities market, unless you hold more than 5% of the fair market value of that class of stock. 2010 tax act online login An interest in a foreign corporation owning U. 2010 tax act online login S. 2010 tax act online login real property generally is not a U. 2010 tax act online login S. 2010 tax act online login real property interest unless the corporation chooses to be treated as a domestic corporation. 2010 tax act online login Qualified investment entities. 2010 tax act online login   Special rules apply to qualified investment entities (QIEs). 2010 tax act online login A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. 2010 tax act online login S. 2010 tax act online login real property holding corporation. 2010 tax act online login    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. 2010 tax act online login S. 2010 tax act online login real property interest is treated as a U. 2010 tax act online login S. 2010 tax act online login real property gain by the shareholder receiving the distribution. 2010 tax act online login A distribution by a QIE on stock regularly traded on an established securities market in the United States is not treated as gain from the sale or exchange of a U. 2010 tax act online login S. 2010 tax act online login real property interest if you did not own more than 5% of that stock at any time during the 1-year period ending on the date of the distribution. 2010 tax act online login A distribution that you do not treat as gain from the sale or exchange of a U. 2010 tax act online login S. 2010 tax act online login real property interest is included in your gross income as a regular dividend. 2010 tax act online login Note. 2010 tax act online login Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. 2010 tax act online login S. 2010 tax act online login real property holding corporation will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. 2010 tax act online login Domestically controlled QIE. 2010 tax act online login   The sale of an interest in a domestically controlled QIE is not the sale of a U. 2010 tax act online login S. 2010 tax act online login real property interest. 2010 tax act online login The entity is domestically controlled if at all times during the testing period less than 50% in value of its stock was held, directly or indirectly, by foreign persons. 2010 tax act online login The testing period is the shorter of (a) the 5-year period ending on the date of disposition, or (b) the period during which the entity was in existence. 2010 tax act online login Wash sale. 2010 tax act online login    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. 2010 tax act online login An applicable wash sale transaction is one in which you: Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U. 2010 tax act online login S. 2010 tax act online login real property interest, and Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period. 2010 tax act online login If this occurs, you are treated as having gain from the sale or exchange of a U. 2010 tax act online login S. 2010 tax act online login real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. 2010 tax act online login This also applies to any substitute dividend payment. 2010 tax act online login   A transaction is not treated as an applicable wash sale transaction if: You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution. 2010 tax act online login Alternative minimum tax. 2010 tax act online login   There may be a minimum tax on your net gain from the disposition of U. 2010 tax act online login S. 2010 tax act online login real property interests. 2010 tax act online login Figure the amount of this tax, if any, on Form 6251. 2010 tax act online login Withholding of tax. 2010 tax act online login   If you dispose of a U. 2010 tax act online login S. 2010 tax act online login real property interest, the buyer may have to withhold tax. 2010 tax act online login See the discussion of Tax Withheld on Real Property Sales in chapter 8. 2010 tax act online login Foreign Income You must treat three kinds of foreign source income as effectively connected with a trade or business in the United States if: You have an office or other fixed place of business in the United States to which the income can be attributed, That office or place of business is a material factor in producing the income, and The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. 2010 tax act online login An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. 2010 tax act online login The three kinds of foreign source income are listed below. 2010 tax act online login Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. 2010 tax act online login Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States. 2010 tax act online login Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. 2010 tax act online login A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. 2010 tax act online login Income, gain, or loss from the sale outside the United States, through the U. 2010 tax act online login S. 2010 tax act online login office or other fixed place of business, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. 2010 tax act online login Item (3) will not apply if you sold the property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a foreign country was a material factor in the sale. 2010 tax act online login Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login For example, foreign source interest and dividend equivalents are treated as U. 2010 tax act online login S. 2010 tax act online login effectively connected income if the income is derived by a foreign person in the active conduct of a banking, financing, or similar business within the United States. 2010 tax act online login Tax on Effectively Connected Income Income you receive during the tax year that is effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U. 2010 tax act online login S. 2010 tax act online login citizens and residents. 2010 tax act online login Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. 2010 tax act online login However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services. 2010 tax act online login Example. 2010 tax act online login Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. 2010 tax act online login S. 2010 tax act online login office of his overseas employer. 2010 tax act online login He worked in the U. 2010 tax act online login S. 2010 tax act online login office until December 25, 2012, but did not leave this country until January 11, 2013. 2010 tax act online login On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. 2010 tax act online login All of Ted's income during his stay here is U. 2010 tax act online login S. 2010 tax act online login source income. 2010 tax act online login During 2012, Ted was engaged in the trade or business of performing personal services in the United States. 2010 tax act online login Therefore, all amounts paid to him in 2012 for services performed in the United States during 2012 are effectively connected with that trade or business during 2012. 2010 tax act online login The salary payment Ted received in January 2013 is U. 2010 tax act online login S. 2010 tax act online login source income to him in 2013. 2010 tax act online login It is effectively connected with a trade or business in the United States because he was engaged in a trade or business in the United States during 2012 when he performed the services that earned the income. 2010 tax act online login Real property income. 2010 tax act online login   You may be able to choose to treat all income from real property as effectively connected. 2010 tax act online login See Income From Real Property , later, in this chapter. 2010 tax act online login The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. 2010 tax act online login S. 2010 tax act online login sources but only if the items are not effectively connected with your U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. 2010 tax act online login S. 2010 tax act online login source fixed or determinable annual or periodic gains, profits, or income. 2010 tax act online login Income is fixed when it is paid in amounts known ahead of time. 2010 tax act online login Income is determinable whenever there is a basis for figuring the amount to be paid. 2010 tax act online login Income can be periodic if it is paid from time to time. 2010 tax act online login It does not have to be paid annually or at regular intervals. 2010 tax act online login Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. 2010 tax act online login Items specifically included as fixed or determinable income are interest (other than original issue discount), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. 2010 tax act online login A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. 2010 tax act online login Other items of income, such as royalties, also may be subject to the 30% tax. 2010 tax act online login Some fixed or determinable income may be exempt from U. 2010 tax act online login S. 2010 tax act online login tax. 2010 tax act online login See chapter 3 if you are not sure whether the income is taxable. 2010 tax act online login Original issue discount (OID). 2010 tax act online login   If you sold, exchanged, or received a payment on a bond or other debt instrument that was issued at a discount after March 31, 1972, all or part of the original issue discount (OID) (other than portfolio interest) may be subject to the 30% tax. 2010 tax act online login The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. 2010 tax act online login The 30% tax applies in the following circumstances. 2010 tax act online login You received a payment on a debt instrument. 2010 tax act online login In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. 2010 tax act online login But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. 2010 tax act online login You sold or exchanged the debt instrument. 2010 tax act online login The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above. 2010 tax act online login   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. 2010 tax act online login S. 2010 tax act online login Source Income Subject to Withholding, if you bought the debt instrument at original issue. 2010 tax act online login However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. 2010 tax act online login You bought the debt instrument at a premium or paid an acquisition premium. 2010 tax act online login The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. 2010 tax act online login S. 2010 tax act online login Treasury securities). 2010 tax act online login The debt instrument is a contingent payment or inflation-indexed debt instrument. 2010 tax act online login For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. 2010 tax act online login   If you held a bond or other debt instrument that was issued at a discount before April 1, 1972, contact the IRS for further information. 2010 tax act online login See chapter 12. 2010 tax act online login Gambling Winnings In general, nonresident aliens are subject to the 30% tax on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business and is not exempted by treaty. 2010 tax act online login However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. 2010 tax act online login Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login Social Security Benefits A nonresident alien must include 85% of any U. 2010 tax act online login S. 2010 tax act online login social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. 2010 tax act online login S. 2010 tax act online login source fixed or determinable annual or periodic income. 2010 tax act online login Social security benefits include monthly retirement, survivor, and disability benefits. 2010 tax act online login This income is exempt under some tax treaties. 2010 tax act online login See Table 1 in Publication 901, U. 2010 tax act online login S. 2010 tax act online login Tax Treaties, for a list of tax treaties that exempt U. 2010 tax act online login S. 2010 tax act online login social security benefits from U. 2010 tax act online login S. 2010 tax act online login tax. 2010 tax act online login Sales or Exchanges of Capital Assets These rules apply only to those capital gains and losses from sources in the United States that are not effectively connected with a trade or business in the United States. 2010 tax act online login They apply even if you are engaged in a trade or business in the United States. 2010 tax act online login These rules do not apply to the sale or exchange of a U. 2010 tax act online login S. 2010 tax act online login real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. 2010 tax act online login See Real Property Gain or Loss , earlier, under Effectively Connected Income. 2010 tax act online login A capital asset is everything you own except: Inventory. 2010 tax act online login Business accounts or notes receivable. 2010 tax act online login Depreciable property used in a trade or business. 2010 tax act online login Real property used in a trade or business. 2010 tax act online login Supplies regularly used in a trade or business. 2010 tax act online login Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. 2010 tax act online login Certain U. 2010 tax act online login S. 2010 tax act online login government publications. 2010 tax act online login Certain commodities derivative financial instruments held by a commodities derivatives dealer. 2010 tax act online login Hedging transactions. 2010 tax act online login A capital gain is a gain on the sale or exchange of a capital asset. 2010 tax act online login A capital loss is a loss on the sale or exchange of a capital asset. 2010 tax act online login If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U. 2010 tax act online login S. 2010 tax act online login currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. 2010 tax act online login You may want to read Publication 544. 2010 tax act online login However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. 2010 tax act online login Specific tax treatment that applies to U. 2010 tax act online login S. 2010 tax act online login citizens or residents generally does not apply to you. 2010 tax act online login The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. 2010 tax act online login Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. 2010 tax act online login Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. 2010 tax act online login Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. 2010 tax act online login Gains on the sale or exchange of original issue discount obligations. 2010 tax act online login Gains in (1) are not subject to the 30% (or lower treaty) rate if you choose to treat the gains as effectively connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login See Income From Real Property , later. 2010 tax act online login 183-day rule. 2010 tax act online login   If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. 2010 tax act online login For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. 2010 tax act online login S. 2010 tax act online login sources over your capital losses from U. 2010 tax act online login S. 2010 tax act online login sources. 2010 tax act online login This rule applies even if any of the transactions occurred while you were not in the United States. 2010 tax act online login   To determine your net gain, consider the amount of your gains and losses that would be recognized and taken into account only if, and to the extent that, they would be recognized and taken into account if you were in a U. 2010 tax act online login S. 2010 tax act online login trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. 2010 tax act online login   In arriving at your net gain, do not take the following into consideration. 2010 tax act online login The four types of gains listed earlier. 2010 tax act online login The deduction for a capital loss carryover. 2010 tax act online login Capital losses in excess of capital gains. 2010 tax act online login Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). 2010 tax act online login Losses from the sale or exchange of property held for personal use. 2010 tax act online login However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). 2010 tax act online login See Itemized Deductions in chapter 5. 2010 tax act online login   If you are not engaged in a trade or business in the United States and have not established a tax year for a prior period, your tax year will be the calendar year for purposes of the 183-day rule. 2010 tax act online login Also, you must file your tax return on a calendar-year basis. 2010 tax act online login   If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year. 2010 tax act online login Reporting. 2010 tax act online login   Report your gains and losses from the sales or exchanges of capital assets that are not effectively connected with a trade or business in the United States on page 4 of Form 1040NR. 2010 tax act online login Report gains and losses from sales or exchanges of capital assets (including real property) that are effectively connected with a trade or business in the United States on a separate Schedule D (Form 1040), Form 4797, or both. 2010 tax act online login Attach them to Form 1040NR. 2010 tax act online login Income From Real Property If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. 2010 tax act online login The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. 2010 tax act online login This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. 2010 tax act online login It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. 2010 tax act online login You can make this choice only for real property income that is not otherwise effectively connected with your U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed. 2010 tax act online login This choice does not treat a nonresident alien, who is not otherwise engaged in a U. 2010 tax act online login S. 2010 tax act online login trade or business, as being engaged in a trade or business in the United States during the year. 2010 tax act online login Example. 2010 tax act online login You are a nonresident alien and are not engaged in a U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login You own a single-family house in the United States that you rent out. 2010 tax act online login Your rental income for the year is $10,000. 2010 tax act online login This is your only U. 2010 tax act online login S. 2010 tax act online login source income. 2010 tax act online login As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. 2010 tax act online login You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. 2010 tax act online login You do not have to file a U. 2010 tax act online login S. 2010 tax act online login tax return (Form 1040NR) because your U. 2010 tax act online login S. 2010 tax act online login tax liability is satisfied by the withholding of tax. 2010 tax act online login If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. 2010 tax act online login (See Publication 527, Residential Rental Property, for information on rental expenses. 2010 tax act online login ) Any resulting net income is taxed at graduated rates. 2010 tax act online login If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. 2010 tax act online login For the first year you make the choice, also attach the statement discussed next. 2010 tax act online login Making the choice. 2010 tax act online login   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. 2010 tax act online login Include the following in your statement. 2010 tax act online login That you are making the choice. 2010 tax act online login Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. 2010 tax act online login A complete list of all your real property, or any interest in real property, located in the United States. 2010 tax act online login Give the legal identification of U. 2010 tax act online login S. 2010 tax act online login timber, coal, or iron ore in which you have an interest. 2010 tax act online login The extent of your ownership in the property. 2010 tax act online login The location of the property. 2010 tax act online login A description of any major improvements to the property. 2010 tax act online login The dates you owned the property. 2010 tax act online login Your income from the property. 2010 tax act online login Details of any previous choices and revocations of the real property income choice. 2010 tax act online login   This choice stays in effect for all later tax years unless you revoke it. 2010 tax act online login Revoking the choice. 2010 tax act online login   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. 2010 tax act online login S. 2010 tax act online login Individual Income Tax Return, for the year you made the choice and for later tax years. 2010 tax act online login You must file Form 1040X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. 2010 tax act online login If this time period has expired for the year of choice, you cannot revoke the choice for that year. 2010 tax act online login However, you may revoke the choice for later tax years only if you have IRS approval. 2010 tax act online login For information on how to get IRS approval, see Regulation section 1. 2010 tax act online login 871-10(d)(2). 2010 tax act online login Transportation Tax A 4% tax rate applies to transportation income that is not effectively connected because it does not meet the two conditions listed earlier under Transportation Income . 2010 tax act online login If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. 2010 tax act online login Attach a statement to your return that includes the following information (if applicable). 2010 tax act online login Your name, taxpayer identification number, and tax year. 2010 tax act online login A description of the types of services performed (whether on or off board). 2010 tax act online login Names of vessels or registration numbers of aircraft on which you performed the services. 2010 tax act online login Amount of U. 2010 tax act online login S. 2010 tax act online login source transportation income derived from each type of service for each vessel or aircraft for the calendar year. 2010 tax act online login Total amount of U. 2010 tax act online login S. 2010 tax act online login source transportation income derived from all types of services for the calendar year. 2010 tax act online login This 4% tax applies to your U. 2010 tax act online login S. 2010 tax act online login source gross transportation income. 2010 tax act online login This only includes transportation income that is treated as derived from sources in the United States if the transportation begins or ends in the United States. 2010 tax act online login For transportation income from personal services, the transportation must be between the United States and a U. 2010 tax act online login S. 2010 tax act online login possession. 2010 tax act online login For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. 2010 tax act online login Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. 2010 tax act online login S. 2010 tax act online login residence with a period of nonresidence. 2010 tax act online login The special rule applies if you meet all of the following conditions. 2010 tax act online login You were a U. 2010 tax act online login S. 2010 tax act online login resident for a period that includes at least 3 consecutive calendar years. 2010 tax act online login You were a U. 2010 tax act online login S. 2010 tax act online login resident for at least 183 days in each of those years. 2010 tax act online login You ceased to be treated as a U. 2010 tax act online login S. 2010 tax act online login resident. 2010 tax act online login You then again became a U. 2010 tax act online login S. 2010 tax act online login resident before the end of the third calendar year after the end of the period described in (1) above. 2010 tax act online login Under this special rule, you are subject to tax on your U. 2010 tax act online login S. 2010 tax act online login source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) for the period you were a nonresident alien, unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login For information on how to figure the special tax, see How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) under Expatriation Tax , below. 2010 tax act online login Example. 2010 tax act online login John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. 2010 tax act online login On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. 2010 tax act online login During his period of residence, he was present in the United States for at least 183 days in each of three consecutive years (2008, 2009, and 2010). 2010 tax act online login He returned to the United States on October 5, 2013, as a lawful permanent resident. 2010 tax act online login He became a resident before the close of the third calendar year (2013) beginning after the end of his first period of residence (August 1, 2010). 2010 tax act online login Therefore, he is subject to tax under the special rule for the period of nonresidence (August 2, 2010, through October 4, 2013) if it is more than the tax that would normally apply to him as a nonresident alien. 2010 tax act online login Reporting requirements. 2010 tax act online login   If you are subject to this tax for any year in the period you were a nonresident alien, you must file Form 1040NR for that year. 2010 tax act online login The return is due by the due date (including extensions) for filing your U. 2010 tax act online login S. 2010 tax act online login income tax return for the year that you again become a U. 2010 tax act online login S. 2010 tax act online login resident. 2010 tax act online login If you already filed returns for that period, you must file amended returns. 2010 tax act online login You must attach a statement to your return that identifies the source of all of your U. 2010 tax act online login S. 2010 tax act online login and foreign gross income and the items of income subject to this special rule. 2010 tax act online login Expatriation Tax The expatriation tax provisions apply to U. 2010 tax act online login S. 2010 tax act online login citizens who have renounced their citizenship and long-term residents who have ended their residency. 2010 tax act online login The rules that apply are based on the dates of expatriation, which are described in the following sections. 2010 tax act online login Expatriation Before June 4, 2004. 2010 tax act online login Expatriation After June 3, 2004, and Before June 17, 2008. 2010 tax act online login Expatriation After June 16, 2008. 2010 tax act online login Long-term resident defined. 2010 tax act online login   You are a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency ends. 2010 tax act online login In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits. 2010 tax act online login Expatriation Before June 4, 2004 If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U. 2010 tax act online login S. 2010 tax act online login taxes. 2010 tax act online login Unless you received a ruling from the IRS that you did not expatriate to avoid U. 2010 tax act online login S. 2010 tax act online login taxes, you are presumed to have tax avoidance as a principal purpose if: Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or Your net worth on the date of your action was $500,000 or more. 2010 tax act online login The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). 2010 tax act online login Table 4-1. 2010 tax act online login Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . 2010 tax act online login . 2010 tax act online login . 2010 tax act online login   THEN the rules outlined on this page apply if . 2010 tax act online login . 2010 tax act online login . 2010 tax act online login     Your 5-year average annual net income tax was more than . 2010 tax act online login . 2010 tax act online login . 2010 tax act online login OR Your net worth equaled or exceeded . 2010 tax act online login . 2010 tax act online login . 2010 tax act online login 1999   110,000   552,000 2000   112,000   562,000 2001   116,000   580,000 2002   120,000   599,000 2003   122,000   608,000 2004 (before June 4)*   124,000   622,000 *If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008. 2010 tax act online login Reporting requirements. 2010 tax act online login   If you lost your U. 2010 tax act online login S. 2010 tax act online login citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. 2010 tax act online login If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended. 2010 tax act online login   Your U. 2010 tax act online login S. 2010 tax act online login residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits. 2010 tax act online login Penalties. 2010 tax act online login   If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. 2010 tax act online login The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. 2010 tax act online login The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. 2010 tax act online login Expatriation tax. 2010 tax act online login   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. 2010 tax act online login It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. 2010 tax act online login See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. 2010 tax act online login Expatriation After June 3, 2004, and Before June 17, 2008 If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply to you if any of the following statements apply. 2010 tax act online login Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than: $124,000 if you expatriated or terminated residency in 2004. 2010 tax act online login $127,000 if you expatriated or terminated residency in 2005. 2010 tax act online login $131,000 if you expatriated or terminated residency in 2006. 2010 tax act online login $136,000 if you expatriated or terminated residency in 2007. 2010 tax act online login $139,000 if you expatriated or terminated residency in 2008. 2010 tax act online login Your net worth is $2 million or more on the date of your expatriation or termination of residency. 2010 tax act online login You fail to certify on Form 8854 that you have complied with all U. 2010 tax act online login S. 2010 tax act online login federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. 2010 tax act online login Exception for dual-citizens and certain minors. 2010 tax act online login   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. 2010 tax act online login However, they still must provide the certification required in (3). 2010 tax act online login Certain dual-citizens. 2010 tax act online login   You may qualify for the exception described above if all of the following apply. 2010 tax act online login You became at birth a U. 2010 tax act online login S. 2010 tax act online login citizen and a citizen of another country and you continue to be a citizen of that other country. 2010 tax act online login You were never a resident alien of the United States (as defined in chapter 1). 2010 tax act online login You never held a U. 2010 tax act online login S. 2010 tax act online login passport. 2010 tax act online login You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. 2010 tax act online login S. 2010 tax act online login citizenship. 2010 tax act online login Certain minors. 2010 tax act online login   You may qualify for the exception described above if you meet all of the following requirements. 2010 tax act online login You became a U. 2010 tax act online login S. 2010 tax act online login citizen at birth. 2010 tax act online login Neither of your parents was a U. 2010 tax act online login S. 2010 tax act online login citizen at the time of your birth. 2010 tax act online login You expatriated before you were 18½. 2010 tax act online login You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation. 2010 tax act online login Tax consequences of presence in the United States. 2010 tax act online login   The following rules apply if you do not meet the exception above for dual-citizens and certain minors and the expatriation rules would otherwise apply to you. 2010 tax act online login   The expatriation tax does not apply to any tax year during the 10-year period if you are physically present in the United States for more than 30 days during the calendar year ending in that year. 2010 tax act online login Instead, you are treated as a U. 2010 tax act online login S. 2010 tax act online login citizen or resident and taxed on your worldwide income for that tax year. 2010 tax act online login You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. 2010 tax act online login   When counting the number of days of presence during a calendar year, count any day you were physically present in the United States at any time during the day. 2010 tax act online login However, do not count any days (up to a limit of 30 days) on which you performed personal services in the United States for an employer who is not related to you if either of the following apply. 2010 tax act online login You have ties with other countries. 2010 tax act online login You have ties with other countries if: You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident of the country in which you, your spouse, or either of your parents were born, and You became fully liable for income tax in that country. 2010 tax act online login You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. 2010 tax act online login Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. 2010 tax act online login See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. 2010 tax act online login Related employer. 2010 tax act online login   If your employer in the United States is any of the following, then your employer is related to you. 2010 tax act online login You must count any days you performed services in the United States for that employer as days of presence in the United States. 2010 tax act online login Members of your family. 2010 tax act online login This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. 2010 tax act online login ), and lineal descendants (children, grandchildren, etc. 2010 tax act online login ). 2010 tax act online login A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. 2010 tax act online login A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. 2010 tax act online login (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. 2010 tax act online login ) A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. 2010 tax act online login Date of tax expatriation. 2010 tax act online login   For purposes of U. 2010 tax act online login S. 2010 tax act online login tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. 2010 tax act online login You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. 2010 tax act online login You file Form 8854 in accordance with the form instructions. 2010 tax act online login Annual return. 2010 tax act online login   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. 2010 tax act online login You must file this form even if you owe no U. 2010 tax act online login S. 2010 tax act online login tax. 2010 tax act online login Penalty. 2010 tax act online login   If you fail to file Form 8854 for any tax year, fail to include all information required to be shown on the form, or include incorrect information, you may have to pay a penalty of $10,000. 2010 tax act online login You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. 2010 tax act online login How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) If the expatriation tax applies to you, you are generally subject to tax on your U. 2010 tax act online login S. 2010 tax act online login source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. 2010 tax act online login S. 2010 tax act online login trade or business. 2010 tax act online login For this purpose, U. 2010 tax act online login S. 2010 tax act online login source gross income (defined in chapter 2) includes gains from the sale or exchange of: Property (other than stock or debt obligations) located in the United States, Stock issued by a U. 2010 tax act online login S. 2010 tax act online login domestic corporation, and Debt obligations of U. 2010 tax act online login S. 2010 tax act online login persons or of the United States, a state or political subdivision thereof, or the District of Columbia. 2010 tax act online login U. 2010 tax act online login S. 2010 tax act online login source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or were considered to own, at any time during the 2-year period ending on the date of expatriation, more than 50% of: The total combined voting power of all classes of that corporation's stock, or The total value of the stock. 2010 tax act online login The income or gain is considered U. 2010 tax act online login S. 2010 tax act online login source income only to the extent of your share of earnings and profits earned or accumulated before the date of expatriation and during the periods you met the ownership requirements discussed above. 2010 tax act online login Any exchange of property is treated as a sale of the property at its fair market value on the date of the exchange and any gain is treated as U. 2010 tax act online login S. 2010 tax act online login source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. 2010 tax act online login Other information. 2010 tax act online login   For more information on the expatriation tax provisions, including exceptions to the tax and special U. 2010 tax act online login S. 2010 tax act online login source rules, see section 877 of the Internal Revenue Code. 2010 tax act online login Expatriation Tax Return If you expatriated or terminated your U. 2010 tax act online login S. 2010 tax act online login residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. 2010 tax act online login Attach it to Form 1040NR if you are required to file that form. 2010 tax act online login If you are present in the United States following your expatriation and are subject to tax as a U. 2010 tax act online login S. 2010 tax act online login citizen or resident, file Form 8854 with Form 1040. 2010 tax act online login Expatriation After June 16, 2008 If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the following conditions. 2010 tax act online login Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than: $139,000 if you expatriated or terminated residency in 2008. 2010 tax act online login $145,000 if you expatriated or terminated residency in 2009 or 2010. 2010 tax act online login $147,000 if you expatriated or terminated residency in 2011. 2010 tax act online login $151,000 if you expatriated or terminated residency in 2012. 2010 tax act online login $155,000 if you expatriated or terminated residency in 2013. 2010 tax act online login Your net worth is $2 million or more on the date of your expatriation or termination of residency. 2010 tax act online login You fail to certify on Form 8854 that you have complied with all U. 2010 tax act online login S. 2010 tax act online login federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. 2010 tax act online login Exception for dual-citizens and certain minors. 2010 tax act online login   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. 2010 tax act online login However, they still must provide the certification required in (3) above. 2010 tax act online login Certain dual-citizens. 2010 tax act online login   You may qualify for the exception described above if both of the following apply. 2010 tax act online login You became at birth a U. 2010 tax act online login S. 2010 tax act online login citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. 2010 tax act online login You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. 2010 tax act online login For the purpose of determining U. 2010 tax act online login S. 2010 tax act online login residency, use the substantial presence test described in chapter 1. 2010 tax act online login Certain minors. 2010 tax act online login   You may qualify for the exception described earlier if you meet both of the following requirements. 2010 tax act online login You expatriated before you were 18½. 2010 tax act online login You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. 2010 tax act online login For the purpose of determining U. 2010 tax act online login S. 2010 tax act online login residency, use the substantial presence test described in chapter 1. 2010 tax act online login Expatriation date. 2010 tax act online login   Your expatriation date is the date you relinquish U. 2010 tax act online login S. 2010 tax act online login citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. 2010 tax act online login S. 2010 tax act online login resident). 2010 tax act online login Former U. 2010 tax act online login S. 2010 tax act online login citizen. 2010 tax act online login   You are considered to have relinquished your U. 2010 tax act online login S. 2010 tax act online login citizenship on the earliest of the following dates. 2010 tax act online login The date you renounced U. 2010 tax act online login S. 2010 tax act online login citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality). 2010 tax act online login The date you furnished to the State Department a signed statement of voluntary relinquishment of U. 2010 tax act online login S. 2010 tax act online login nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality). 2010 tax act online login The date the State Department issued a certificate of loss of nationality. 2010 tax act online login The date that a U. 2010 tax act online login S. 2010 tax act online login court canceled your certificate of naturalization. 2010 tax act online login Former long-term resident. 2010 tax act online login   You are considered to have terminated your long-term residency on the earliest of the following dates. 2010 tax act online login The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. 2010 tax act online login S. 2010 tax act online login consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. 2010 tax act online login The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order. 2010 tax act online login If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. 2010 tax act online login See Effect of Tax Treaties in chapter 1 for more information about dual residents. 2010 tax act online login How To Figure the Expatriation Tax (If You Expatriate After June 16, 2008) In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in your property as if the property had been sold for its fair market value on the day before your expatriation date (“mark-to-market tax”). 2010 tax act online login This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. 2010 tax act online login But see Exceptions , later. 2010 tax act online login Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. 2010 tax act online login S. 2010 tax act online login internal revenue laws. 2010 tax act online login Losses from deemed sales must be taken into account to the extent otherwise provided under U. 2010 tax act online login S. 2010 tax act online login internal revenue laws. 2010 tax act online login However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. 2010 tax act online login The net gain that you otherwise must include in your income is reduced (but not below zero) by: $600,000 if you expatriated or terminated residency before January 1, 2009. 2010 tax act online login $626,000 if you expatriated or terminated residency in 2009. 2010 tax act online login $627,000 if you expatriated or terminated residency in 2010. 2010 tax act online login $636,000 if you expatriated or terminated residency in 2011. 2010 tax act online login $651,000 if you expatriated or terminated residency in 2012. 2010 tax act online login $668,000 if you expatriated or terminated residency in 2013. 2010 tax act online login Exceptions. 2010 tax act online login   The mark-to-market tax does not apply to the following. 2010 tax act online login Eligible deferred compensation items. 2010 tax act online login Ineligible deferred compensation items. 2010 tax act online login Interests in nongrantor trusts. 2010 tax act online login Specified tax deferred accounts. 2010 tax act online login Instead, items (1) and (3) may be subject to withholding at source. 2010 tax act online login In the case of item (2), you are treated as receiving the present value of your accrued benefit as of the day before the expatriation date. 2010 tax act online login In the case of item (4), you are treated as receiving a distribution of your entire interest in the account on the day before your expatriation date. 2010 tax act online login See paragraphs (d), (e), and (f) of section 877A for more information. 2010 tax act online login Expatriation Tax Return If you expatriated or terminated your U. 2010 tax act online login S. 2010 tax act online login residency, or you are subject to the expatriation rules (as discussed earlier in the first paragraph under Expatriation After June 16, 2008), you must file Form 8854. 2010 tax act online login Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. 2010 tax act online login Deferral of payment of mark-to-market tax. 2010 tax act online login   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. 2010 tax act online login If you make this election, the following rules apply. 2010 tax act online login You can make the election on a property-by-property basis. 2010 tax act online login The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. 2010 tax act online login Interest is charged for the period the tax is deferred. 2010 tax act online login The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. 2010 tax act online login The due date of the return required for the year of death. 2010 tax act online login The time that the security provided for the property fails to be adequate. 2010 tax act online login See item (6) below. 2010 tax act online login You make the election on Form 8854. 2010 tax act online login You must provide adequate security (such as a bond). 2010 tax act online login You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax. 2010 tax act online login   For more information about the deferral of payment, see the Instructions for Form 8854. 2010 tax act online login Prev  Up  Next   Home   More Online Publications
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The 2010 Tax Act Online Login

2010 tax act online login 8. 2010 tax act online login   Foreign Insurance Taxes Table of Contents Premium. 2010 tax act online login Tax is imposed on insurance policies issued by foreign insurers. 2010 tax act online login Any person who makes, signs, issues, or sells any of the documents and instruments subject to the tax, or for whose use or benefit they are made, signed, issued, or sold, is liable for the tax. 2010 tax act online login The following tax rates apply to each dollar (or fraction thereof) of the premium paid. 2010 tax act online login Casualty insurance and indemnity, fidelity, and surety bonds: 4 cents. 2010 tax act online login For example, on a premium payment of $10. 2010 tax act online login 10, the tax is 44 cents. 2010 tax act online login Life, sickness, and accident insurance, and annuity contracts: 1 cent. 2010 tax act online login For example, on a premium payment of $10. 2010 tax act online login 10, the tax is 11 cents. 2010 tax act online login Reinsurance policies covering any of the taxable contracts described in items (1) and (2): 1 cent. 2010 tax act online login However, the tax does not apply to casualty insurance premiums paid to foreign insurers for coverage of export goods in transit to foreign destinations. 2010 tax act online login Premium. 2010 tax act online login   Premium means the agreed price or consideration for assuming and carrying the risk or obligation. 2010 tax act online login It includes any additional charge or assessment payable under the contract, whether in one sum or installments. 2010 tax act online login If premiums are refunded, claim the tax paid on those premiums as an overpayment against tax due on other premiums paid or file a claim for refund. 2010 tax act online login When liability attaches. 2010 tax act online login   The liability for this tax attaches when the premium payment is transferred to the foreign insurer or reinsurer (including transfers to any bank, trust fund, or similar recipient designated by the foreign insurer or reinsurer) or to any nonresident agent, solicitor, or broker. 2010 tax act online login A person can pay the tax before the liability attaches if the person keeps records consistent with that practice. 2010 tax act online login Who must file. 2010 tax act online login   The person who pays the premium to the foreign insurer (or to any nonresident person such as a foreign broker) must pay the tax and file the return. 2010 tax act online login Otherwise, any person who issued or sold the policy, or who is insured under the policy, is required to pay the tax and file the return. 2010 tax act online login    The person liable for this tax must keep accurate records that identify each policy or instrument subject to tax. 2010 tax act online login These records must clearly establish the type of policy or instrument, the gross premium paid, the identity of the insured and insurer, and the total premium charged. 2010 tax act online login If the premium is to be paid in installments, the records must also establish the amount and anniversary date of each installment. 2010 tax act online login   The records must be kept at the place of business or other convenient location for at least 3 years after the later of the date any part of the tax became due, or the date any part of the tax was paid. 2010 tax act online login During this period, the records must be readily accessible to the IRS. 2010 tax act online login   The person having control or possession of a policy or instrument subject to this tax must keep the policy for at least 3 years after the date any part of the tax on it was paid. 2010 tax act online login For information on reinsurance premiums paid from one foreign insurer to another foreign insurer, see Rev. 2010 tax act online login Rul. 2010 tax act online login 2008-15. 2010 tax act online login You can find Rev. 2010 tax act online login Rul. 2010 tax act online login 2008-15 on page 633 of I. 2010 tax act online login R. 2010 tax act online login B. 2010 tax act online login 2008-12 at www. 2010 tax act online login irs. 2010 tax act online login gov/pub/irs-irbs/irb08-12. 2010 tax act online login pdf. 2010 tax act online login Treaty-based positions under IRC 6114. 2010 tax act online login   You may have to file an annual report disclosing the amount of premiums exempt from United States excise tax as a result of the application of a treaty with the United States that overrides (or otherwise modifies) any provision of the Internal Revenue Code. 2010 tax act online login   Attach any disclosure statement to the first quarter Form 720. 2010 tax act online login You may be able to use Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), as a disclosure statement. 2010 tax act online login See the Instructions for Form 720 for information on how and where to file. 2010 tax act online login   See Revenue Procedure 92-14 in Cumulative Bulletin 1992-1 for procedures you can use to claim a refund of this tax under certain U. 2010 tax act online login S. 2010 tax act online login treaties. 2010 tax act online login Prev  Up  Next   Home   More Online Publications