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2010-2011 Priority Guidance Plan
The IRS announced the release of the 2010 - 2011 Priority Guidance Plan. Click here to see items of interest to the tax-exempt bond community.

2009-2010 Priority Guidance Plan
The IRS announced the release of the 2009 – 2010 Priority Guidance Plan. Click here to see items of interest to the tax-exempt bond community.

Internal Revenue Manual (IRM) Materials relating to Tax Exempt Bonds
The IRM contains the policies, procedural instructions and guidelines used by the Internal Revenue Service. The provided materials relate specifically to tax-exempt bonds.

Treasury Regulations
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The H&r Free Federal

H&r free federal 2. H&r free federal   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. H&r free federal This chapter will help you determine the source of different types of income you may receive during the tax year. H&r free federal This chapter also discusses special rules for married individuals who are domiciled in a country with community property laws. H&r free federal Topics - This chapter discusses: Income source rules, and Community income. H&r free federal Resident Aliens A resident alien's income is generally subject to tax in the same manner as a U. H&r free federal S. H&r free federal citizen. H&r free federal 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. H&r free federal S. H&r free federal tax return. H&r free federal You must report these amounts from sources within and outside the United States. H&r free federal Nonresident Aliens A nonresident alien usually is subject to U. H&r free federal S. H&r free federal income tax only on U. H&r free federal S. H&r free federal source income. H&r free federal Under limited circumstances, certain foreign source income is subject to U. H&r free federal S. H&r free federal tax. H&r free federal See Foreign Income in chapter 4. H&r free federal The general rules for determining U. H&r free federal S. H&r free federal source income that apply to most nonresident aliens are shown in Table 2-1. H&r free federal The following discussions cover the general rules as well as the exceptions to these rules. H&r free federal Not all items of U. H&r free federal S. H&r free federal source income are taxable. H&r free federal See chapter 3. H&r free federal Interest Income Generally, U. H&r free federal S. H&r free federal source interest income includes the following items. H&r free federal Interest on bonds, notes, or other interest-bearing obligations of U. H&r free federal S. H&r free federal residents or domestic corporations. H&r free federal Interest paid by a domestic or foreign partnership or foreign corporation engaged in a U. H&r free federal S. H&r free federal trade or business at any time during the tax year. H&r free federal Original issue discount. H&r free federal Interest from a state, the District of Columbia, or the U. H&r free federal S. H&r free federal Government. H&r free federal The place or manner of payment is immaterial in determining the source of the income. H&r free federal 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. H&r free federal Exceptions. H&r free federal   U. H&r free federal S. H&r free federal source interest income does not include the following items. H&r free federal 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. H&r free federal S. H&r free federal possession. H&r free federal However, the interest will be considered U. H&r free federal S. H&r free federal source interest income if either of the following apply. H&r free federal The recipient of the interest is related to the resident alien or domestic corporation. H&r free federal See section 954(d)(3) for the definition of related person. H&r free federal The terms of the obligation are significantly modified after August 9, 2010. H&r free federal Any extension of the term of the obligation is considered a significant modification. H&r free federal 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. H&r free federal 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. H&r free federal Dividends In most cases, dividend income received from domestic corporations is U. H&r free federal S. H&r free federal source income. H&r free federal Dividend income from foreign corporations is usually foreign source income. H&r free federal Exceptions to both of these rules are discussed below. H&r free federal 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. H&r free federal Dividend equivalent payments. H&r free federal   U. H&r free federal S. H&r free federal source dividends also include all dividend equivalent payments. H&r free federal 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. H&r free federal S. H&r free federal sources. H&r free federal    The Internal Revenue Service has issued final regulations that would affect the treatment of dividend equivalent payments and specified notional principal contracts. H&r free federal You can view this regulation at www. H&r free federal irs. H&r free federal gov/irb/2013-52_IRB/ar08. H&r free federal html. H&r free federal First exception. H&r free federal   Dividends received from a domestic corporation are not U. H&r free federal S. H&r free federal source income if the corporation elects to take the American Samoa economic development credit. H&r free federal Second exception. H&r free federal   Part of the dividends received from a foreign corporation is U. H&r free federal S. H&r free federal 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. H&r free federal If the corporation was formed less than 3 years before the declaration, use its total gross income from the time it was formed. H&r free federal Determine the part that is U. H&r free federal S. H&r free federal source income by multiplying the dividend by the following fraction. H&r free federal   Foreign corporation's gross income connected with a U. H&r free federal S. H&r free federal 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. H&r free federal S. H&r free federal source income. H&r free federal They must be paid by a noncorporate resident or U. H&r free federal S. H&r free federal corporation or by any foreign person if the amounts are effectively connected with the conduct of a U. H&r free federal S. H&r free federal trade or business. H&r free federal For more information, see Internal Revenue Code sections 861(a)(9) and 862(a)(9). H&r free federal 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. H&r free federal The only exceptions to this rule are discussed in chapter 3 under Employees of foreign persons, organizations, or offices, and under Crew members. H&r free federal 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. H&r free federal Compensation (other than certain fringe benefits) is sourced on a time basis. H&r free federal Certain fringe benefits (such as housing and education) are sourced on a geographical basis. H&r free federal Or, you may be permitted to use an alternative basis to determine the source of compensation. H&r free federal See Alternative Basis , later. H&r free federal Multi-level marketing. H&r free federal   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. H&r free federal 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. H&r free federal 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. H&r free federal Self-employed individuals. H&r free federal   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. H&r free federal In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. H&r free federal Time Basis Use a time basis to figure your U. H&r free federal S. H&r free federal source compensation (other than the fringe benefits discussed later). H&r free federal 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. H&r free federal The time period for which the compensation is made does not have to be a year. H&r free federal 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. H&r free federal Example 1. H&r free federal Christina Brooks, a resident of the Netherlands, worked 240 days for a U. H&r free federal S. H&r free federal company during the tax year. H&r free federal She received $80,000 in compensation. H&r free federal None of it was for fringe benefits. H&r free federal Christina performed services in the United States for 60 days and performed services in the Netherlands for 180 days. H&r free federal Using the time basis for determining the source of compensation, $20,000 ($80,000 × 60/240) is her U. H&r free federal S. H&r free federal source income. H&r free federal Example 2. H&r free federal Rob Waters, a resident of South Africa, is employed by a corporation. H&r free federal His annual salary is $100,000. H&r free federal None of it is for fringe benefits. H&r free federal During the first quarter of the year he worked entirely within the United States. H&r free federal On April 1, Rob was transferred to Singapore for the remainder of the year. H&r free federal 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. H&r free federal Accordingly, $25,000 of Rob's annual salary is attributable to the first quarter of the year (. H&r free federal 25 × $100,000). H&r free federal All of it is U. H&r free federal S. H&r free federal source income because he worked entirely within the United States during that quarter. H&r free federal The remaining $75,000 is attributable to the last three quarters of the year. H&r free federal During those quarters, he worked 150 days in Singapore and 30 days in the United States. H&r free federal His periodic performance of services in the United States did not result in distinct, separate, and continuous periods of time. H&r free federal Of this $75,000, $12,500 ($75,000 × 30/180) is U. H&r free federal S. H&r free federal source income. H&r free federal Multi-year compensation. H&r free federal   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. H&r free federal 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. H&r free federal   You determine the period to which the compensation is attributable based on the facts and circumstances of your case. H&r free federal 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. H&r free federal   The amount of compensation treated as from U. H&r free federal S. H&r free federal sources is figured by multiplying the total multi-year compensation by a fraction. H&r free federal 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. H&r free federal 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. H&r free federal Geographical Basis Compensation you receive as an employee in the form of the following fringe benefits is sourced on a geographical basis. H&r free federal Housing. H&r free federal Education. H&r free federal Local transportation. H&r free federal Tax reimbursement. H&r free federal Hazardous or hardship duty pay as defined in Regulations section 1. H&r free federal 861-4(b)(2)(ii)(D)(5). H&r free federal Moving expense reimbursement. H&r free federal The amount of fringe benefits must be reasonable and you must substantiate them by adequate records or by sufficient evidence. H&r free federal Principal place of work. H&r free federal   The above fringe benefits, except for tax reimbursement and hazardous or hardship duty pay, are sourced based on your principal place of work. H&r free federal Your principal place of work is usually the place where you spend most of your working time. H&r free federal This could be your office, plant, store, shop, or other location. H&r free federal 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. H&r free federal   If you have more than one job at any time, your main job location depends on the facts in each case. H&r free federal 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. H&r free federal Housing. H&r free federal   The source of a housing fringe benefit is determined based on the location of your principal place of work. H&r free federal 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. H&r free federal Rent. H&r free federal Utilities (except telephone charges). H&r free federal Real and personal property insurance. H&r free federal Occupancy taxes not deductible under section 164 or 216(a). H&r free federal Nonrefundable fees for securing a leasehold. H&r free federal Rental of furniture and accessories. H&r free federal Household repairs. H&r free federal Residential parking. H&r free federal Fair rental value of housing provided in kind by your employer. H&r free federal   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. H&r free federal ), 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. H&r free federal Education. H&r free federal   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. H&r free federal An education fringe benefit includes payments only for the following expenses for education at an elementary or secondary school. H&r free federal Tuition, fees, academic tutoring, special needs services for a special needs student, books, supplies, and other equipment. H&r free federal Room and board and uniforms that are required or provided by the school in connection with enrollment or attendance. H&r free federal Local transportation. H&r free federal   The source of a local transportation fringe benefit is determined based on the location of your principal place of work. H&r free federal 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. H&r free federal 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. H&r free federal Actual expenses do not include the cost (including interest) of any vehicle purchased by you or on your behalf. H&r free federal Tax reimbursement. H&r free federal   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. H&r free federal Moving expense reimbursement. H&r free federal   The source of a moving expense reimbursement is generally based on the location of your new principal place of work. H&r free federal 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. H&r free federal 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. H&r free federal 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. H&r free federal 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. H&r free federal 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. H&r free federal 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. H&r free federal 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. H&r free federal Your name and social security number (written across the top of the statement). H&r free federal The specific compensation income, or the specific fringe benefit, for which you are using the alternative basis. H&r free federal For each item in (2), the alternative basis of allocation of source used. H&r free federal For each item in (2), a computation showing how the alternative allocation was computed. H&r free federal A comparison of the dollar amount of the U. H&r free federal S. H&r free federal compensation and foreign compensation sourced under both the alternative basis and the time or geographical basis discussed earlier. H&r free federal 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. H&r free federal This is true whether the vessel or aircraft is owned, hired, or leased. H&r free federal The term “vessel or aircraft” includes any container used in connection with a vessel or aircraft. H&r free federal All income from transportation that begins and ends in the United States is treated as derived from sources in the United States. H&r free federal 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. H&r free federal For transportation income from personal services, 50% of the income is U. H&r free federal S. H&r free federal source income if the transportation is between the United States and a U. H&r free federal S. H&r free federal possession. H&r free federal For nonresident aliens, this only applies to income derived from, or in connection with, an aircraft. H&r free federal For information on how U. H&r free federal S. H&r free federal source transportation income is taxed, see chapter 4. H&r free federal 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. H&r free federal However, see Activities to be performed outside the United States , later. H&r free federal For example, payments for research or study in the United States made by the United States, a noncorporate U. H&r free federal S. H&r free federal resident, or a domestic corporation, are from U. H&r free federal S. H&r free federal sources. H&r free federal Similar payments from a foreign government or foreign corporation are foreign source payments even though the funds may be disbursed through a U. H&r free federal S. H&r free federal agent. H&r free federal Payments made by an entity designated as a public international organization under the International Organizations Immunities Act are from foreign sources. H&r free federal Activities to be performed outside the United States. H&r free federal   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. H&r free federal S. H&r free federal source income. H&r free federal    These rules do not apply to amounts paid as salary or other compensation for services. H&r free federal See Personal Services, earlier, for the source rules that apply. H&r free federal 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. H&r free federal S. H&r free federal sources. H&r free federal That part is the amount attributable to earnings of the pension plan and the employer contributions made for services performed in the United States. H&r free federal This applies whether the distribution is made under a qualified or nonqualified stock bonus, pension, profit-sharing, or annuity plan (whether or not funded). H&r free federal If you performed services as an employee of the United States, you may receive a distribution from the U. H&r free federal S. H&r free federal Government under a plan, such as the Civil Service Retirement System, that is treated as a qualified pension plan. H&r free federal Your U. H&r free federal S. H&r free federal source income is the otherwise taxable amount of the distribution that is attributable to your total U. H&r free federal S. H&r free federal Government basic pay other than tax-exempt pay for services performed outside the United States. H&r free federal Rents or Royalties Your U. H&r free federal S. H&r free federal 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. H&r free federal U. H&r free federal S. H&r free federal 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. H&r free federal Real Property Real property is land and buildings and generally anything built on, growing on, or attached to land. H&r free federal 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. H&r free federal Natural resources. H&r free federal   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. H&r free federal For information on determining that part, see section 1. H&r free federal 863-1(b) of the regulations. H&r free federal Table 2-1. H&r free federal 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. H&r free federal S. H&r free federal or foreign corporation* Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. H&r free federal 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. H&r free federal For more information, see section 1. H&r free federal 863-1(b) of the regulations. H&r free federal *Exceptions include: a) Dividends paid by a U. H&r free federal S. H&r free federal corporation are foreign source if the corporation elects the  American Samoa economic development credit. H&r free federal  b) Part of a dividend paid by a foreign corporation is U. H&r free federal S. H&r free federal source if at least 25% of the  corporation's gross income is effectively connected with a U. H&r free federal S. H&r free federal trade or business for the  3 tax years before the year in which the dividends are declared. H&r free federal Personal Property Personal property is property, such as machinery, equipment, or furniture, that is not real property. H&r free federal 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. H&r free federal 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. H&r free federal Tax home. H&r free federal   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. H&r free federal Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. H&r free federal 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. H&r free federal If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. H&r free federal Inventory property. H&r free federal   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. H&r free federal Income from the sale of inventory that you purchased is sourced where the property is sold. H&r free federal Generally, this is where title to the property passes to the buyer. H&r free federal For example, income from the sale of inventory in the United States is U. H&r free federal S. H&r free federal source income, whether you purchased it in the United States or in a foreign country. H&r free federal   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. H&r free federal For information on making this allocation, see section 1. H&r free federal 863-3 of the regulations. H&r free federal   These rules apply even if your tax home is not in the United States. H&r free federal Depreciable property. H&r free federal   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. H&r free federal You allocate this part of the gain to sources in the United States based on the ratio of U. H&r free federal S. H&r free federal depreciation adjustments to total depreciation adjustments. H&r free federal The rest of this part of the gain is considered to be from sources outside the United States. H&r free federal   For this purpose, “U. H&r free federal S. H&r free federal depreciation adjustments” are the depreciation adjustments to the basis of the property that are allowable in figuring taxable income from U. H&r free federal S. H&r free federal sources. H&r free federal 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. H&r free federal S. H&r free federal depreciation adjustments. H&r free federal But there are some exceptions for certain transportation, communications, and other property used internationally. H&r free federal   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. H&r free federal   A loss is sourced in the same way as the depreciation deductions were sourced. H&r free federal However, if the property was used predominantly in the United States, the entire loss reduces U. H&r free federal S. H&r free federal source income. H&r free federal   The basis of property usually means the cost (money plus the fair market value of other property or services) of property you acquire. H&r free federal Depreciation is an amount deducted to recover the cost or other basis of a trade or business asset. H&r free federal 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. H&r free federal A depreciation deduction is any deduction for depreciation or amortization or any other allowable deduction that treats a capital expenditure as a deductible expense. H&r free federal Intangible property. H&r free federal   Intangible property includes patents, copyrights, secret processes or formulas, goodwill, trademarks, trade names, or other like property. H&r free federal 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. H&r free federal This is the same as the source rule for gain from the sale of depreciable property. H&r free federal See Depreciable property , earlier, for details on how to apply this rule. H&r free federal   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. H&r free federal 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. H&r free federal If payments for goodwill do not depend on its productivity, use, or disposition, their source is the country in which the goodwill was generated. H&r free federal Sales through offices or fixed places of business. H&r free federal   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. H&r free federal S. H&r free federal source income. H&r free federal 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. H&r free federal   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. H&r free federal S. H&r free federal source income. H&r free federal The income is treated as U. H&r free federal S. H&r free federal source income if an income tax of less than 10% of the income from the sale is paid to a foreign country. H&r free federal 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. H&r free federal Community Income If you are married and you or your spouse is subject to the community property laws of a foreign country, a U. H&r free federal S. H&r free federal state, or a U. H&r free federal S. H&r free federal possession, you generally must follow those laws to determine the income of yourself and your spouse for U. H&r free federal S. H&r free federal tax purposes. H&r free federal 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. H&r free federal S. H&r free federal citizen or resident and you do not both choose to be treated as U. H&r free federal S. H&r free federal residents as explained in chapter 1. H&r free federal In these cases, you and your spouse must report community income as explained later. H&r free federal Earned income. H&r free federal   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. H&r free federal That spouse must report all of it on his or her separate return. H&r free federal Trade or business income. H&r free federal   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. H&r free federal That spouse must report all of it on his or her separate return. H&r free federal Partnership income (or loss). H&r free federal   A partner's distributive share of partnership income (or loss) is treated as the income (or loss) of the partner. H&r free federal The partner must report all of it on his or her separate return. H&r free federal Separate property income. H&r free federal   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. H&r free federal That spouse must report all of it on his or her separate return. H&r free federal Use the appropriate community property law to determine what is separate property. H&r free federal Other community income. H&r free federal   All other community income is treated as provided by the applicable community property laws. H&r free federal Prev  Up  Next   Home   More Online Publications