Chapters 3

Chapters 3 - INTERNATIONALTAXATION SourceofIncomeRules...

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INTERNATIONAL TAXATION Source-of-Income Rules
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General Concepts Determines what Non-resident Aliens will be taxed on: U.S. source only. Establishes the numerator in determining the Foreign Tax Credit limitation for U.S. citizens and Resident Aliens Foreign Source Income Worldwide Income X Precredit U.S. Tax = Foreign Tax Credit Limitation
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General Concepts Income Assigned according to specific code provisions Deductions Two step process: Allocation according to income producing activities Traceable costs Apportionment between U.S. source and Foreign source income Nontraceable costs
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Income Items Interest – Residence of payer (Sec. 861(a) U.S. Source, Sec. 862(a) Foreign Source) If >80% foreign source income, then all is foreign source Dividends – Residence of payer If >25% foreign source income (3 year test), then that proportion is foreign source Personal Services – where performed
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Income Items Property Sales
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Chapters 3 - INTERNATIONALTAXATION SourceofIncomeRules...

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