Amended 1978, 1986, 1988, 2010
- 2010 Pub. L. 111-226 Pub. L. 111–226, § 217(c)(1), redesignated subsecs. (d) to (f) as (c) to (e), respectively, and struck out former subsec. (c) which related to foreign business requirements.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(g)(9), added subsec. (f).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1212(d), redesignated subsec. (f) as (e) and struck out former subsec. (e) relating to treatment of income from certain leased aircraft, vessels, and spacecraft as income from sources within the United States.
- 1978 Pub. L. 95-600 Pub. L. 95–600, § 370(a), added subsec. (f).
Cases: Boeing Co. v. United States, 537 U.S. 437 (2003); Iglesias v. United States, 848 F.2d 362 (2d Cir. 1988); United States v. Bell, 414 F.3d 474 (3rd Cir. 2005)
Forms: Form 5471
Final rules 29
(a) Gross income from sources within United States The following items of gross income shall be treated as income from sources within the United States:
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(1) Interest Interest from the United States or the District of Columbia, and interest on bonds, notes, or other interest-bearing obligations of noncorporate residents or domestic corporations not including—
Amended 1966, 1969, 1971, 1975, 1976, 1978, 1986, 2004, 2010
- 2010 Pub. L. 111-226 Pub. L. 111–226, § 217(a), redesignated subpars. (B) and (C) as (A) and (B), respectively, and struck out former subpar. (A) which read as follows: “interest from a resident alien individual or domestic corporation, if such individual or corporation meets the 80-percent foreign business requirements of subsection (c)(1),”.
- 2004 Pub. L. 108-357 Pub. L. 108–357 added subpar. (C).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1241(b)(1)(A), substituted “noncorporate residents or domestic corporations” for “residents, corporate or otherwise,” in introductory text.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1241(b)(1)(B), redesignated subpar. (E), as previously redesignated by § 1214(c)(5)(A) of Pub. L. 99–514, as (C) and struck out former subpar. (C) [previously (D)] which read as follows: “in the case of interest received from a foreign corporation (other than interest paid or credited by a domestic branch of a foreign corporation, if such branch is engaged in the commercial banking business), 50 percent or more of the gross income of which from all sources for the 3-year period ending with the close of its taxable year preceding the payment of such interest (or for such part of such period as the corporation has been in existence) was effectively connected with the conduct of a trade or business within the United States, an amount of such interest which bears the same ratio to such interest as the gross income of such foreign corporation for such period which was not effectively connected with the conduct of a trade or business within the United States bears to its gross income from all sources,”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1214(c)(5)(A), redesignated subpar. (D) as (C). Former subpar. (C) redesignated (B).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1214(c)(5)(A), redesignated subpar. (H) as (F). Pub. L. 99–514, § 1241(b)(1)(B), then redesignated such subpar. (F) as (D). The original subpar. (D) was redesignated (C) and struck out, and the original subpar. (F) was redesignated (D), then (B).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1241(b)(1)(B), redesignated subpar. (E), as previously redesignated by § 1214(c)(5)(A) of Pub. L. 99–514, as (C).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1214(c)(5)(A), redesignated subpar. (G) as (E) and struck out former subpar. (E) which read as follows: “income derived by a foreign central bank of issue from bankers’ acceptances,”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, §§ 1214(c)(5)(A), 1241(b)(1)(B), redesignated successively former subpar. (F) as (D) and (B), respectively.
- 1986 Pub. L. 99-514 Pub. L. 99–514, §§ 1214(c)(5)(A), 1241(b)(1)(B), redesignated successively former subpar. (G) as (E) and (C), respectively.
- 1986 Pub. L. 99-514 Pub. L. 99–514, §§ 1214(c)(5)(A), 1241(b)(1)(B), redesignated successively former subpar. (H) as (F) and (D), respectively.
- 1978 Pub. L. 95-600 Pub. L. 95–600, § 540(a), designated existing provisions as cl. (i) and added cl. (ii).
- 1976 Pub. L. 94-455 Pub. L. 94–455, §§ 1901(c)(7), 1904(b)(10)(B), struck out “, any Territory, any political subdivision of a Territory,” after “United States” in provisions preceding subpar. (A) and, in subpar. (G), substituted “subsection (c) of section 4912 (as in effect before July 1, 1974)” for “section 4912(c)” and “subsection (c)(2) of such section” for “section 4912(c)(2)”.
- 1975 Pub. L. 93-625 Pub. L. 93–625, § 9(a), added subpar. (H).
- 1971 Pub. L. 92-9 Pub. L. 92–9 added subpar. (G).
- 1969 Pub. L. 91-172 Pub. L. 91–172, § 435(a)(1), struck out “after December 31, 1972,” after “interest paid or credited” in parenthetical after “interest received from a foreign corporation”.
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 102(a)(2), added subpars. (C), (D), and (F), and redesignated former subpar. (C) as (E).
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(A) interest—
Amended 1966, 1986, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(a)(29), (c)(14), inserted “and” at end of subpar. (A), substituted a period for a comma at end of subpar. (B), and struck out subpars. (C) and (D) which read as follows:
- 1990 “(C) interest on a debt obligation which was part of an issue with respect to which an election has been made under subsection (c) of section 4912 (as in effect before July 1, 1974) and which, when issued (or treated as issued under subsection (c)(2) of such section), had a maturity not exceeding 15 years and, when issued, was purchased by one or more underwriters with a view to distribution through resale, but only with respect to interest attributable to periods after the date of such election, and
- 1990 “(D) interest on a debt obligation which was part of an issue which—
“(i) was part of an issue outstanding on April 1, 1971,
“(ii) was guaranteed by a United States person,
“(iii) was treated under chapter 41 as a debt obligation of a foreign obligor,
“(iv) as of June 30, 1974, had a maturity of not more than 15 years, and
“(v) when issued, was purchased by one or more underwriters for the purpose of distribution through resale.”
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1214(a)(1), (c)(5)(A), amended subpar. (B) generally and redesignated it as (A). Prior to amendment and redesignation, former subpar. (B) read as follows: “interest received from a resident alien individual or a domestic corporation, when it is shown to the satisfaction of the Secretary that less than 20 percent of the gross income from all sources of such individual or such corporation has been derived from sources within the United States, as determined under the provisions of this part, for the 3-year period ending with the close of the taxable year of such individual or such corporation preceding the payment of such interest, or for such part of such period as may be applicable,”. Former subpar. (A), which read “interest on amounts described in subsection (c) received by a nonresident alien individual or a foreign corporation, if such interest is not effectively connected with the conduct of a trade or business within the United States,”, was struck out.
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 102(a)(1)(A), substituted “interest on amounts described in subsection (c) received by a nonresident alien individual or a foreign corporation, if such interest is not effectively connected with the conduct of a trade or business within the United States” for “interest on deposits with persons carrying on the banking business paid to persons not engaged in business within the United States”.
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(i) on deposits with a foreign branch of a domestic corporation or a domestic partnership if such branch is engaged in the commercial banking business, and
(ii) on amounts satisfying the requirements of subparagraph (B) of section 871(i)(3) which are paid by a foreign branch of a domestic corporation or a domestic partnership, and
(B) in the case of a foreign partnership, which is predominantly engaged in the active conduct of a trade or business outside the United States, any interest not paid by a trade or business engaged in by the partnership in the United States and not allocable to income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States.
Amended 1966, 1986, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(a)(29), (c)(14), inserted “and” at end of subpar. (A), substituted a period for a comma at end of subpar. (B), and struck out subpars. (C) and (D) which read as follows:
- 1990 “(C) interest on a debt obligation which was part of an issue with respect to which an election has been made under subsection (c) of section 4912 (as in effect before July 1, 1974) and which, when issued (or treated as issued under subsection (c)(2) of such section), had a maturity not exceeding 15 years and, when issued, was purchased by one or more underwriters with a view to distribution through resale, but only with respect to interest attributable to periods after the date of such election, and
- 1990 “(D) interest on a debt obligation which was part of an issue which—
“(i) was part of an issue outstanding on April 1, 1971,
“(ii) was guaranteed by a United States person,
“(iii) was treated under chapter 41 as a debt obligation of a foreign obligor,
“(iv) as of June 30, 1974, had a maturity of not more than 15 years, and
“(v) when issued, was purchased by one or more underwriters for the purpose of distribution through resale.”
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1241(b)(1)(B), redesignated subpar. (D), as previously redesignated and amended by § 1214(c)(5)(A), (B) of Pub. L. 99–514, as (B) and struck out former subpar. (B) [previously (C)] which read as follows: “interest received from a foreign corporation (other than interest paid or credited by a domestic branch of a foreign corporation, if such branch is engaged in the commercial banking business), when it is shown to the satisfaction of the Secretary that less than 50 percent of the gross income from all sources of such foreign corporation for the 3-year period ending with the close of its taxable year preceding the payment of such interest (or for such part of such period as the corporation has been in existence) was effectively connected with the conduct of a trade or business within the United States,”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1214(c)(5)(A), (B), redesignated former subpar. (F) as (D), substituted in cl. (ii), “subparagraph (B) of section 871(i)(3)” for “paragraph (2) of subsection (c)”, and redesignated former subpar. (C) as (B). Former subpar. (B) redesignated (A).
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 102(a)(2), struck out interest received from a resident foreign corporation, and substituted “gross income from all sources of such individual or such corporation” for “gross income of such resident payor or domestic corporation”, and “taxable year of such individual or such corporation” for “taxable year of such payor”.
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(2) Dividends The amount received as dividends—
Amended 1987, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13002(e)(2), substituted “100/65th” for “100/80th” and “100/50th” for “100/70th” in concluding provisions.
- 1987 Pub. L. 100-203 Pub. L. 100–203, § 10221(d)(4)(B), inserted at end “In the case of any dividend from a 20-percent owned corporation (as defined in section 243(c)(2)), subparagraph (B) shall be applied by substituting ‘100/80th’ for ‘100/70th’.”
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(A) from a domestic corporation, or
Amended 1976, 1986, 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141 struck out “other than a corporation which has an election in effect under section 936” after “corporation”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1214(b), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “from a domestic corporation other than a corporation which has an election in effect under section 936, and other than a corporation less than 20 percent of whose gross income is shown to the satisfaction of the Secretary to have been derived from sources within the United States, as determined under the provisions of this part, for the 3-year period ending with the close of the taxable year of such corporation preceding the declaration of such dividends (or for such part of such period as the corporation has been in existence), or”.
- 1976 Pub. L. 94-455 Pub. L. 94–455, §§ 1051(h)(3), 1906(b)(13)(A), substituted “other than a corporation which has an election in effect under section 936” for “other than a corporation entitled to the benefits of section 931” and struck out “or his delegate” after “Secretary”.
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(B) from a foreign corporation unless less than 25 percent of the gross income from all sources of such foreign corporation for the 3-year period ending with the close of its taxable year preceding the declaration of such dividends (or for such part of such period as the corporation has been in existence) was effectively connected (or treated as effectively connected other than income described in section 884(d)(2)) with the conduct of a trade or business within the United States; but only in an amount which bears the same ratio to such dividends as the gross income of the corporation for such period which was effectively connected (or treated as effectively connected other than income described in section 884(d)(2)) with the conduct of a trade or business within the United States bears to its gross income from all sources; but dividends (other than dividends for which a deduction is allowable under section 245(b)) from a foreign corporation shall, for purposes of subpart A of part III (relating to foreign tax credit), be treated as income from sources without the United States to the extent (and only to the extent) exceeding the amount which is 100/50th of the amount of the deduction allowable under section 245 in respect of such dividends, or
Amended 1962, 1966, 1986, 1987, 1988, 2017
- 2017 Pub. L. 115-97 Pub. L. 115–97, § 13002(e)(1), substituted “100/50th” for “100/70th”.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(q)(7), substituted “other than income described in section 884(d)(2)” for “other than under section 884(d)(2)” in two places.
- 1987 Pub. L. 100-203 Pub. L. 100–203, § 10221(d)(4)(A), which directed that subpar. (B) be amended by substituting “100/70th” for “100/85th”, was executed by substituting “100/70th” for “100/85ths” to reflect the probable intent of Congress.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1241(b)(2), substituted “25 percent” for “50 percent” and inserted “(or treated as effectively connected other than under section 884(d)(2))” in two places.
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 102(b), substituted “50 percent of the gross income from all sources” for “50 percent of the gross income”, “effectively connected with the conduct of a trade or business within the United States” for “derived from sources within the United States as determined from the provisions of this part”, and “ratio to such dividends as the gross income of the corporation for such period which was effectively connected with the conduct of a trade or business within the United States bears to its gross income from all sources” for “ratio to such dividends as the gross income of the corporation for such period derived from sources within the United States bears to its gross income from all sources” and inserted “(other than dividends for which a deduction is allowable under section 245(b))” after “dividends” and “(and only to the extent)” after “extent”.
- 1962 Pub. L. 87-834 Pub. L. 87–834 substituted “to the extent exceeding the amount which is 100/85ths of the amount of the deduction allowable under section 245 in respect of such dividends” for “to the extent exceeding the amount of the deduction allowable under section 245 in respect of such dividends.”
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(C) from a foreign corporation to the extent that such amount is required by section 243(e) (relating to certain dividends from foreign corporations) to be treated as dividends from a domestic corporation which is subject to taxation under this chapter, and to such extent subparagraph (B) shall not apply to such amount, or
Amended 1960, 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(q)(15), substituted “section 243(e)” for “section 243(d)”.
- 1960 Pub. L. 86-779 Pub. L. 86–779 added subpar. (C).
(D) from a DISC or former DISC (as defined in section 992(a)) except to the extent attributable (as determined under regulations prescribed by the Secretary) to qualified export receipts described in section 993(a)(1) (other than interest and gains described in section 995(b)(1)).
Amended 1971, 1976
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
- 1971 Pub. L. 92-178 Pub. L. 92–178, § 503, added subpar. (D).
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In the case of any dividend from a 20-percent owned corporation (as defined in section 243(c)(2)), subparagraph (B) shall be applied by substituting “100/65th” for “100/50th”.
(3) Personal services Compensation for labor or personal services performed in the United States; except that compensation for labor or services performed in the United States shall not be deemed to be income from sources within the United States if—
Amended 1997, 2001
- 2001 Pub. L. 107-16 Pub. L. 107–16 struck out “except for purposes of sections 79 and 105 and subchapter D,” after “In addition,” in concluding provisions.
- 1997 Pub. L. 105-34 Pub. L. 105–34 inserted concluding provisions “In addition, except for purposes of sections 79 and 105 and subchapter D, compensation for labor or services performed in the United States shall not be deemed to be income from sources within the United States if the labor or services are performed by a nonresident alien individual in connection with the individual’s temporary presence in the United States as a regular member of the crew of a foreign vessel engaged in transportation between the United States and a foreign country or a possession of the United States.”
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(A) the labor or services are performed by a nonresident alien individual temporarily present in the United States for a period or periods not exceeding a total of 90 days during the taxable year,
(B) such compensation does not exceed $3,000 in the aggregate, and
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(C) the compensation is for labor or services performed as an employee of or under a contract with—
(i) a nonresident alien, foreign partnership, or foreign corporation, not engaged in trade or business within the United States, or
(ii) an individual who is a citizen or resident of the United States, a domestic partnership, or a domestic corporation, if such labor or services are performed for an office or place of business maintained in a foreign country or in a possession of the United States by such individual, partnership, or corporation.
Amended 1966
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 102(c), inserted “an individual who is a citizen or resident of the United States, a domestic partnership, or” before “a domestic corporation” and “individual, partnership, or” after “United States by such”.
In addition, compensation for labor or services performed in the United States shall not be deemed to be income from sources within the United States if the labor or services are performed by a nonresident alien individual in connection with the individual’s temporary presence in the United States as a regular member of the crew of a foreign vessel engaged in transportation between the United States and a foreign country or a possession of the United States.
(4) Rentals and royalties Rentals or royalties from property located in the United States or from any interest in such property, including rentals or royalties for the use of or for the privilege of using in the United States patents, copyrights, secret processes and formulas, good will, trade-marks, trade brands, franchises, and other like property.
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(5) Disposition of United States real property interest Gains, profits, and income from the disposition of a United States real property interest (as defined in section 897(c)).
Amended 1976, 1980
- 1980 Pub. L. 96-499 Pub. L. 96–499 substituted “Disposition of United States real property interest” for “Sale or exchange of real property” in heading and “disposition of a United States real property interest (as defined in section 897(c))” for “sale or exchange of real property located in the United States” in text.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(b)(26)(A), substituted “sale or exchange” for “sale” in headings and text.
(6) Sale or exchange of inventory property Gains, profits, and income derived from the purchase of inventory property (within the meaning of section 865(i)(1)) without the United States (other than within a possession of the United States) and its sale or exchange within the United States.
Amended 1976, 1986, 1988, 1989
- 1989 Pub. L. 101-239 Pub. L. 101–239, § 7811(i)(2), substituted “865(i)(1)” for “865(h)(1)”.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1018(u)(39), substituted “inventory property” for “personal property” in heading.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1211(b)(1)(B), substituted “inventory property (within the meaning of section 865(h)(1))” for “personal property”.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(b)(26)(A), substituted “sale or exchange” for “sale” in headings and text.
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(7) Amounts received as underwriting income (as defined in section 832(b)(3)) derived from the issuing (or reinsuring) of any insurance or annuity contract—
(A) in connection with property in, liability arising out of an activity in, or in connection with the lives or health of residents of, the United States, or
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(B) in connection with risks not described in subparagraph (A) as a result of any arrangement whereby another corporation receives a substantially equal amount of premiums or other consideration in respect to issuing (or reinsuring) any insurance or annuity contract in connection with property in, liability arising out of activity in, or in connection with the lives or health of residents of, the United States.
“Substantially” implies facts and circumstances. No regulation cites this provision (eCFR, Oct 19, 2026)
Amended 1976, 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(i)(10), amended par. (7) generally. Prior to amendment, par. (7) read as follows: “Amounts received as underwriting income (as defined in section 832(b)(3)) derived from the insurance of United States risks (as defined in section 953(a)).”
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1036(a), added par. (7).
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(8) Social security benefits Any social security benefit (as defined in section 86(d)).
Amended 1983
- 1983 Pub. L. 98-21 Pub. L. 98–21 added par. (8).
(9) Guarantees Amounts received, directly or indirectly, from—
(A) a noncorporate resident or domestic corporation for the provision of a guarantee of any indebtedness of such resident or corporation, or
(B) any foreign person for the provision of a guarantee of any indebtedness of such person, if such amount is connected with income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States.
Amended 2010
- 2010 Pub. L. 111-240 Pub. L. 111–240 added par. (9).
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(b) Taxable income from sources within United States From the items of gross income specified in subsection (a) as being income from sources within the United States there shall be deducted the expenses, losses, and other deductions properly apportioned or allocated thereto and a ratable part of any expenses, losses, or other deductions which cannot definitely be allocated to some item or class of gross income. The remainder, if any, shall be included in full as taxable income from sources within the United States. In the case of an individual who does not itemize deductions, an amount equal to the standard deduction shall be considered a deduction which cannot definitely be allocated to some item or class of gross income.
Amended 1977, 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 104(b)(11), substituted “the standard deduction” for “the zero bracket amount”.
- 1977 Pub. L. 95-30 Pub. L. 95–30 provided that, in the case of an individual who does not itemize deductions, an amount equal to the zero bracket amount shall be considered a deduction which cannot definitely be allocated to some item or class of gross income.
(c) Special rule for application of subsection (a)(2)(B) For purposes of subsection (a)(2)(B), if the foreign corporation has no gross income from any source for the 3-year period (or part thereof) specified, the requirements of such subsection shall be applied with respect to the taxable year of such corporation in which the payment of the dividend is made.
Amended 1966, 1969, 1975, 1976, 1986, 1988, 2010
- 2010 Pub. L. 111-226 Pub. L. 111–226, § 217(c)(1), redesignated subsecs. (d) to (f) as (c) to (e), respectively, and struck out former subsec. (c) which related to foreign business requirements.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(g)(3), inserted “or, in the case of a corporation, is attributable to income so derived by a subsidiary of such corporation” after parenthetical in cl. (i), struck out “or chain of subsidiaries of such corporation” after “by a subsidiary” in cl. (ii), and inserted sentence at end defining “subsidiary”.
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1012(i)(14)(B), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “such section shall be applied by substituting ‘10 percent’ for ‘50 percent’ each place it appears.”
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1214(a)(2), amended subsec. (c) generally, substituting provisions relating to foreign business requirements for provisions relating to interest on deposits.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1041, struck out provision that subsecs. (a)(1)(A) and (c) would cease to apply effective with respect to amounts paid or credited after Dec. 31, 1976.
- 1975 Pub. L. 93-625 Pub. L. 93–625, § 8, substituted “1976” for “1975”.
- 1969 Pub. L. 91-172 Pub. L. 91–172, § 435(a)(2), substituted “1975” for “1972”.
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 102(a)(1)(B), (3), added subsecs. (c) and (d).
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(d) Income from certain railroad rolling stock treated as income from sources within the United States
Amended 1966, 1986, 2010
- 2010 Pub. L. 111-226 Pub. L. 111–226, § 217(c)(1), redesignated subsecs. (d) to (f) as (c) to (e), respectively, and struck out former subsec. (c) which related to foreign business requirements.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1214(c)(5)(C), amended subsec. (d) generally, substituting provision for special rule for application of subsec. (a)(2)(B) for former provision for special rules for application of subsec. (a), pars. (1)(B) to (1)(D) and (2)(B), pars. (1) and (2) thereof relating to new entities and transition rule provisions.
- 1966 Pub. L. 89-809 Pub. L. 89–809, § 102(a)(1)(B), (3), added subsecs. (c) and (d).
(1) General rule For purposes of subsection (a) and section 862(a), if—
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(A) a taxpayer leases railroad rolling stock which is section 1245 property (as defined in section 1245(a)(3)) to a domestic common carrier by railroad or a corporation which is controlled, directly or indirectly, by one or more such common carriers, and
(B) the use under such lease is expected to be use within the United States,
all amounts includible in gross income by the taxpayer with respect to such railroad rolling stock (including gain from sale or other disposition of such railroad rolling stock) shall be treated as income from sources within the United States. The requirements of subparagraph (B) of the preceding sentence shall be treated as satisfied if the only expected use outside the United States is use by a person (whether or not a United States person) in Canada or Mexico on a temporary basis which is not expected to exceed a total of 90 days in any taxable year.
(2) Paragraph (1) not to apply where lessor is a member of controlled group which includes a railroad Paragraph (1) shall not apply to a lease between two members of the same controlled group of corporations (as defined in section 1563) if any member of such group is a domestic common carrier by railroad or a switching or terminal company all of whose stock is owned by one or more domestic common carriers by railroad.
(3) Denial of foreign tax credit No credit shall be allowed under section 901 for any payments to foreign countries with respect to any amount received by the taxpayer with respect to railroad rolling stock which is subject to paragraph (1).
(e) Cross reference For treatment of interest paid by the branch of a foreign corporation, see section 884(f).
Amended 1971, 1976, 1980, 1986, 1989, 1990, 1996, 2010
- 2010 Pub. L. 111-226 Pub. L. 111–226, § 217(c)(1), redesignated subsecs. (d) to (f) as (c) to (e), respectively, and struck out former subsec. (c) which related to foreign business requirements.
- 1996 Pub. L. 104-188 Pub. L. 104–188 provided that the amendment made by section 11813(b)(17) of Pub. L. 101–508 shall be applied as if the material stricken by such amendment included the closing parenthesis after “section 48(a)(5)”. See 1990 Amendment note below.
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11813(b)(17), which directed the substitution of “which is section 1245 property (as defined in section 1245(a)(3))” for “which is section 38 property (or would be section 38 property but for section 48(a)(5)”, was executed by making the substitution for “which is section 38 property (or would be section 38 property but for section 48(a)(5))”. See 1996 Amendment note above.
- 1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(c)(6)(C), substituted “all of whose stock is owned by one or more domestic common carriers by railroad” for “referred to in subparagraph (B) of section 184(d)(1)”.
- 1989 Pub. L. 101-239 Pub. L. 101–239, § 7841(d)(9), substituted “section 862(a)” for “section 826(a)” in introductory provisions.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1212(d), redesignated subsec. (f) as (e) and struck out former subsec. (e) relating to treatment of income from certain leased aircraft, vessels, and spacecraft as income from sources within the United States.
- 1980 Pub. L. 96-605 Pub. L. 96–605 substituted provision directing that income from certain leased aircraft, vessels, and spacecraft be treated as income from sources within the United States for provision permitting the taxpayer to elect to treat income from certain aircraft and vessels as income from sources within the United States and prescribing the manner of revocating such an election.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(b)(26)(B), substituted “sale, exchange, or other disposition” for “sale or other disposition”.
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
- 1971 Pub. L. 92-178 Pub. L. 92–178, § 314(a), added subsec. (e).