26 U.S.C. § 863 : US Code - Section 863: Special rules for determining source

Search 26 U.S.C. § 863 : US Code - Section 863: Special rules for determining source

(a) Allocation under regulations
Items of gross income, expenses, losses, and deductions, other
than those specified in sections 861(a) and 862(a), shall be
allocated or apportioned to sources within or without the United
States, under regulations prescribed by the Secretary. Where items
of gross income are separately allocated to sources within the
United States, there shall be deducted (for the purpose of
computing the taxable income therefrom) the expenses, losses, and
other deductions properly apportioned or allocated thereto and a
ratable part of other 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.
(b) Income partly from within and partly from without the United
States
In the case of gross income derived from sources partly within
and partly without the United States, the taxable income may first
be computed by deducting the expenses, losses, or other deductions
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; and the portion of
such taxable income attributable to sources within the United
States may be determined by processes or formulas of general
apportionment prescribed by the Secretary. Gains, profits, and
income -
(1) from services rendered partly within and partly without the
United States,
(2) from the sale or exchange of inventory property (within the
meaning of section 865(i)(1)) produced (in whole or in part) by
the taxpayer within and sold or exchanged without the United
States, or produced (in whole or in part) by the taxpayer without
and sold or exchanged within the United States, or
(3) derived from the purchase of inventory property (within the
meaning of section 865(i)(1)) within a possession of the United
States and its sale or exchange within the United States,
shall be treated as derived partly from sources within and partly
from sources without the United States.
(c) Source rule for certain transportation income
(1) Transportation beginning and ending in the United States
All transportation income attributable to transportation which
begins and ends in the United States shall be treated as derived
from sources within the United States.
(2) Other transportation having United States connection
(A) In general
50 percent of all transportation income attributable to
transportation which -
(i) is not described in paragraph (1), and
(ii) begins or ends in the United States,
shall be treated as from sources in the United States.
(B) Special rule for personal service income
Subparagraph (A) shall not apply to any transportation income
which is income derived from personal services performed by the
taxpayer, unless such income is attributable to transportation
which -
(i) begins in the United States and ends in a possession of
the United States, or
(ii) begins in a possession of the United States and ends
in the United States.
In the case of transportation income derived from, or in
connection with, a vessel, this subparagraph shall only apply
if the taxpayer is a citizen or resident alien.
(3) Transportation income
For purposes of this subsection, the term "transportation
income" means any income derived from, or in connection with -
(A) the use (or hiring or leasing for use) of a vessel or
aircraft, or
(B) the performance of services directly related to the use
of a vessel or aircraft.
For purposes of the preceding sentence, the term "vessel or
aircraft" includes any container used in connection with a vessel
or aircraft.
(d) Source rules for space and certain ocean activities
(1) In general
Except as provided in regulations, any income derived from a
space or ocean activity -
(A) if derived by a United States person, shall be sourced in
the United States, and
(B) if derived by a person other than a United States person,
shall be sourced outside the United States.
(2) Space or ocean activity
For purposes of paragraph (1) -
(A) In general
The term "space or ocean activity" means -
(i) any activity conducted in space, and
(ii) any activity conducted on or under water not within
the jurisdiction (as recognized by the United States) of a
foreign country, possession of the United States, or the
United States.
Such term includes any activity conducted in Antarctica.
(B) Exception for certain activities
The term "space or ocean activity" shall not include -
(i) any activity giving rise to transportation income (as
defined in section 863(c)),
(ii) any activity giving rise to international
communications income (as defined in subsection (e)(2)), and
(iii) any activity with respect to mines, oil and gas
wells, or other natural deposits to the extent within the
United States or any foreign country or possession of the
United States (as defined in section 638).
For purposes of applying section 638, the jurisdiction of any
foreign country shall not include any jurisdiction not
recognized by the United States.
(e) International communications income
(1) Source rules
(A) United States persons
In the case of any United States person, 50 percent of any
international communications income shall be sourced in the
United States and 50 percent of such income shall be sourced
outside the United States.
(B) Foreign persons
(i) In general
Except as provided in regulations or clause (ii), in the
case of any person other than a United States person, any
international communications income shall be sourced outside
the United States.
(ii) Special rule for income attributable to office or fixed
place of business in the United States
In the case of any person (other than a United States
person) who maintains an office or other fixed place of
business in the United States, any international
communications income attributable to such office or other
fixed place of business shall be sourced in the United
States.
(2) Definition
For purposes of this section, the term "international
communications income" includes all income derived from the
transmission of communications or data from the United States to
any foreign country (or possession of the United States) or from
any foreign country (or possession of the United States) to the
United States.