Monday, February 24, 2014

Source Of Income Rules

The source of income is important in determining if the income may be excluded under section 933 of the Internal Revenue Code. Below are the general rules for determining the source of your income:

Example Of Source Of Income Rules
Item of Income: Salaries and other compensation  -  Factor Determining Source: Where the service is performed
Item of Income: Pensions Contributions  -  Factor Determining Source: Where services were performed that earned the pension
Item of Income: Pensions Investment earnings  -  Factor Determining Source: Where pension trust is located
Item of Income: Interest  -   Factor Determining Source: Residence of the payer
Item of Income: Dividends  -  Factor Determining Source: Location of payer
Item of Income: Rents  -  Factor Determining Source: Location of property
Item of Income: Royalties Natural resources  -  Factor Determining Source:  Location of property
Item of Income: Royalties Patents, copyrights, etc  -   Factor Determining Source: Where the property is used
Item of Income: Sale of real property  -  Factor Determining Source: Location of property

Item of Income: Sale of personal property  -  Factor Determining Source: *Seller’s tax home (but see Special Rules for Gains From Dispositions of Certain Property for exceptions)
*Caution: There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U.S. citizen or resident alien prior to becoming a bona fide resident of a possession. You
are subject to these special rules if you meet both of the following conditions:
• For the tax year for which the source of gain must be determined, you are a bona fide resident of Puerto Rico.
• For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident
of Puerto Rico).
• If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant
possession for purposes of the Internal Revenue Code.

The information on this website is general information and is for educational use and has not been verified for accuracy nor completeness. You, the reader, should further research your specific individual situation. In addition you should contact your accounting professional for professional advice derived from specific details from your structure and financial position.

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