tion of such dividends (or for such part of such period as the corporation has been in existence) was derived from sources within the United States as determined under the provisions of this part; but only in an amount which bears the same 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; but dividends 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 exceeding the amount of the deduction allowable under section 245 in respect of such dividends, or (C) from a foreign corporation to the extent that such amount is required by section 243 (d) (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. (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— (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 (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) 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 corporation. (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. (5) SALE OF REAL PROPERTY.-Gains, profits, and income from the sale of real property located in the United States. (6) SALE OF PERSONAL PROPERTY.-Gains, profits, and income derived from the purchase of personal property without the United States (other than within a possession of the United States) and its sale within the United States. (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. SEC. 862. INCOME FROM SOURCES WITHOUT THE UNITED STATES. (a) GROSS INCOME FROM SOURCES WITHOUT UNITED STATES.-The following items of gross income shall be treated as income from sources without the United States: (1) interest other than that derived from sources within the United States as provided in section 861 (a) (1); (2) dividends other than those derived from sources within the United States as provided in section 861 (a) (2); (3) compensation for labor or personal services performed without the United States; (4) rentals or royalties from property located without the United States or from any interest in such property, including rentals or royalties for the use of or for the privilege of using without the United States patents, copyrights, secret processes and formulas, good will, trade-marks, trade brands, franchises, and other like properties; (5) gains, profits, and income from the sale of real property located without the United States; and (6) gains, profits, and income derived from the purchase of personal property within the United States and its sale without the United States. (b) TAXABLE INCOME FROM SOURCES WITHOUT UNITED STATES.From the items of gross income specified in subsection (a) 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 treated in full as taxable income from sources without the United States. SEC. 863. ITEMS NOT SPECIFIED IN SECTION 861 OR 862. (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 or his delegate. 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 or his delegate. Gains, profits, and income (1) from transportation or other services rendered partly within and partly without the United States, (2) from the sale of personal property produced (in whole or in part) by the taxpayer within and sold without the United States, or produced (in whole or in part) by the taxpayer without and sold within the United States, or (3) derived from the purchase of personal property within a possession of the United States and its sale within the United States, shall be treated as derived partly from sources within and partly from sources without the United States. SEC. 864. DEFINITIONS. For purposes of this part, the word "sale" includes "exchange"; the word "sold" includes "exchanged"; and the word "produced" includes "created", "fabricated", "manufactured", "extracted", "processed", "cured", or "aged". PART II-NONRESIDENT ALIENS AND FOREIGN CORPORATIONS Subpart A. Nonresident alien individuals. Subpart B. Foreign corporations. Subpart C. Miscellaneous provisions. Subpart A-Nonresident Alien Individuals Sec. 871. Tax on nonresident alien individuals. Sec. 873. Deductions. Sec. 874. Allowance of deductions and credits. Sec. 875. Partnerships. Sec. 876. Alien residents of Puerto Rico. Sec. 877. Foreign educational, charitable, and certain other exempt organizations. SEC. 871. TAX ON NONRESIDENT ALIEN INDIVIDUALS. (a) No UNITED STATES BUSINESS AND GROSS INCOME OF NOT MORE THAN $15,400. (1) IMPOSITION OF TAX.-Except as otherwise provided in subsection (b) there is hereby imposed for each taxable year, in lieu of the tax imposed by section 1, on the amount received, by every nonresident alien individual not engaged in trade or business within the United States, from sources within the United States, as interest (except interest on deposits with persons carrying on the banking business), dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income (including amounts described in section 402 (a) (2), section 403 (a) (2), section 631 (b) and (c), and section 1235, which are considered to be gains from the sale or exchange of capital assets), a tax of 30 percent of such amount. (2) CAPITAL GAINS OF ALIENS TEMPORARILY PRESENT IN THE UNITED STATES.-In the case of a nonresident alien individual not engaged in trade or business in the United States, there is hereby imposed for each taxable year, in addition to the tax imposed by paragraph (1)— (A) if he is present in the United States for a period or periods aggregating less than 90 days during such taxable year-a tax of 30 percent of the amount by which his gains, derived from sources within the United States, from sales or exchanges of capital assets effected during his presence in the United States exceed his losses, allocable to sources within the United States, from such sales or exchanges effected during such presence; or (B) if he is present in the United States for a period or períods aggregating 90 days or more during such taxable year-a tax of 30 percent of the amount by which his gains, derived from sources within the United States, from sales or exchanges of capital assets effected at any time during such year exceed his losses, allocable to sources within the United States, from such sales or exchanges effected at any time during such year. For purposes of this paragraph, gains and losses shall be taken into account only if, and to the extent that, they would be recognized and taken into account if such individual were engaged in trade or business in the United States, except that such gains and losses shall be computed without regard to section 1202 (relating to deduction for capital gains) and such losses shall be determined without the benefits of the capital loss carryover provided in section 1212. (b) No UNITED STATES BUSINESS AND GROSS INCOME OF MORE THAN $15,400.-A nonresident alien individual not engaged in trade or business within the United States shall be taxable without regard to subsection (a) if during the taxable year the sum of the aggregate amount received from the sources specified in subsection (a) (1), plus the amount by which gains from sales or exchanges of capital assets exceed losses from such sales or exchanges (determined in accordance with subsection (a) (2)) is more than $15,400, except that (1) the gross income shall include only income from the sources specified in subsection (a) (1) plus any gain (to the extent provided in subchapter P; sec. 1201 and following, relating to capital gains and losses) from a sale or exchange of a capital asset if such gain would be taken into account were the tax being determined under subsection (a) (2); (2) the deductions (other than the deduction for charitable contributions and gifts provided in section 873 (c)) shall be allowed only if and to the extent that they are properly allocable to the gross income from the sources specified in subsection (a), except that any loss from the sale or exchange of a capital asset shall be allowed (to the extent provided in subchapter P without the benefit of the capital loss carryover provided in section 1212) if such loss would be taken into account were the tax being determined under subsection (a) (2). If (without regard to this sentence) the amount of the taxes imposed in the case of such an individual under section 1 or under section 1201 (b), minus the sum of the credits under sections 34 and 35, is an amount which is less than 30 percent of the sum of (A) the aggregate amount received from the sources specified in subsection (a) (1), plus (B) the amount, determined under subsection (a) (2), by which gains from sales or exchanges of capital assets exceed losses from such sales or exchanges, then this subsection shall not apply and subsection (a) shall apply. For purposes of this subsection, the term "aggregate amount received from the sources specified in subsection (a) (1)" shall be applied without any exclusion under section 116. (c) UNITED STATES BUSINESS.-A nonresident alien individual engaged in trade or business within the United States shall be taxable without regard to subsection (a). For purposes of part I, this section, sections 881 and 882, and chapter 3, the term "engaged in trade or business within the United States" includes the performance of personal services within the United States at any time within the taxable year, but does not include the performance of personal services (1) for a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in trade or business within the United States, or (2) for an office or place of business maintained by a domestic corporation in a foreign country or in a possession of the United States, 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 and whose compensation for such services does not exceed in the aggregate $3,000. Such term does not include the effecting, through a resident broker, commission agent, or custodian, of transactions in the United States in stocks or securities, or in commodities (if of a kind customarily dealt in on an organized commodity exchange, if the transaction is of the kind customarily consummated at such place, and if the alien, partnership, or corporation has no office or place of business in the United States at any time during the taxable year through which or by the direction of which such transactions in commodities are effected). (d) CROSS REFERENCES. (1) For doubling of tax on citizens of certain foreign countries, see section 891. (2) For tax treatment of certain amounts distributed by the United States to nonresident alien individuals, see section 402 (a) (4). SEC. 872. GROSS INCOME. (a) GENERAL RULE.-In the case of a nonresident alien individual gross income includes only the gross income from sources within the United States. (b) EXCLUSIONS.-The following items shall not be included in gross income of a nonresident alien individual, and shall be exempt from taxation under this subtitle: (1) SHIPS UNDER FOREIGN FLAG.-Earnings derived from the operation of a ship or ships documented under the laws of a foreign country which grants an equivalent exemption to citizens of the United States and to corporations organized in the United States. (2) AIRCRAFT OF FOREIGN REGISTRY.-Earnings derived from the operation of aircraft registered under the laws of a foreign |