country which grants an equivalent exemption to citizens of the United States and to corporations organized in the United States. SEC. 873. DEDUCTIONS. (a) GENERAL RULE.-In the case of a nonresident alien individual the deductions shall be allowed only if and to the extent that they are connected with income from sources within the United States; and the proper apportionment and allocation of the deductions with respect to sources of income within and without the United States shall be determined as provided in part I, under regulations prescribed by the Secretary or his delegate. (b) LOSSES. (1) The deduction, for losses not connected with the trade or business if incurred in transactions entered into for profit, allowed by section 165 (c) (2) (relating to losses) shall be allowed whether or not connected with income from sources within the United States, but only if the profit, if such transaction had resulted in a profit, would be taxable under this subtitle (2) The deduction for losses of property not connected with the trade or business if arising from certain casualties or theft, allowed by section 165 (c) (3) shall be allowed whether or not connected with income from sources within the United States, but only if the loss is of property within the United States. (c) CHARITABLE CONTRIBUTIONS.-The deduction for charitable contributions and gifts provided by section 170 shall be allowed whether or not connected with income from sources within the United States but only as to contributions or gifts made to domestic corporations, or to community chests, funds, or foundations, created in the United States. (d) PERSONAL EXEMPTION.-In the case of a nonresident alien. individual who is not a resident of a contiguous country, only one exemption under section 151 shall be allowed as a deduction. (e) STANDARD DEDUCTION. For disallowance of standard deduction, see section 142 (b) (1). SEC. 874. ALLOWANCE OF DEDUCTIONS AND CREDITS. (a) RETURN PREREQUISITE TO ALLOWANCE.-A nonresident alien. individual shall receive the benefit of the deductions and credits allowed to him in this subtitle only by filing or causing to be filed a true and accurate return of his total income received from all sources in the United States, in the manner prescribed in subtitle F (sec. 6001 and following relating to procedure and administration), including therein all the information which the Secretary or his delegate may deem necessary for the calculation of such deductions and credits. This subsection shall not be construed to deny the credits provided. by sections 31 and 32 for tax withheld at the source. (b) TAX WITHHELD AT SOURCE.-The benefit of the deduction for exemptions under section 151 may, in the discretion of the Secretary or his delegate, and under regulations prescribed by the Secretary or his delegate, be received by a nonresident alien individual entitled thereto, by filing a claim therefor with the withholding agent. (c) FOREIGN TAX CREDIT NOT ALLOWED.-A nonresident alien individual shall not be allowed the credits against the tax for taxes of foreign countries and possessions of the United States allowed by section 901. SEC. 875. PARTNERSHIPS. For purposes of this subtitle, a nonresident alien individual shall be considered as being engaged in a trade or business within the United States if the partnership of which he is a member is so engaged. SEC. 876. ALIEN RESIDENTS OF PUERTO RICO. (a) No APPLICATION TO CERTAIN ALIEN RESIDENTS OF PUERTO RICO. This subpart shall not apply to an alien individual who is a bona fide resident of Puerto Rico during the entire taxable year, and such alien shall be subject to the tax imposed by section 1. (b) CROSS REFERENCE. For exclusion from gross income of income derived from sources within Puerto Rico, see section 933. SEC. 877. FOREIGN EDUCATIONAL, CHARITABLE, AND CERTAIN OTHER EXEMPT ORGANIZATIONS. For special provisions relating to unrelated business income of foreign educational, charitable, and other exempt trusts, see section 512 (a). Subpart B-Foreign Corporations Sec. 881. Tax on foreign corporations not engaged in business in Sec. 882. Tax on resident foreign corporations. Sec. 883. Exclusions from gross income. Sec. 884. Cross references. SEC. 881. TAX ON FOREIGN CORPORATIONS NOT ENGAGED IN BUSINESS IN UNITED STATES. (a) IMPOSITION OF TAX.-In the case of every foreign corporation not engaged in trade or business within the United States, there is hereby imposed for each taxable year, in lieu of the taxes imposed by section 11, a tax of 30 percent of the amount received 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 631 (b) and (c) which are considered to be gains from the sale or exchange of capital assets). (b) DOUBLING OF TAX. For doubling of tax on corporations of certain foreign countries, see section 891. SEC. 882. TAX ON RESIDENT FOREIGN CORPORATIONS. (a) IMPOSITION OF TAX.-A foreign corporation engaged in trade or business within the United States shall be taxable as provided in section 11. (b) GROSS INCOME.-In the case of a foreign corporation, gross income includes only the gross income from sources within the United States. (c) ALLOWANCE OF DEDUCTIONS AND CREDITS.— (1) DEDUCTIONS ALLOWED ONLY IF RETURN FILED.-A foreign corporation shall receive the benefit of the deductions allowed to it in this subtitle only by filing or causing to be filed with the Secretary or his delegate a true and accurate return of its total income received from all sources in the United States, in the manner prescribed in subtitle F, including therein all the information which the Secretary or his delegate may deem necessary for the calculation of such deductions. (2) ALLOCATION OF DEDUCTIONS.-In the case of a foreign corporation the deductions shall be allowed only if and to the extent that they are connected with income from sources within the United States; and the proper apportionment and allocation of the deductions with respect to sources within and without the United States shall be determined as provided in part I, under regulations prescribed by the Secretary or his delegate. (3) CHARITABLE CONTRIBUTIONS.-The deduction for charitable contributions and gifts provided by section 170 shall be allowed whether or not connected with income from sources within the United States. (4) FOREIGN TAX CREDIT.-Foreign corporations shall not be allowed the credits against the tax for taxes of foreign countries. and possessions of the United States allowed by section 901. (d) RETURNS OF TAX BY AGENT.-If any foreign corporation has no office or place of business in the United States but has an agent in the United States, the return required under section 6012 shall be made by the agent. SEC. 883. EXCLUSIONS FROM GROSS INCOME. The following items shall not be included in gross income of a foreign corporation, 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 country which grants an equivalent exemption to citizens of the United States and to corporations organized in the United States. SEC. 884. CROSS REFERENCES. (1) For withholding at source of tax on income of foreign corporations, see section 1442. (2) For rules applicable in determining whether any foreign corporation is engaged in trade or business within the United States, see section 871 (c). (3) For special provisions relating to foreign insurance companies, see subchapter L (sec. 801 and following). (4) For special provisions relating to unrelated business income of foreign educational, charitable, and certain other exempt organizations, see section 512 (a). Subpart C-Miscellaneous Provisions Sec. 891. Doubling of rates of tax on citizens and corporations of certain foreign countries Sec. 892 Sec. 893. Income of foreign governments and of international organizations Compensation of employees of foreign governments or international organizations Sec. 894. Income exempt under treaty. SEC. 891. Doubling of RATES OF TAX ON CITIZENS AND CORPORATIONS OF CERTAIN FOREIGN COUNTRIES Whenever the President finds that, under the laws of any foreign country, citizens or corporations of the United States are being subjected to discriminatory or extraterritorial taxes, the President shall so proclaim and the rates of tax imposed by sections 1, 3, 11, 802, 821, 831, 852, 871, and 881 shall, for the taxable year during which such proclamation is made and for each taxable year thereafter, be doubled in the case of each citizen and corporation of such foreign country; but the tax at such doubled rate shall be considered as imposed by such sections as the case may be. In no case shall this section operate to increase the taxes imposed by such sections (computed without regard to this section) to an amount in excess of 80 percent of the taxable income of the taxpayer (computed without regard to the deductions allowable under section 151 and under part VIII of subchapter B). Whenever the President finds that the laws of any foreign country with respect to which the President has made a proclamation under the preceding provisions of this section have been modified so that discriminatory and extraterritorial taxes applicable to citizens and corporations of the United States have been removed, he shall so proclaim, and the provisions of this section. providing for doubled rates of tax shall not apply to any citizen or corporation of such foreign country with respect to any taxable year beginning after such proclamation is made. SEC. 892. INCOME OF FOREIGN GOVERNMENTS AND OF INTERNATIONAL ORGANIZATIONS. The income of foreign governments or international organizations received from investments in the United States in stocks, bonds, or other domestic securities, owned by such foreign governments or by international organizations, or from interest on deposits in banks in the United States of moneys belonging to such foreign governments or international organizations, or from any other source within the United States, shall not be included in gross income and shall be exempt from taxation under this subtitle. SEC. 893. COMPENSATION OF EMPLOYEES OF FOREIGN GOVERNMENTS OR INTERNATIONAL ORGANIZATIONS. (a) RULE FOR EXCLUSION.-Wages, fees, or salary of any employee of a foreign government or of an international organization (including a consular or other officer, or a nondiplomatic representative), received as compensation for official services to such government or international organization shall not be included in gross income and shall be exempt from taxation under this subtitle if (1) such employee is not a citizen of the United States, or is a citizen of the Republic of the Philippines (whether or not a citizen. of the United States); and (2) in the case of an employee of a foreign government, the services are of a character similar to those performed by employees of the Government of the United States in foreign countries; and (3) in the case of an employee of a foreign government, the foreign government grants an equivalent exemption to employees of the Government of the United States performing similar services in such foreign country. (b) CERTIFICATE BY SECRETARY OF STATE.-The Secretary of State shall certify to the Secretary of the Treasury the names of the foreign countries which grant an equivalent exemption to the employees of the Government of the United States performing services in such foreign countries, and the character of the services performed by employees of the Government of the United States in foreign countries. SEC. 894. INCOME EXEMPT UNDER TREATY. Income of any kind, to the extent required by any treaty obligation of the United States, shall not be included in gross income and shall be exempt from taxation under this subtitle. PART III—INCOME FROM SOURCES WITHOUT THE UNITED STATES Subpart A. Foreign tax credit. Subpart B. Earned income of citizens of United States. Subpart E. China Trade Act corporations. Subpart A-Foreign Tax Credit Sec. 901. Taxes of foreign countries and of possessions of United Sec. 902. Credit for corporate stockholder in foreign corporation. Sec. 904. Limitation on credit. Sec. 905. Applicable rules. SEC. 901. TAXES OF FOREIGN COUNTRIES AND OF POSSESSIONS OF UNITED STATES. (a) ALLOWANCE OF CREDIT.-If the taxpayer chooses to have the benefits of this subpart, the tax imposed by this chapter shall, subject to the applicable limitation of section 904, be credited with the amounts provided in the applicable paragraph of subsection (b) plus, in the case of a corporation, the taxes deemed to have been paid under section 902. Such choice for any taxable year may be made or changed at any time before the expiration of the period prescribed for making a claim for credit or refund of the tax imposed by this chapter for such taxable year. The credit shall not be allowed against the tax imposed by section 531 (relating to the tax on accumulated earnings), against the additional tax imposed for the taxable year under section 1333 (relating to war loss recoveries), or against the personal holding company tax imposed by section 541. (b) AMOUNT ALLOWED.-Subject to the applicable limitation of section 904, the following amounts shall be allowed as the credit under subsection (a): (1) CITIZENS AND DOMESTIC CORPORATIONS.-In the case of a citizen of the United States and of a domestic corporation, the |