WHO ARE RESIDENT ALIENS. The question whether or not an alien resides in this country is sometimes difficult to determine. The Treasury Department holds that the term "nonresident alien individual" means an individual (a) whose residence 31 is not within the United States, and (b) who is not a citizen of the United States. Any alien living in the United States who is not! a mere transient is a resident of the United States for purposes of the income tax. Whether he is a transient or not is determined by his intentions with regard to his stay. If he lives in the United States and has no definite intention as to his stay, he is a resident. The best evidence of such intentions is afforded by the conduct, acts, and declarations of the alien. The typical transient is one who stops for a short time in the course of a journey through the United States, sometimes performing labor, sometimes not, or one who enters the United States intending only to stop long enough to carry out some purpose, object, or plan not involving an extended stay. A mere floating intention, indefinite as to time, to return to another country is not sufficient to constitute him a transient. An alien's statements as to his intention with regard to residence are not conclusive, but when unequivocal will determine the question of his intention, unless his conduct, acts, or other surrounding circumstances contradict the statements. It sometimes occurs that an alien who genuinely intends his stay to be transient may put off his departure from time to time by reason of changed conditions, remaining a transient though living in the United States for a considerable time. The fact that an alien's family is abroad does not necessarily indicate that he is a transient rather than a resident. An alien who enters this country intending to make his home in a foreign country as soon as he has accumulated a sum of money sufficient to provide for his journey abroad is to be considered a transient, provided his expectation in this regard may reasonably, considering the rate of his saving, be fulfilled within a comparatively short time. It will be presumed that an alien who has established a residence 31 The Treasury Department has adopted the following definition of the word "residence" as used in the income tax laws: "That place where a man has his true, fixed and permanent home and principal establishment, and to which, whenever he is absent, he has the intention of returning; and indicates permanency of occupation as distinct from lodging or boarding, or temporary occupation." (T. D. 2242.) in the United States, as outlined above, continues to be a resident until he or his family evidence an intention to change their residence to another country by starting to remove. Thus, alien residents who, following the armistice agreement of November 11, 1918, take steps toward returning to their native countries, as by applying for passports, may for the purpose of withholding, be regarded as residents for that portion of the taxable year which elapsed up to the time such step was taken. But the status of the alien on the last day of his taxable year or period determines his liability to tax for such year or period as a resident or non-resident.32 Aliens coming into the United States with the intention of becoming residents and other resident aliens can establish the fact of their residence and acquire the privileges of resident aliens under the statute, by filing a certificate with the withholding agents charged with the duty of withholding the tax on income paid to non-resident aliens.33 The distinction between resident and non-resident aliens is also discussed elsewhere in this book.34 1 Non-Resident Aliens.35 Non-resident aliens are those individuals who are neither citizens nor residents of this country.36 As stated above, they are taxable only on that part of their income which is from sources within the United States, including interest on bonds, notes or other interest-bearing obligations of residents, corporate or otherwise, dividends from resident corporations and including all amounts received (although paid under a contract for the sale of goods or otherwise) representing profits on the manufacture and disposition of goods within the United States.87 32 Reg. 45, Arts. 312, 313, and 314. This rule differs from the English rule which provides that a person within the United Kingdom, for some temporary purpose only for less than six months during the year, is not taxable as a resident, but after a residence of six months he becomes chargeable with the duties for the year commencing on April 6th preceding. 33 Reg. 45, Art. 362; T. D. 2242. This certificate is known officially as Form No. 1078 (Revised). 34 See Chapter 4. 35 The term "non-resident alien" is defined more fully in Chapter 4. 36 Reg. 45, Art. 312. A citizen of a possession of the United States, who is not otherwise a citizen or a resident of the United States, including only the States, the territories of Alaska and Hawaii, and the District of Columbia, is treated for the purpose of the tax as if he were a non-resident alien individual (Reg. 45, Art. 1121; Revenue Act of 1918, § 260). 37 Revenue Act of 1918, § 213 (c). If a non-resident alien conducts business through an agent in this country, the agent will be subject to the duty of filing a return for his non-resident principal and of paying both the normal tax and the surtax on his behalf.38 Taxation of Individuals between United States and Porto Rico and Philippine Islands. A citizen of the United States who resides. in Porto Rico, and a citizen of Porto Rico who resides in the United States, are taxed in both places, but the income tax in the United States is credited with the amount of any income, war profits and excess profits taxes paid in Porto Rico. A resident of the United States, who is not a citizen of Porto Rico, is taxable in Porto Rico as a nonresident alien individual on any income derived from sources within Porto Rico, but the income tax in the United States is credited with the tax paid in Porto Rico. A resident of Porto Rico, who is not a citizen of the United States, is taxable in the United States as a non-resident alien individual on any income derived from sources within the United States, and receives no credit. The same principles apply in the case of the Philippine Islands.39 Husband and Wife. In so far as possible the family is treated as a unit for purposes of the income tax, and the husband and wife may make joint returns.40 Unless the wife files a separate return or joins with her husband in a return which sets forth her income separately, her husband should include in his return the income accruing to the wife from services rendered by her or the sale of products of her labor.41 The personal exemption is in such cases deducted from the joint income, but both the normal tax and the surtax is in all cases imposed upon the separate incomes.42 Minors. Under the 1916 and 1917 Laws, minors 43 were not required to make returns for themselves, their returns being required to be made by their guardians. This rule is now 38 Revenue Act of 1918, § 223; Reg. 45, Art. 404. 39 Reg. 45, Art. 1132. 40 Revenue Act of 1918, § 223. See Chapter 34. 41 Reg. 45, Art. 401. 42 Reg. 45, Art. 2; T. D. 2090. 43 A minor is a person under 21 years of age or under the statutory age of majority where he lives. (Reg. 45, Art. 403.) 44 Reg. 33, Art. 17; Letter from Treasury Department dated April 11, 1918; I. T. S. 1918, ¶ 3295. changed, and minors are required to make returns unless their income is included in the return of the parent or reported by a fiduciary. Incompetents. Incompetents or insane persons are unable to make their own returns, and their returns must be made by the guardian or other person charged with the care of the person or property of such incompetent or insane person.46 Agents. The return of a taxpayer may be made by an agent when by reason of illness, absence, or nonresidence the person liable for the return is unable to make it, the agent assuming the responsibility for making the return and incurring liability to the specific penalties provided for erroneous, false, or fraudulent returns. Responsible representatives of non-resident aliens having charge of the property of non-resident aliens may be charged with the duty of making a return and paying the tax normal and additional, on the income passing through their hands.48 Fiduciaries. Guardians, trustees, executors, administrators, receivers, conservators or any persons acting in a fiduciary capacity are charged with special duties under the law. These duties are fully discussed in another chapter.49 Persons Dying During the Year. When a person dies during any calendar year, it is the duty of the executor or administrator or person taking charge of his property to make a return for the deceased from the beginning of the year to the date of death.50 In case the decedent dies after the close of the calendar year, but before March 15th of the following year, and has not made a return for the preceding calendar year, a return should be made for the full year preceding and in addition a return from January 1 of the current year to the date of death. If during the period in which the decedent lived he was not in receipt of 45 Revenue Act of 1918, § 223; Reg. 45, Art. 403. This change was accomplished by the omission of the words "of lawful age" from the section requiring returns of individuals. Compare Revenue Act of 1916, § 8 (b) with Revenue Act of 1918, § 223. This subject is more fully discussed in Chapter 34. 46 Revenue Act of 1918, § 223; Reg. 45, Art. 422. 47 Revenue Act of 1918, § 223. 48 Revenue Act of 1918, § 223; 49 Revenue Act of 1918, § 225. Reg. 45, Art. 404. See Chapter 5. 50 Reg. 45, Art. 421. Mandell v. Pierce, 3 Cliff 134, 16 Fed. Cas. No. 9008. $1,000 of net income, if unmarried, or $2,000 if married or the head of a family, no return need be filed,51 unless he was a nonresident alien, in which case a return should be filed, whether he was married or single, regardless of amount.52 The fact that a person may have died before the passage of the law does not relieve his estate from liability to tax, if he lived after the incidence of the tax.53 51 Reg. 45, Art. 421. 52 Reg. 33, Rev., Arts. 4 and 14; Reg. 45, Art. 403. 53 Brady v. Anderson, 240 Fed. 665, writ of certiorari denied, 244 U. S. 654. Thus, a person dying after January 1, 1919, but before February 25, 1919, the date on which the 1918 Law went into effect, will be held to be taxable thereunder. The effect of making the act retroactive is to apply it to him exactly as if it had been enacted on January 1, 1918. |