PUBLIC LAW 591 - CHAPTER 736
APPROVED
H. R. 8300
Internal Revenue Code of 1954
ENACTED DURING THE
SECOND SESSION OF THE EIGHTY-THIRD CONGRESS
OF THE
Begun and held at the City of
An Act
To revise the internal revenue laws of the
Be it enacted by
the Senate and House of Representatives of the
(1) The provisions of
this Act set forth under the heading "Internal Revenue Title" may be
cited as the "Internal Revenue Code of 1954".
(2) The Internal
Revenue Code enacted on
(b) PUBLICATION.—This Act shall be
published as volume 68A of the
(c) CROSS REFERENCE.—For saving provisions,
effective date provisions, and other related provisions, see chapter 80 (sec.
7801 and following) of the Internal Revenue Code of 1954.
(d) ENACTMENT OF INTERNAL
REVENUE TITLE INTO LAW.—The Internal Revenue Title
referred to in subsection (a)(1) is as follows:
Subchapter
N—Tax Based on Income From Sources Within or Without
the
Part II. Nonresident aliens and foreign corporations.
Part III. Income from sources without the
PART
I—DETERMINATION OF SOURCES OF INCOME
Sec.
861. Income from
sources within the
Sec.
862. Income from
sources without the
Sec.
863. Items not specified in
section 861 or 862.
Sec.
864. Definitions.
SEC.
861. INCOME
FROM SOURCES WITHIN THE UNITED STATES.
(a) GROSS INCOME FROM SOURCES WITHIN UNITED STATES.—The
following items of gross income shall be treated as income from sources within
the
(1) INTEREST.—Interest
from the
(A) interest on deposits
with persons carrying on the banking business paid to persons not engaged in
business within the
(B) interest received from a resident alien
individual, a resi- dent foreign corporation, or a
domestic corporation, when it is shown to the satisfaction of the Secretary or
his delegate that less than 20 percent of the gross income of such resident payor or domestic corporation has been derived from sources
within the United States, as determined under the provisions of this part, for
the 3-year period ending with the close of the taxable year of such payor preceding the payment of such interest, or for such
part of such period as may be applicable, and
(C) income derived by a
foreign central bank of issue from bankers' acceptances.
(2) DIVIDENDS.—The amount received as dividends—
(A) from a domestic corporation other than a
corporation entitled to the benefits of section 931, and other than a cor- poration less than 20
percent of whose gross income is shown to the satisfaction of the Secretary or
his delegate to have been derived from sources within the United States, as
determined under the provisions of this part, for the 3-year period ending with
the close of the taxable year of such corporation preceding the declaration of
such dividends (or for such part of such period as the corporation has been in
existence), or
(B) from a foreign corporation unless less than
50 percent of the gross income of such foreign corporation for the 3-year
period ending with the close of its taxable year preceding the declara- tion of such dividends
(or for such part of such period as the corporation has been in existence) was
derived from sources
§861(a)(2)(B)
276 INTERNAL
REVENUE CODE OF 1954
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 de- duction allowable under section 245 in
respect of such dividends.
(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 cor-
poration, not engaged in trade or business within the
(ii) a domestic
corporation, if such labor or services are per- formed for an office or place
of business maintained in a foreign country or in a possession of the
(4) RENTALS AND ROYALTIES.—Rentals or royalties
from prop- erty located in the
(5) SALE OF REAL PROPERTY.—Gains, profits, and
income from the sale of real property located in the
(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
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
(1) interest other than
that derived from sources within the
§861(a)(2)(B)
(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 with- out the
(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 with- out 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
(6) gains, profits, and
income derived from the purchase of personal property within the
(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 appor- tioned 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
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 appor-
tioned 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
(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 in- come 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
(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
§863 (b)(2)
278 INTERNAL
REVENUE CODE OF 1954
(3) derived from the
purchase of personal property within a possession of the
shall be treated as
derived partly from sources within and partly from sources without the
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".