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1040ez 2014

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1040ez 2014

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The 1040ez 2014

1040ez 2014 2. 1040ez 2014   Source of Income Table of Contents Introduction Topics - This chapter discusses: Resident Aliens Nonresident AliensInterest Income Dividends Guarantee of Indebtedness Personal Services Transportation Income Scholarships, Grants, Prizes, and Awards Pensions and Annuities Rents or Royalties Real Property Personal Property Community Income Introduction After you have determined your alien status, you must determine the source of your income. 1040ez 2014 This chapter will help you determine the source of different types of income you may receive during the tax year. 1040ez 2014 This chapter also discusses special rules for married individuals who are domiciled in a country with community property laws. 1040ez 2014 Topics - This chapter discusses: Income source rules, and Community income. 1040ez 2014 Resident Aliens A resident alien's income is generally subject to tax in the same manner as a U. 1040ez 2014 S. 1040ez 2014 citizen. 1040ez 2014 If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U. 1040ez 2014 S. 1040ez 2014 tax return. 1040ez 2014 You must report these amounts from sources within and outside the United States. 1040ez 2014 Nonresident Aliens A nonresident alien usually is subject to U. 1040ez 2014 S. 1040ez 2014 income tax only on U. 1040ez 2014 S. 1040ez 2014 source income. 1040ez 2014 Under limited circumstances, certain foreign source income is subject to U. 1040ez 2014 S. 1040ez 2014 tax. 1040ez 2014 See Foreign Income in chapter 4. 1040ez 2014 The general rules for determining U. 1040ez 2014 S. 1040ez 2014 source income that apply to most nonresident aliens are shown in Table 2-1. 1040ez 2014 The following discussions cover the general rules as well as the exceptions to these rules. 1040ez 2014 Not all items of U. 1040ez 2014 S. 1040ez 2014 source income are taxable. 1040ez 2014 See chapter 3. 1040ez 2014 Interest Income Generally, U. 1040ez 2014 S. 1040ez 2014 source interest income includes the following items. 1040ez 2014 Interest on bonds, notes, or other interest-bearing obligations of U. 1040ez 2014 S. 1040ez 2014 residents or domestic corporations. 1040ez 2014 Interest paid by a domestic or foreign partnership or foreign corporation engaged in a U. 1040ez 2014 S. 1040ez 2014 trade or business at any time during the tax year. 1040ez 2014 Original issue discount. 1040ez 2014 Interest from a state, the District of Columbia, or the U. 1040ez 2014 S. 1040ez 2014 Government. 1040ez 2014 The place or manner of payment is immaterial in determining the source of the income. 1040ez 2014 A substitute interest payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as the interest on the transferred security. 1040ez 2014 Exceptions. 1040ez 2014   U. 1040ez 2014 S. 1040ez 2014 source interest income does not include the following items. 1040ez 2014 Interest paid by a resident alien or a domestic corporation on obligations issued before August 10, 2010, if for the 3-year period ending with the close of the payer's tax year preceding the interest payment, at least 80% of the payer's total gross income: Is from sources outside the United States, and Is attributable to the active conduct of a trade or business by the individual or corporation in a foreign country or a U. 1040ez 2014 S. 1040ez 2014 possession. 1040ez 2014 However, the interest will be considered U. 1040ez 2014 S. 1040ez 2014 source interest income if either of the following apply. 1040ez 2014 The recipient of the interest is related to the resident alien or domestic corporation. 1040ez 2014 See section 954(d)(3) for the definition of related person. 1040ez 2014 The terms of the obligation are significantly modified after August 9, 2010. 1040ez 2014 Any extension of the term of the obligation is considered a significant modification. 1040ez 2014 Interest paid by a foreign branch of a domestic corporation or a domestic partnership on deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law if the interest paid or credited can be deducted by the association. 1040ez 2014 Interest on deposits with a foreign branch of a domestic corporation or domestic partnership, but only if the branch is in the commercial banking business. 1040ez 2014 Dividends In most cases, dividend income received from domestic corporations is U. 1040ez 2014 S. 1040ez 2014 source income. 1040ez 2014 Dividend income from foreign corporations is usually foreign source income. 1040ez 2014 Exceptions to both of these rules are discussed below. 1040ez 2014 A substitute dividend payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as a distribution on the transferred security. 1040ez 2014 Dividend equivalent payments. 1040ez 2014   U. 1040ez 2014 S. 1040ez 2014 source dividends also include all dividend equivalent payments. 1040ez 2014 Dividend equivalent payments include substitute dividends, payments made pursuant to a specified notional principal contract, and all similar payments that, directly or indirectly, are contingent on or determined by reference to, the payment of a dividend from U. 1040ez 2014 S. 1040ez 2014 sources. 1040ez 2014    The Internal Revenue Service has issued final regulations that would affect the treatment of dividend equivalent payments and specified notional principal contracts. 1040ez 2014 You can view this regulation at www. 1040ez 2014 irs. 1040ez 2014 gov/irb/2013-52_IRB/ar08. 1040ez 2014 html. 1040ez 2014 First exception. 1040ez 2014   Dividends received from a domestic corporation are not U. 1040ez 2014 S. 1040ez 2014 source income if the corporation elects to take the American Samoa economic development credit. 1040ez 2014 Second exception. 1040ez 2014   Part of the dividends received from a foreign corporation is U. 1040ez 2014 S. 1040ez 2014 source income if 25% or more of its total gross income for the 3-year period ending with the close of its tax year preceding the declaration of dividends was effectively connected with a trade or business in the United States. 1040ez 2014 If the corporation was formed less than 3 years before the declaration, use its total gross income from the time it was formed. 1040ez 2014 Determine the part that is U. 1040ez 2014 S. 1040ez 2014 source income by multiplying the dividend by the following fraction. 1040ez 2014   Foreign corporation's gross income connected with a U. 1040ez 2014 S. 1040ez 2014 trade or business for the 3-year period     Foreign corporation's gross income from all sources for that period   Guarantee of Indebtedness Certain amounts received directly or indirectly, for the provision of a guarantee of indebtedness issued after September 27, 2010, are U. 1040ez 2014 S. 1040ez 2014 source income. 1040ez 2014 They must be paid by a noncorporate resident or U. 1040ez 2014 S. 1040ez 2014 corporation or by any foreign person if the amounts are effectively connected with the conduct of a U. 1040ez 2014 S. 1040ez 2014 trade or business. 1040ez 2014 For more information, see Internal Revenue Code sections 861(a)(9) and 862(a)(9). 1040ez 2014 Personal Services All wages and any other compensation for services performed in the United States are considered to be from sources in the United States. 1040ez 2014 The only exceptions to this rule are discussed in chapter 3 under Employees of foreign persons, organizations, or offices, and under Crew members. 1040ez 2014 If you are an employee and receive compensation for labor or personal services performed both inside and outside the United States, special rules apply in determining the source of the compensation. 1040ez 2014 Compensation (other than certain fringe benefits) is sourced on a time basis. 1040ez 2014 Certain fringe benefits (such as housing and education) are sourced on a geographical basis. 1040ez 2014 Or, you may be permitted to use an alternative basis to determine the source of compensation. 1040ez 2014 See Alternative Basis , later. 1040ez 2014 Multi-level marketing. 1040ez 2014   Certain companies sell products through a multi-level marketing arrangement, such that an upper-tier distributor, who has sponsored a lower-tier distributor, is entitled to a payment from the company based on certain activities of that lower-tier distributor. 1040ez 2014 Generally, depending on the facts, payments from such multi-level marketing companies to independent (non-employee) distributors (upper-tier distributors) that are based on the sales or purchases of persons whom they have sponsored (lower-tier distributors) constitute income for the performance of personal services in recruiting, training, and supporting the lower-tier distributors. 1040ez 2014 The source of such income is generally based on where the services of the upper-tier distributor are performed, and may, depending on the facts, be considered multi-year compensation, with the source of income determined over the period to which such compensation is attributable. 1040ez 2014 Self-employed individuals. 1040ez 2014   If you are self-employed, you determine the source of compensation for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. 1040ez 2014 In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. 1040ez 2014 Time Basis Use a time basis to figure your U. 1040ez 2014 S. 1040ez 2014 source compensation (other than the fringe benefits discussed later). 1040ez 2014 Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed services in the United States during the year     Total number of days you performed services during the year   You can use a unit of time less than a day in the above fraction, if appropriate. 1040ez 2014 The time period for which the compensation is made does not have to be a year. 1040ez 2014 Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. 1040ez 2014 Example 1. 1040ez 2014 Christina Brooks, a resident of the Netherlands, worked 240 days for a U. 1040ez 2014 S. 1040ez 2014 company during the tax year. 1040ez 2014 She received $80,000 in compensation. 1040ez 2014 None of it was for fringe benefits. 1040ez 2014 Christina performed services in the United States for 60 days and performed services in the Netherlands for 180 days. 1040ez 2014 Using the time basis for determining the source of compensation, $20,000 ($80,000 × 60/240) is her U. 1040ez 2014 S. 1040ez 2014 source income. 1040ez 2014 Example 2. 1040ez 2014 Rob Waters, a resident of South Africa, is employed by a corporation. 1040ez 2014 His annual salary is $100,000. 1040ez 2014 None of it is for fringe benefits. 1040ez 2014 During the first quarter of the year he worked entirely within the United States. 1040ez 2014 On April 1, Rob was transferred to Singapore for the remainder of the year. 1040ez 2014 Rob is able to establish that the first quarter of the year and the last 3 quarters of the year are two separate, distinct, and continuous periods of time. 1040ez 2014 Accordingly, $25,000 of Rob's annual salary is attributable to the first quarter of the year (. 1040ez 2014 25 × $100,000). 1040ez 2014 All of it is U. 1040ez 2014 S. 1040ez 2014 source income because he worked entirely within the United States during that quarter. 1040ez 2014 The remaining $75,000 is attributable to the last three quarters of the year. 1040ez 2014 During those quarters, he worked 150 days in Singapore and 30 days in the United States. 1040ez 2014 His periodic performance of services in the United States did not result in distinct, separate, and continuous periods of time. 1040ez 2014 Of this $75,000, $12,500 ($75,000 × 30/180) is U. 1040ez 2014 S. 1040ez 2014 source income. 1040ez 2014 Multi-year compensation. 1040ez 2014   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. 1040ez 2014 Multi-year compensation is compensation that is included in your income in one tax year but that is attributable to a period that includes two or more tax years. 1040ez 2014   You determine the period to which the compensation is attributable based on the facts and circumstances of your case. 1040ez 2014 For example, an amount of compensation that specifically relates to a period of time that includes several calendar years is attributable to the entire multi-year period. 1040ez 2014   The amount of compensation treated as from U. 1040ez 2014 S. 1040ez 2014 sources is figured by multiplying the total multi-year compensation by a fraction. 1040ez 2014 The numerator of the fraction is the number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in the United States in connection with the project. 1040ez 2014 The denominator of the fraction is the total number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in connection with the project. 1040ez 2014 Geographical Basis Compensation you receive as an employee in the form of the following fringe benefits is sourced on a geographical basis. 1040ez 2014 Housing. 1040ez 2014 Education. 1040ez 2014 Local transportation. 1040ez 2014 Tax reimbursement. 1040ez 2014 Hazardous or hardship duty pay as defined in Regulations section 1. 1040ez 2014 861-4(b)(2)(ii)(D)(5). 1040ez 2014 Moving expense reimbursement. 1040ez 2014 The amount of fringe benefits must be reasonable and you must substantiate them by adequate records or by sufficient evidence. 1040ez 2014 Principal place of work. 1040ez 2014   The above fringe benefits, except for tax reimbursement and hazardous or hardship duty pay, are sourced based on your principal place of work. 1040ez 2014 Your principal place of work is usually the place where you spend most of your working time. 1040ez 2014 This could be your office, plant, store, shop, or other location. 1040ez 2014 If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work. 1040ez 2014   If you have more than one job at any time, your main job location depends on the facts in each case. 1040ez 2014 The more important factors to be considered are: The total time you spend at each place, The amount of work you do at each place, and How much money you earn at each place. 1040ez 2014 Housing. 1040ez 2014   The source of a housing fringe benefit is determined based on the location of your principal place of work. 1040ez 2014 A housing fringe benefit includes payments to you or on your behalf (and your family's if your family resides with you) only for the following. 1040ez 2014 Rent. 1040ez 2014 Utilities (except telephone charges). 1040ez 2014 Real and personal property insurance. 1040ez 2014 Occupancy taxes not deductible under section 164 or 216(a). 1040ez 2014 Nonrefundable fees for securing a leasehold. 1040ez 2014 Rental of furniture and accessories. 1040ez 2014 Household repairs. 1040ez 2014 Residential parking. 1040ez 2014 Fair rental value of housing provided in kind by your employer. 1040ez 2014   A housing fringe benefit does not include: Deductible interest and taxes (including deductible interest and taxes of a tenant-stockholder in a cooperative housing corporation), The cost of buying property, including principal payments on a mortgage, The cost of domestic labor (maids, gardeners, etc. 1040ez 2014 ), Pay television subscriptions, Improvements and other expenses that increase the value or appreciably prolong the life of property, Purchased furniture or accessories, Depreciation or amortization of property or improvements, The value of meals or lodging that you exclude from gross income, or The value of meals or lodging that you deduct as moving expenses. 1040ez 2014 Education. 1040ez 2014   The source of an education fringe benefit for the education expenses of your dependents is determined based on the location of your principal place of work. 1040ez 2014 An education fringe benefit includes payments only for the following expenses for education at an elementary or secondary school. 1040ez 2014 Tuition, fees, academic tutoring, special needs services for a special needs student, books, supplies, and other equipment. 1040ez 2014 Room and board and uniforms that are required or provided by the school in connection with enrollment or attendance. 1040ez 2014 Local transportation. 1040ez 2014   The source of a local transportation fringe benefit is determined based on the location of your principal place of work. 1040ez 2014 Your local transportation fringe benefit is the amount that you receive as compensation for local transportation for you or your spouse or dependents at the location of your principal place of work. 1040ez 2014 The amount treated as a local transportation fringe benefit is limited to actual expenses incurred for local transportation and the fair rental value of any employer-provided vehicle used predominantly by you, your spouse, or your dependents for local transportation. 1040ez 2014 Actual expenses do not include the cost (including interest) of any vehicle purchased by you or on your behalf. 1040ez 2014 Tax reimbursement. 1040ez 2014   The source of a tax reimbursement fringe benefit is determined based on the location of the jurisdiction that imposed the tax for which you are reimbursed. 1040ez 2014 Moving expense reimbursement. 1040ez 2014   The source of a moving expense reimbursement is generally based on the location of your new principal place of work. 1040ez 2014 However, the source is determined based on the location of your former principal place of work if you provide sufficient evidence that such determination of source is more appropriate under the facts and circumstances of your case. 1040ez 2014 Sufficient evidence generally requires an agreement between you and your employer, or a written statement of company policy, which is reduced to writing before the move and which is entered into or established to induce you or other employees to move to another country. 1040ez 2014 The written statement or agreement must state that your employer will reimburse you for moving expenses that you incur to return to your former principal place of work regardless of whether you continue to work for your employer after returning to that location. 1040ez 2014 It may contain certain conditions upon which the right to reimbursement is determined as long as those conditions set forth standards that are definitely ascertainable and can only be fulfilled prior to, or through completion of, your return move to your former principal place of work. 1040ez 2014 Alternative Basis If you are an employee, you can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your compensation than the time or geographical basis. 1040ez 2014 If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your compensation. 1040ez 2014 Also, if your total compensation from all sources is $250,000 or more, check “Yes” to both questions on line K on page 5 of Form 1040NR, and attach a written statement to your tax return that sets forth all of the following. 1040ez 2014 Your name and social security number (written across the top of the statement). 1040ez 2014 The specific compensation income, or the specific fringe benefit, for which you are using the alternative basis. 1040ez 2014 For each item in (2), the alternative basis of allocation of source used. 1040ez 2014 For each item in (2), a computation showing how the alternative allocation was computed. 1040ez 2014 A comparison of the dollar amount of the U. 1040ez 2014 S. 1040ez 2014 compensation and foreign compensation sourced under both the alternative basis and the time or geographical basis discussed earlier. 1040ez 2014 Transportation Income Transportation income is income from the use of a vessel or aircraft or for the performance of services directly related to the use of any vessel or aircraft. 1040ez 2014 This is true whether the vessel or aircraft is owned, hired, or leased. 1040ez 2014 The term “vessel or aircraft” includes any container used in connection with a vessel or aircraft. 1040ez 2014 All income from transportation that begins and ends in the United States is treated as derived from sources in the United States. 1040ez 2014 If the transportation begins or ends in the United States, 50% of the transportation income is treated as derived from sources in the United States. 1040ez 2014 For transportation income from personal services, 50% of the income is U. 1040ez 2014 S. 1040ez 2014 source income if the transportation is between the United States and a U. 1040ez 2014 S. 1040ez 2014 possession. 1040ez 2014 For nonresident aliens, this only applies to income derived from, or in connection with, an aircraft. 1040ez 2014 For information on how U. 1040ez 2014 S. 1040ez 2014 source transportation income is taxed, see chapter 4. 1040ez 2014 Scholarships, Grants, Prizes, and Awards Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. 1040ez 2014 However, see Activities to be performed outside the United States , later. 1040ez 2014 For example, payments for research or study in the United States made by the United States, a noncorporate U. 1040ez 2014 S. 1040ez 2014 resident, or a domestic corporation, are from U. 1040ez 2014 S. 1040ez 2014 sources. 1040ez 2014 Similar payments from a foreign government or foreign corporation are foreign source payments even though the funds may be disbursed through a U. 1040ez 2014 S. 1040ez 2014 agent. 1040ez 2014 Payments made by an entity designated as a public international organization under the International Organizations Immunities Act are from foreign sources. 1040ez 2014 Activities to be performed outside the United States. 1040ez 2014   Scholarships, fellowship grants, targeted grants, and achievement awards received by nonresident aliens for activities performed, or to be performed, outside the United States are not U. 1040ez 2014 S. 1040ez 2014 source income. 1040ez 2014    These rules do not apply to amounts paid as salary or other compensation for services. 1040ez 2014 See Personal Services, earlier, for the source rules that apply. 1040ez 2014 Pensions and Annuities If you receive a pension from a domestic trust for services performed both in and outside the United States, part of the pension payment is from U. 1040ez 2014 S. 1040ez 2014 sources. 1040ez 2014 That part is the amount attributable to earnings of the pension plan and the employer contributions made for services performed in the United States. 1040ez 2014 This applies whether the distribution is made under a qualified or nonqualified stock bonus, pension, profit-sharing, or annuity plan (whether or not funded). 1040ez 2014 If you performed services as an employee of the United States, you may receive a distribution from the U. 1040ez 2014 S. 1040ez 2014 Government under a plan, such as the Civil Service Retirement System, that is treated as a qualified pension plan. 1040ez 2014 Your U. 1040ez 2014 S. 1040ez 2014 source income is the otherwise taxable amount of the distribution that is attributable to your total U. 1040ez 2014 S. 1040ez 2014 Government basic pay other than tax-exempt pay for services performed outside the United States. 1040ez 2014 Rents or Royalties Your U. 1040ez 2014 S. 1040ez 2014 source income includes rent and royalty income received during the tax year from property located in the United States or from any interest in that property. 1040ez 2014 U. 1040ez 2014 S. 1040ez 2014 source income also includes rents or royalties for the use of, or for the privilege of using, in the United States, intangible property such as patents, copyrights, secret processes and formulas, goodwill, trademarks, franchises, and similar property. 1040ez 2014 Real Property Real property is land and buildings and generally anything built on, growing on, or attached to land. 1040ez 2014 Gross income from sources in the United States includes gains, profits, and income from the sale or other disposition of real property located in the United States. 1040ez 2014 Natural resources. 1040ez 2014   The income from the sale of products of any farm, mine, oil or gas well, other natural deposit, or timber located in the United States and sold in a foreign country, or located in a foreign country and sold in the United States, is partly from sources in the United States. 1040ez 2014 For information on determining that part, see section 1. 1040ez 2014 863-1(b) of the regulations. 1040ez 2014 Table 2-1. 1040ez 2014 Summary of Source Rules for Income of Nonresident Aliens Item of income Factor determining source Salaries, wages, other compensation Where services performed Business income:   Personal services Where services performed Sale of inventory—purchased Where sold Sale of inventory—produced Allocation Interest Residence of payer Dividends Whether a U. 1040ez 2014 S. 1040ez 2014 or foreign corporation* Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. 1040ez 2014 Where property is used Sale of real property Location of property Sale of personal property Seller's tax home (but see Personal Property , later, for exceptions) Pension distributions attributable to contributions Where services were performed that earned the pension Investment earnings on pension contributions Location of pension trust Sale of natural resources Allocation based on fair market value of product at export terminal. 1040ez 2014 For more information, see section 1. 1040ez 2014 863-1(b) of the regulations. 1040ez 2014 *Exceptions include: a) Dividends paid by a U. 1040ez 2014 S. 1040ez 2014 corporation are foreign source if the corporation elects the  American Samoa economic development credit. 1040ez 2014  b) Part of a dividend paid by a foreign corporation is U. 1040ez 2014 S. 1040ez 2014 source if at least 25% of the  corporation's gross income is effectively connected with a U. 1040ez 2014 S. 1040ez 2014 trade or business for the  3 tax years before the year in which the dividends are declared. 1040ez 2014 Personal Property Personal property is property, such as machinery, equipment, or furniture, that is not real property. 1040ez 2014 Gain or loss from the sale or exchange of personal property generally has its source in the United States if you have a tax home in the United States. 1040ez 2014 If you do not have a tax home in the United States, the gain or loss generally is considered to be from sources outside the United States. 1040ez 2014 Tax home. 1040ez 2014   Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. 1040ez 2014 Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. 1040ez 2014 If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. 1040ez 2014 If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. 1040ez 2014 Inventory property. 1040ez 2014   Inventory property is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. 1040ez 2014 Income from the sale of inventory that you purchased is sourced where the property is sold. 1040ez 2014 Generally, this is where title to the property passes to the buyer. 1040ez 2014 For example, income from the sale of inventory in the United States is U. 1040ez 2014 S. 1040ez 2014 source income, whether you purchased it in the United States or in a foreign country. 1040ez 2014   Income from the sale of inventory property that you produced in the United States and sold outside the United States (or vice versa) is partly from sources in the United States and partly from sources outside the United States. 1040ez 2014 For information on making this allocation, see section 1. 1040ez 2014 863-3 of the regulations. 1040ez 2014   These rules apply even if your tax home is not in the United States. 1040ez 2014 Depreciable property. 1040ez 2014   To determine the source of any gain from the sale of depreciable personal property, you must first figure the part of the gain that is not more than the total depreciation adjustments on the property. 1040ez 2014 You allocate this part of the gain to sources in the United States based on the ratio of U. 1040ez 2014 S. 1040ez 2014 depreciation adjustments to total depreciation adjustments. 1040ez 2014 The rest of this part of the gain is considered to be from sources outside the United States. 1040ez 2014   For this purpose, “U. 1040ez 2014 S. 1040ez 2014 depreciation adjustments” are the depreciation adjustments to the basis of the property that are allowable in figuring taxable income from U. 1040ez 2014 S. 1040ez 2014 sources. 1040ez 2014 However, if the property is used predominantly in the United States during a tax year, all depreciation deductions allowable for that year are treated as U. 1040ez 2014 S. 1040ez 2014 depreciation adjustments. 1040ez 2014 But there are some exceptions for certain transportation, communications, and other property used internationally. 1040ez 2014   Gain from the sale of depreciable property that is more than the total depreciation adjustments on the property is sourced as if the property were inventory property, as discussed above. 1040ez 2014   A loss is sourced in the same way as the depreciation deductions were sourced. 1040ez 2014 However, if the property was used predominantly in the United States, the entire loss reduces U. 1040ez 2014 S. 1040ez 2014 source income. 1040ez 2014   The basis of property usually means the cost (money plus the fair market value of other property or services) of property you acquire. 1040ez 2014 Depreciation is an amount deducted to recover the cost or other basis of a trade or business asset. 1040ez 2014 The amount you can deduct depends on the property's cost, when you began using the property, how long it will take to recover your cost, and which depreciation method you use. 1040ez 2014 A depreciation deduction is any deduction for depreciation or amortization or any other allowable deduction that treats a capital expenditure as a deductible expense. 1040ez 2014 Intangible property. 1040ez 2014   Intangible property includes patents, copyrights, secret processes or formulas, goodwill, trademarks, trade names, or other like property. 1040ez 2014 The gain from the sale of amortizable or depreciable intangible property, up to the previously allowable amortization or depreciation deductions, is sourced in the same way as the original deductions were sourced. 1040ez 2014 This is the same as the source rule for gain from the sale of depreciable property. 1040ez 2014 See Depreciable property , earlier, for details on how to apply this rule. 1040ez 2014   Gain in excess of the amortization or depreciation deductions is sourced in the country where the property is used if the income from the sale is contingent on the productivity, use, or disposition of that property. 1040ez 2014 If the income is not contingent on the productivity, use, or disposition of the property, the income is sourced according to your tax home as discussed earlier. 1040ez 2014 If payments for goodwill do not depend on its productivity, use, or disposition, their source is the country in which the goodwill was generated. 1040ez 2014 Sales through offices or fixed places of business. 1040ez 2014   Despite any of the earlier rules, if you do not have a tax home in the United States, but you maintain an office or other fixed place of business in the United States, treat the income from any sale of personal property (including inventory property) that is attributable to that office or place of business as U. 1040ez 2014 S. 1040ez 2014 source income. 1040ez 2014 However, this rule does not apply to sales of inventory property for use, disposition, or consumption outside the United States if your office or other fixed place of business outside the United States materially participated in the sale. 1040ez 2014   If you have a tax home in the United States but maintain an office or other fixed place of business outside the United States, income from sales of personal property, other than inventory, depreciable property, or intangibles, that is attributable to that foreign office or place of business may be treated as U. 1040ez 2014 S. 1040ez 2014 source income. 1040ez 2014 The income is treated as U. 1040ez 2014 S. 1040ez 2014 source income if an income tax of less than 10% of the income from the sale is paid to a foreign country. 1040ez 2014 This rule also applies to losses if the foreign country would have imposed an income tax of less than 10% had the sale resulted in a gain. 1040ez 2014 Community Income If you are married and you or your spouse is subject to the community property laws of a foreign country, a U. 1040ez 2014 S. 1040ez 2014 state, or a U. 1040ez 2014 S. 1040ez 2014 possession, you generally must follow those laws to determine the income of yourself and your spouse for U. 1040ez 2014 S. 1040ez 2014 tax purposes. 1040ez 2014 But you must disregard certain community property laws if: Both you and your spouse are nonresident aliens, or One of you is a nonresident alien and the other is a U. 1040ez 2014 S. 1040ez 2014 citizen or resident and you do not both choose to be treated as U. 1040ez 2014 S. 1040ez 2014 residents as explained in chapter 1. 1040ez 2014 In these cases, you and your spouse must report community income as explained later. 1040ez 2014 Earned income. 1040ez 2014   Earned income of a spouse, other than trade or business income and a partner's distributive share of partnership income, is treated as the income of the spouse whose services produced the income. 1040ez 2014 That spouse must report all of it on his or her separate return. 1040ez 2014 Trade or business income. 1040ez 2014   Trade or business income, other than a partner's distributive share of partnership income, is treated as the income of the spouse carrying on the trade or business. 1040ez 2014 That spouse must report all of it on his or her separate return. 1040ez 2014 Partnership income (or loss). 1040ez 2014   A partner's distributive share of partnership income (or loss) is treated as the income (or loss) of the partner. 1040ez 2014 The partner must report all of it on his or her separate return. 1040ez 2014 Separate property income. 1040ez 2014   Income derived from the separate property of one spouse (and which is not earned income, trade or business income, or partnership distributive share income) is treated as the income of that spouse. 1040ez 2014 That spouse must report all of it on his or her separate return. 1040ez 2014 Use the appropriate community property law to determine what is separate property. 1040ez 2014 Other community income. 1040ez 2014   All other community income is treated as provided by the applicable community property laws. 1040ez 2014 Prev  Up  Next   Home   More Online Publications