2001 Instructions for Form 1040NR - Uncle Fed's Tax*Board

exchange of the U.S. real property the periods described in section of foreign income that may be taxed at
interest. 897(c)(1)(A)(ii). the graduated rates are:
Section 897(h) provides special rules • Interest or dividends from the U.S.
Gains or losses from the disposition
for a real estate investment trust.
business.
of a U.S. real property interest by a
• Income from foreign sales made by
partnership, trust, or estate generally Virgin Islands Real Estate. Gain or your U.S. office.
are passed through and must be loss on dispositions of real property • Rents or royalties you received for
reported on the income tax return of interests located in the U.S. Virgin the use of intangible property located
each partner or beneficiary. Islands is reported on returns filed with outside the United States or the
U.S. Real Property Interests. A U.S. the Virgin Islands tax authorities. Tax privilege of using it. Such property
real property interest is any interest on these dispositions is paid to the includes patents, copyrights,
(other than an interest solely as a Virgin Islands tax authorities.
trademarks, and franchises.
creditor) in real property located in the
United States or the Virgin Islands, or
Income You May Elect To
Treat as Effectively
Special Rules for Former
any interest in a domestic corporation
that is a U.S. real property holding Connected With a U.S. Trade U.S. Citizens and Former
corporation. Generally, real property
or Business
includes:
U.S. Long-Term
• Land and unsevered natural You may elect to treat some items of
income as effectively connected with a
Residents
products of the land, such as growing
crops and timber, and mines, wells, and U.S. trade or business. The election Section 877 may affect your tax liability
other natural deposits.
applies to all income from real property, if you are a former citizen or former
• Improvements on land, including or an interest in real property, located in long-term resident (LTR) of the United
buildings, other inherently permanent the United States and held for the States. You are a former LTR if you
structures, and structural components production of income. Income from real were a lawful permanent resident of the
of these.
property includes:
United States (that is, you had a green
• Personal property associated with • Rental income from real property. card) for at least 8 of the 15
the use of real property, such as • Profit from disposing of U.S. timber, consecutive tax years ending with the
farming, forestry, mining, or
coal, or iron ore while keeping a share year your residency ended. In
construction equipment, or property in it.
determining if you are a former LTR, do
used in lodging facilities or rented office • Rents and royalties from mines, oil or not count any year that you were
space. See Pub. 519 for exceptions. gas wells, or other natural resources. treated as a resident of another country
A corporation is a U.S. real property The election does not apply to under a tax treaty and you did not
holding corporation if the fair market dispositions of U.S. real property waive treaty benefits.
value of its U.S. real property interests interests discussed earlier.
If you were a former citizen or former
is 50% or more of the fair market value To make the election, attach a LTR and you relinquished your
of its U.S. real property interests, statement to your return for the year of citizenship or terminated your residency
interests in foreign real property, plus the election. Include in your statement: after February 5, 1995, you are subject
any other of its assets that are used or
1. That you are making the election. to the provisions of section 877 on your
held for use in a trade or business. For
2. A complete list of all your real U.S. source income if one of the
special rules, see sections 897(c)(4)
property, or any interest in real
principal purposes of your action was to
and (5).
property, located in the United States avoid U.S. taxes.
An interest in a foreign corporation is (including location). Give the legal
You are considered to have tax
a U.S. real property interest only if the identification of U.S. timber, coal, or avoidance as a principal purpose if (a)
corporation elected to be treated as a iron ore in which you have an interest. your average annual net income tax for
domestic corporation.
3. The extent of your interest in the the last 5 tax years ending before the
real property.
An interest in a domestic corporation date of your action to relinquish your
4. A description of any substantial
is not a U.S. real property interest if at citizenship or terminate your residency
improvements on such real property.
the date of disposition of the interest in was more than $100,000 or (b) your net
5. Your income from the property.
the corporation (a) the corporation did worth on the date of your action was
6. The dates you owned it.
not hold any U.S. real property interests $500,000 or more. These amounts are
7. Whether the election is under
and (b) all the U.S. real property adjusted for inflation if your expatriation
section 871(d) or treaty.
interests held by the corporation during action is after 1996 (see the chart on
8. Details of any previous elections
the shorter of the periods described in
page 7).
and revocations of the real property
section 897(c)(1)(A)(ii):
elections.
Although there are exceptions to
1. Were disposed of in a transaction these rules, you will qualify for an
in which all gain realized was
Foreign Income Taxed by the
exception only if you are eligible to
recognized or
submit a ruling request to the IRS that
2. Ceased to be U.S. real property United States
your renunciation of U.S. citizenship or
interests because of the application of You may be required to report some termination of U.S. residency did not
section 897(c)(1)(B) to one or more income from foreign sources on your have as one of its principal purposes
other corporations. U.S. return if it is effectively connected the avoidance of U.S. tax and you
with a U.S. trade or business. For this submit such a ruling request in a
Stock Regularly Traded. A U.S. real foreign income to be treated as complete and good faith manner. For
property interest does not include any effectively connected with a U.S. trade more details about these exceptions,
class of stock of a domestic corporation or business, you must have a fixed see section 877(c); Notice 97-19,
that is regularly traded on an place of business in the United States. 1997-1 C.B. 394; and Notice 98-34,
established securities market, unless The income, gain, or loss must result 1998-2 C.B. 29. You can find Notice
you held more than 5% of that class of directly from the usual business 97-19 on page 40 of Internal Revenue
stock at any time during the shorter of activities of your U.S. office. The kinds Bulletin 1997-10 and Notice 98-34 on
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