om 45963

Department of the Treasury

Internal Revenue Service

Exclusion of Income From
Sources in American Samoa

> See instructions below.
» Attach to Form 1040.

OMB No. 1545:0173

1987

Attachment
Sequence No. 68

Name(s) as shown on Form 1040

Your social security number

Year Name of possession (see Specific Instructions) in which you worked
(If self-employed, write ‘‘self-employed’’ next to the name of the possession.)
A 1985
B 1986
Cc 1987

Note: Do not file this form unless you have income in 1987 from sources in American Samoa. If you do have income in 1987 from sources
in American Samoa, complete the rest of this form to see if you qualify for the exclusion.

Total Gross Income and Possession Exclusion

Dates you were employed or engaged
ina business in a U.S. possession

Gross income during periods shown in columns (b) and (c) from

(dates are inclusive)

Sources in U.S. possessions

Salaries, wages, or active

Year From— To— conduct of a trade or Sources outside U.S. Sources in
business Other income and U.S. possessions Us.
(a) (b) © (d) (e) 10) (e)
11985 |
2 1986 | [
iz

Dates you were employed or engaged
ina business in American Samoa
(dates are inclusive)

Sources in American Samoa only

Sources outside U.S. Y
and American Samoa

3 1987

4 Add lines 1 through 3 for columns
(d) through (g) .

: |

5 Add columns (d) and (e), line 4. This is your gross income from sources in U.S. possessions

6 Add columns (f) and (g), line 4, and the amount on line 5. This is your total gross income

7 Multiply the amount on line 6 by 80% (.80) and enter the result

8 Multiply the amount on line 6 by 50% (.50) and enter the result

Note: /f the amount on line 5 is equal to or more than the amount on line 7, and ‘the amount in ncolumn ),
line 4, is equal to or more than the amount on line 8, you qualify to take the possession exclusion. If

you choose to take the exclusion, complete line 9.

9 Add the amounts in columns (qd), (e), and (f), line 3, that you received outside the United States. This is the

amount you may exclude from your 1987 gross income

General Instructions

Paperwork Reduction Act Notice.—We ask for this
information to carry out the Internal Revenue laws of the
United States. We need it to ensure that taxpayers are
complying with these laws and to allow us to figure and
collect the right amount of tax. You are required to give us
this information.

Changes You Should Note
The Tax Reform Act of 1986 made many changes that affect

rules for exclusion of income from United States possessions.

American Samoa.—Beginning in 1987, American Samoa is
the only area that qualifies for the “possession exclusion.”

This means that you must have had income in 1987 froma
source in American Samoa before you can qualify for the
exclusion.

American Samoa, Guam, and the Northern Mariana
Islands. —Beginning in 1988, a new possession exclusion
may apply to bona fide residents of American Samoa,
Guam, and the Northern Mariana Islands. The new
exclusion rules, however, will not apply unless an
implementation agreement is in effect between the
Possession and the United States. At the time this form
went to print, none of these possessions had entered into an
implementation agreement.

Form 4563 (1987)


Form 4563 (1987)

Page 2

Purpose of Form

Use Form 4563 if you are a U.S. citizen who worked in
American Samoa in 1987 and you want to see if you qualify
for the “possession exclusion.” If you qualify and choose to
take the exclusion, also use Form 4563 to figure the
amount of the exclusion.

Additional Information
You may want to get Publication 570, Tax Guide for U.S.

Citizens Employed in U.S. Possessions, for more
information.

Who Qualifies for the Exclusion
You will qualify for the exclusion if:
e You are a U.S. citizen who worked in American Samoa
during 1987; and
@ At least 80% of your total gross income, line 6, was from
sources in U.S. possessions (see Specific Instructions);
and
@ At least 50% of your total gross income, line 6, was from
wages, salaries, or your active conduct of a trade or
business in U.S. possessions (see Specific Instructions).
Note: /f you do not qualify for the possession exclusion, you
may qualify for benefits relating to earned income from
sources outside the United States. To take these benefits,
your tax home must be in a foreign country and you must be
a resident of, or present in, a foreign country for a specified
period of time. A U.S. possession or territory is not a foreign
country. To see if you qualify for benefits relating to earned
income from sources outside the United States, get
Publication 54, Tax Guide for U.S. Citizens and Resident
Aliens Abroad.

Where To File

Mail your return to the Internal Revenue Service Center,
Philadelphia, PA 19255, U.S.A.

Note: /f you do not take the exclusion, follow the instructions
for Form 1040. Report all your taxable income, including
income from foreign and possession sources. Be sure to take
all exemptions, deductions, and credits that you are entitled
to take. File your return with the Internal Revenue Service
Center shown in the Form 1040 instructions for the place
where you live.

Figuring Your Tax on Form 1040

Income You Must Report.— Even if you may take the
exclusion, you must still report the following income on your
Form 1040:

income you received from U.S. sources. (The United States
means the 50 States and the District of Columbia.)

Income you or your agent received in the United States
from any source. (This generally includes salary you earned
in a U.S. possession that your employer deposited in your
bank account in the United States.)

@ All income you received as an employee of the U.S.
Government or any of its agencies.

@ All income you received during the part of your 1987 tax
year that is not part of the period shown in columns (b) and
(c) of line 3. The source of that income or the place where
it was received does not matter. It does not qualify for the
possession exclusion.

Deductions You May Take.—If otherwise allowable, the

following deductions are allowed whether or not they are

connected with U.S. source income.

@ One personal exemption of $1,900.

e Losses from transactions you entered into for profit, but
that were not connected with a trade or business. The
transactions must be of a kind whose profits, if there had
been any, would have been taxable. The losses may not
have been reimbursed by insurance.

e Casualty and theft losses to nonbusiness property in the
United States. Use Form 4684, Casualties and Thefts, to
report them.

@ Charitable contributions (Schedule A, Form 1040).

Other deductions are allowed only if they relate to income
from U.S. sources. For example, a teacher may deduct the
business expense of teaching aids bought to use while
teaching in the United States, but not aids bought to use in
American Samoa.

Benefits You May Not Take.— The following benefits are

not allowed if you take the possession exclusion.

e Standard deduction.

@ Exemption for your spouse or any dependents.

Credit or deduction for income taxes paid to a foreign
country or a U.S. possession.

e Earned income credit.

@ Deduction for medical and dental expenses.

Lines 33 through 37, Form 1040.—To itemize your
deductions on Schedule A (Form 1040), follow the
instructions for line 33a on page 15 of the Form 1040
Instructions.

Enter zero on line 33b. (If you take the exclusion, you
cannot claim the standard deduction.) Write “Form 4563” on
the dotted line to the left of line 33b.

If you itemize your deductions, subtract line 33a from line
31 and enter the result on line 34. Otherwise, enter on line
34 the amount from line 31

Enter $1,900 on line 35. (If you take the exclusion, you
may claim only one personal exemption of $1,900.)

Subtract line 35 from line 34 and enter the result on line
36. Follow the instructions for line 37 on page 16 of the Form
1040 Instructions to figure your tax.

Specific Instructions

For purposes of completing lines A, B, 1, and 2 (1985 and
1986 sources of income), the following are considered U.S.
possessions:

American Samoa Howland Island

Wake Island Baker Island
Midway Islands Jarvis Island
Palmyra Other U.S. islands, cays, and

Johnston Island reefs that are not part of any of
Kingman Reef the 50 States.

For purposes of completing lines C and 3 (1987 sources of
income), only American Samoa is considered a U.S.
possession.

Lines 1, 2, and 3.— Enter in columns (b) and (c) the dates
that you were employed or engaged in a business in the
qualified possession during the 3-year period ending on the
last day of your 1987 tax year.

Enter in columns (qd), (e), (f), and (g), your gross income
for the period shown in columns (b) and (c). If you file a joint
tax return with your spouse, see Publication 570.

Note: Publication 570 explains how to determine the source
of income.

Line 9.—If you qualify, you may exclude the total earned
income, investment income, and capital gains you received
during the tax year from sources outside the United States.
The amounts in columns (d), (e), and (f), line 3, that you
received outside the United States may be excluded from
your 1987 gross income.

Note: Taking the exclusion may not be to your advantage
because it limits the other tax benefits you may use. You
should figure your tax both with and without the exclusion to
see which is better for you.