vm 4563

Department of the Treasury
Internal Revenue Service

Exclusion of Income from

Sources in United States Possessions
> See instructions on back.

> Attach to Form 1040.

1982

Name(s) as shown on Form 1040

Your social security number

Total Gross Income and Possessions Exclusion

(See instructions)

| ome no. 1545-0173

Periods when you received income Gross income during periods shown in columns (b) and (c)
from sources in U.S. possessions From sources in US
(Dates are inclusive) possessions
From salary, wages, outset, Sana US. From sources
or active conduct Other income possessions in Us.
Year From— To— of a trade or
business
(a) b) © (a) (e) (0) @)
1 1980
$ $ $ $
2 1981
3 1982)
4Totals. 2 ee ee ee LS $ $ $
5 Add columns (d) and (e), line 4. This is your income from sources in U.S. possessions, . . . . $
6 Add columns (f) and (g), line 4. This is your income from sources other than U.S. possessions . $
7 Add lines 5 and 6. This is your total gross income for the test period. (See instructions to determine if you
qualify for the exclusion.) . . . . - - +) ) + + ee ee eS

Source of Gross Income from Salary, Wages, or Active Conduct of a Trade or Business

(Column (d) above)

Name of possession in which you worked

Year (If self-employed, write ‘‘self-employed’’ next to the name of the possession)

1980

1981

1982

For Paperwork Reduction Act Notice, see back of form. 363-181-1

Form 4563 (1982)


Instructions

Paperwork Reduction Act Notice.—
The Paperwork Reduction Act of 1980
says we must tell you why we are col-
lecting this information, how we will
use it, and whether you have to give
it to us. We ask for the information
to carry out the Internal Revenue laws
of the United States. We need it to
ensure that you 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 in-
formation.

Purpose

Use Form 4563 if you are a U.S.
citizen who worked in a U.S. posses-
sion and you want to see if you qualify
for the ‘‘possession exclusion.”

Additional Information

You may want to get Publication
570, Tax Guide for U.S. Citizens Em-
ployed in U.S. Possessions, for more
information.

Who Qualifies for Exclusion

You will qualify for the exclusion if:
(1) you are a U.S. citizen who worked
in one of the possessions listed below;
and (2) you meet both the income and
time tests explained below.

U.S. Possessions.—You may qualify
for the exclusion if you worked in the
following areas:

American Samoa

Wake Island

Midway Islands

Palmyra

Johnston Island

Kingman Reef

Howland Island

Baker Island

Jarvis Island

Other U.S. islands, cays, and

reefs that are not part of any

of the 50 States or the District

of Columbia.

You do not qualify for the exclusion
if you worked in Guam, the Northern
Mariana Islands, the Virgin Islands,
or Puerto Rico. See Publication 570
if you worked in any of these four
areas.

Income Test.—Fill in Form 4563.
Your entries in columns (d), (e), (f),
and (g) of lines 1, 2, and 3 should
add up to your gross income for the
periods shown. You meet the income
test if:

@ The amount on line 5 is at
least 80% of the amount on line 7;
and

@ The amount in column (d),
line 4, is at least 50% of the amount
online 7.

Time Test.—You must have met the
income test in one of the following
periods:

© During 1980 through 1982;

or

© During the part of these 3
years, ending in 1982, that you con-
ducted a trade or business in a U.S.
possession or had a job there. Count
this period from the date you actually
began working there.

Note: /f you do not qualify for the
possession exclusion, you may quality
for benefits relating to earned income
from sources outside the United
States. To take these benefits, your
tax home must be in a foreign coun-
try and you must be a resident of,
or present in, a foreign country for a
specified period of time. To see if
you qualify, get Publication 54, Tax
Guide for U.S. Citizens Abroad.

Amount of Exclusion

If you qualify, you may exclude the
total earned income, investment in-
come, and capital gains you received
during the tax year from sources out-
side the U.S. Add the amounts in
columns (d), (e), and (f), line 3. This
is the amount of income you may ex-
clude from your 1982 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.

Figuring Your Tax on Form 1040
Income You Must Report.—Even if
you can take the exclusion, you must
still report the following income on
Form 1040:

e@ Income you received from
U.S. sources. The United States
means the 50 States and the District
of Columbia.

@ Income you or your agent re-
ceived in the United States from any
source. (This generally includes sal-
ary you earned in a U.S. possession
that your employer deposited in your
bank account in the United States.)

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

@ All income you received dur-
ing the part of the tax year that is not
part of your time test period de-
scribed above. The source of that in-
come or the place where it was re-
ceived does not matter. It does not
qualify for the possession exclusion.
Deductions You Can Take.—The
following deductions are allowed
whether or not they are connected
with U.S. source income:

e@ One personal exemption of
$1,000.

US. GOVERNMENT PRINTING OFFICE : 198—O-363-181

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

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

© Charitable contributions. Re-
port them on 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 teach-
ing aids bought to use while teaching
in the United States, but not aids
bought to use in a U.S. possession.

Benefits You Cannot Take.—The fol-
lowing benefits are not allowed if you
claim the possession exclusion:

© The zero bracket amount.

e@ Exemptions for age, blind-
ness, your spouse, or any dependents.

e Income averaging on Sched-
ule G (Form 1040).

© Credit or deduction for in-
come taxes paid to a foreign country
or a U.S. possession.

e Earned income credit.

© Deduction for married couple
when both work (Schedule W, Form
1040).

Lines 34a through 38, Form
1040.—If you take the exclusion, you
must itemize your deductions on
Schedule A (Form 1040). Follow the
instructions for line 34a on page 12
of the Form 1040 instructions, paying
special attention to the section titled
After you’ve completed Schedule A,
to determine what entries you should
make on lines 34a and 35 of Form
1040. Enter $1,000 on line 36 of
Form 1040. (When you take the ex-
clusion, you may only claim one per-
sonal exemption of $1,000.) Subtract
line 36 from line 35 and enter the re-
sult on line 37. Follow the instructions
for line 38 on page 13 of the Form
1040 instructions to figure your tax.

Where to File

Attach this form to your Form 1040
and file it with the Internal Revenue
Service Center, Philadelphia, PA
19255.

Note: If you do not take the exclusion,
follow the instructions for Form 1040.
Report all your taxable income, in-
cluding income from foreign and pos-
session sources. Be sure to take all
exemptions, deductions, and credits
that you are allowed.

363-181-1