vom 4563

Department of the Tredsury

Internal Revenue Service ® Attach to Form 1040.

Exclusion of Income from
Sources in United States Possessions

| 1971

For calenc 71 or other taxa

1971, and ending... 19

Name and address as shown on Form 1040

~~ Social security number
i I
|

Periods in Which Income Was

Derived From Sources Within

Possessions of United States
(Dates are inclusive)

Year

Name of Possession

From— To—

Totals .

Gross Income for A\

licable Periods

Gross Income During Periods Shown in Columns (3) and (4)

Gross Income From Sources Within
Possessions of United States Gross Income From
Sources Outside

United States and
Possessions of
United States *

Gross Income From
Sources Within
United States

Gross income from
salary, wages, or
active conduct ‘of a
trade or business

Other gross income

Total of columns 5, 6, 7, and 8

$

Source of Gross Income from Salary, Wages, or Active Conduct of a Trade or Business (Column 5, above)

Name and Address of Employer

Year (If self-employed, so state)

1969) .....
1970] _
1971

Nature of Business

INSTRUCTIONS (References are to the Internal Revenue Code)

A. Exclusion.—In general, foreign source income received
outside the United States, actually or constructively, and all
types of income from sources in a possession of the United
States and not received in the United States, including earned
income, investment income, and capital gains, qualify for
exemption from United States tax. (See section 638.)

B. Who is Entitled to Benefits of Section 931.—A United
States citizen is entitled to the benefits of section 931 if for
the 3 years ending with the close of this tax year at least:

1. 80% or more of his gross income (computed without
the benefit of this section) was derived from sources within a
possession of the United States, and

2. 50% or more of his gross income (computed without
the benefit of this section) was derived from the active conduct
of a trade or business within a possession of the United States
either on his own account or as an employee or an agent of
another.

If you did not conduct a trade or business or were not em-
ployed in a possession for the entire 3 years, you are required
to meet the test only for that part of the 3-year period during
which you were engaged in business or were employed in the
possession in order to obtain the benefits of section 931. The
computation period begins when you have possession source
income.

C. Where to File.—Attach Form 4563 to your Form 1040
and file with Internal Revenue Service Center, 11601 Roosevelt
Boulevard, Philadelphia, Pennsylvania 19155.

D. The United States and Possessions of the United
States.—For purposes of section 931, the term “United States”
means only the 50 States and the District of Columbia.
Examples of possessions are the Panama Canal Zone, Guam,
American Samoa, Wake, Johnston Island, and the Midway
Islands, The Vicgin Islands and Puerto Rico are in different
categories and are not “possessions”.

E. Income to be Reported.—If you meet the requirements
of paragraph B above, and therefore are permitted to exclude

> Salary earned by you in a United States possession and deposited by
your employer to your bank account in the United States is considered
3s received in the the United States.

your possession and foreign source income, you must never-
theless report the following income on Form 1040:

1. Allincome received from United States sources,

2. All amounts received in the United States (whether by
you or your agent) with respect to income derived from pos-
sessions or other foreign sources, and

3. Amounts received for services performed as an em-
ployee of the United States or any agency thereof regardless
of where the services were performed.

F. Deductions.—lf you are entitled to the benefits of section
931, you may claim deductions only to the extent they are
connected with income from sources within the United States
and the District of Columbia. The proper apportionment and
allocation of the deductions with respect to income from
sources within and without the United States shall be deter-
mined as provided in the Regulations.

Exceptions.—The following deductions are allowed whether
or not they are connected with United States source income:

1. One personal exemption of $675.

2. Losses allowed by section 165(c)(2) which are not
connected with a trade or business, if these losses were in-
curred in transactions entered into for profit, but only if the
profit, if such transaction had resulted in a profit, would be
taxable.

3. Losses allowed by section 165(c)(3) of property not
connected with a trade or business if arising from certain
casualties or theft, but only if the loss is of property within
the United States.

4. Contributions and gifts to qualified charitable organiza-
tions allowed by section 170.

If you claim the benefits of section 931, you are not allowed:

(a) To use the standard deduction or the tax tables.

(b) To claim exemptions for your spouse or dependents.

(c) To use the income averaging provisions of sections
1301, 1302, 1303, 1304 and 1305.

(d) To claim a credit for income taxes paid to a foreign
country or to a possession of the United States.

‘YeUS, GOVERNMENT PRINTING OFFICE :1971—O-418-116-58-0709359