vm 4563

Department of the Treasury

Internal Revenua Service & Attach to Form 1040,

Exclusion of Income from
Sources in United States Possessions

For calendar year 1970 or other taxable year beginning...

1970, and ending...

Name and address as shown on Form 1040

__ Statement of Gross | Income for Applicable Period

Periods in Which Income Was

Derived From Sources Within

Possessions of United States
(Dates are inclusive)

Year Name of Possession

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

Gross Income From
Sources Within

| Gross

‘ome from
Possessions of United Stat
| Fame To | ata aM@RSS 2%, | other gross income | United Sates” meee
‘trade or business
q@ (2) @) (4) 6) (6) ” (8)
1968}... $. oats $.
ce ce cc on ce
1970
Totals $ $ $ $ ~
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 i
Year (lf self-employed, so state) Nature of Business
1968)...
1969|__
1970)
INSTRUCTIONS (References are to the Internal Revenue Code)
A. Exclusion.—In general, foreign source income received your possession and foreign source income, you must never-

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 United 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 Virgin 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
as received in the United States.

JeUS. GOVERNMENT PRINTING OFFICE:1970-0-370-124

theless report the following income on Form 1040:

(1) all income 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.—If you are entitled to the benefits of section
931 you may claim deductions only if and to the extent they
are connected with income from sources within the United
States. The proper apportionment and allocation of the deduc-
tions with respect to income from sources within and without
the United States shall be determined as provided in the
Regulations.

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

1. One personal exemption of $625.

2. Losses allowed by section 165(c)(2) which are not
connected with a trade or business, if these losses were
incurred 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 organi-
zations allowed by section 170.

If you claim the benefits of section 931, you may not:

1. Use the 10% standard deduction or the tax tables.

2 Claim exemptions for your spouse or dependents.

Use the income averaging provisions of sections 1301,
1302, 1303, 1304 and 1305.

4. Claim a credit for income taxes paid to a foreign country
or to a possession of the United States.

1e—81167-1 Po