vm 4563

Department of the Treasury
Internal Revenue Service

Exclusion of Income from

Sources in United States Possessions
» Attach to Form 1040.

For calendar year 1973 or other taxable year beginning ....

Name and address as shown on Form 1040

Gross Income for Applicable Periods

Periods in Which Income Was
Derived From Sources Within
Possessions of United States

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

Gross Income From Sources Within
Possessions of United States

Gross Income From

Year Name of Possession (Dates are inclusive) Sources Outside | Gross Income From
Gross United States and |” Sources Within
i ossessions o} inited States
active conduc! of 2 | Other eross income | United States *
trade or business
qd) @) (6) @” (8)

Totals... se 1 ee

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)

Year

Name and Address of Employer
(If self-employed, so state)

Nature of Business

1971
1972] __.
1973

INSTRUCTIONS (References are to the internal

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 under section 931. In-
come earned from services performed in
Non-U.S. Continental Shelf Areas may
qualify for exclusion under section 931 as
possession or other foreign source in-
come. (See section 638.)

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

1. 80% of his gross income (com-
puted without the benefit of this section)
was derived from sources within a pos-
session of the United States, and

2. 50% of his gross income (com-
puted without the benefit of this section)
was derived from the active conduct of €
trade or business within a possession 01
the United States either on his own ac-
count or as an employee or an agent of
another.

If you did not conduct a trade or busi-
ness or were not employed in a posses-
sion for the entire 3 years, you are re-
quired to meet the test only for that part
of the 3-year period during which you
were engaged in business or were em-
“Salary earned by you in a United States pos-

session and deposited by your employer to

ye
your bank account in the United States is con-
sidered as received in the United States.

ployed in the possession in order to ob-
tain the benefits of section 931. The
computation period begins when you start
to work as an employee, or when you
become actively engaged in your trade or
business.

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, American
Samoa, Wake, Johnston Island, and the
Midway Islands. The Virgin Islands, Guam,
and Puerto Rico are in different categories
and are not “possessions” for purposes
of applying section 931.

E. Income to be Reported.—If you
meet the requirements of paragraph B
above, and therefore are permitted to
exclude your possession and other for-
eign source income, you must neverthe-
less 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 per-
formed as an employee of the United
States or any agency thereof regardless
of where the services were performed.

‘Ye US. GOVERNMENT PRINTING OFFICE : 1978-O-500-144

Revenue Code)

F. Deductions.—If you are entitled to
the benefits of section 931, youmayclaim
deductions only to the extent they are
connected with income from sources
within the United States. The proper ap-
portionment 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
are allowed whether or not they are con-
nected with United States source income:

1. One personal exemption of $750.

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 organizations allowed by sec-
tion 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 pro-
visions of sections 1301, 1302, 1303,
1304 and 1305.

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

E.1. 36 2717749