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‘‘(b) INSUBSTANTIAL RENTAL ACTIVITY.— 
‘‘(1) NOT RENTAL PROPERTY.—If an individual 
or individuals own property, such individual or indi-
viduals and their families use the property on more 
than 14 days during the taxable year for nonbusi-
ness purposes, the property is rented for no more 
than 14 days during the taxable year, and the total 
rental received by the individuals with respect to 
such property does not exceed $10,000, the property 
shall not be considered rental property or used in 
the activity of rental of real estate during the tax-
able year for purposes of subsection (a) and the 
Simplified USA Tax for businesses under chapter 2. 
‘‘(2) RENTS
FROM
NONRENTAL
PROPERTY.— 
Any rent from property described in paragraph (1) 
shall be included in gross income for purposes of the 
Simplified USA Income Tax. 
‘‘(c) USE FOR A NONBUSINESS PURPOSE.—For pur-
poses of this section, ‘use for a nonbusiness purpose’ 
means use other than— 
‘‘(1) use for which fair rent is paid, 
‘‘(2) use in connection with the preparation of 
the property for rental, or 
‘‘(3) use that serves a clear business purpose.
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Use during any part of a day shall constitute use for that 
day. 
‘‘Subchapter G—Accounting Methods and 
Periods 
‘‘Sec. 121. Taxable year. 
‘‘Sec. 122. Cash method of accounting; installment sales. 
‘‘SEC. 121. TAXABLE YEAR. 
‘‘(a) IN GENERAL.—The taxable year for all individ-
uals subject to tax under this chapter shall be the calendar 
year except as provided in subsection (b). 
‘‘(b) SHORT TAXABLE YEARS.— 
‘‘(1) BIRTH.—An individual’s taxable year in 
the year of his birth shall begin on the date of his 
birth. 
‘‘(2) DEATH.—An individual’s taxable year in 
the year of his death shall end on the date of his 
death. 
‘‘SEC. 122. CASH METHOD OF ACCOUNTING; INSTALLMENT 
SALES. 
‘‘(a) IN GENERAL.—All individuals shall determine 
their income and deductions using the cash receipts and 
disbursement method. 
‘‘(b) OID RULES.— 
‘‘(1) IN
GENERAL.—Original issue discount 
shall not be included in gross income until received.
191 
‘‘(2) PREVIOUSLY RECOGNIZED OID.—Original 
issue discount included in income under the Internal 
Revenue Code of 1986 shall increase the adjusted 
basis of the instrument to which the original issue 
discount related and shall not again be included in 
income when received. 
‘‘(c) INSTALLMENT SALES.— 
‘‘(1) IN GENERAL.—Taxpayers shall take into 
account income from installment sales when re-
ceived. 
‘‘(2) REGULATIONS.—The Secretary shall pro-
mulgate regulations implementing paragraph (1). 
Such regulations shall generally follow the principles 
of sections 453, 453A and 453B of the Internal Rev-
enue Code of 1986, except to the extent such prin-
ciples are inconsistent with other provisions of this 
chapter. 
‘‘(d) CONSTRUCTIVE
RECEIPT.—Income shall be 
treated as received when constructively received. 
‘‘(e) EFFECT OF CHANGE OF ACCOUNTING METH-
OD.—Rules similar to those under section 226 shall apply 
to ensure that a taxpayer does not deduct the same ex-
pense twice or include the same item in income twice. 
‘‘Subchapter H—Nonresident Aliens 
‘‘Sec. 131. Tax on nonresident alien individuals. 
‘‘Sec. 132. Tax treatment of certain community income of nonresident aliens.
192 
‘‘SEC. 131. TAX ON NONRESIDENT ALIEN INDIVIDUALS. 
‘‘(a) NONBUSINESS INCOME.— 
‘‘(1) INCOME OTHER THAN CERTAIN GAINS.— 
There is hereby imposed for each taxable year a tax 
of 30 percent of the amount received from sources 
within the United States by a nonresident alien indi-
vidual as— 
‘‘(A) interest (other than portfolio interest 
(as defined in subsection (b)(2)), deposit inter-
est (as defined in subsection (b)(3)) and origi-
nal issue discount, dividends, rents, salaries, 
wages, premiums, annuities, compensations, re-
munerations, emoluments, and other fixed or 
determinable annual periodical gains, profits 
and income, 
‘‘(B) gains from the disposal of timber, 
coal, or iron ore with a retained economic inter-
est, 
‘‘(C) in the case of the sale of an original 
discount obligation or payment on an original 
issue discount obligation, the interest accrued 
while the individual was a nonresident alien, 
and 
‘‘(D) includible social security benefits (as 
defined in section 3(b)(2)).
193 
‘‘(2) CAPITAL GAINS OF CERTAIN ALIENS.—In 
the case of a nonresident alien individual present in 
the United States for a period or periods aggre-
gating 183 days or more during the taxable year, 
there is hereby imposed a tax of 30 percent of the 
amount by which the gains, derived from sources 
within the United States, from the sale or exchange 
at any time during such year exceeds his losses, allo-
cable to sources within the United States, from the 
sale or exchange at any time during such year of 
capital assets. 
‘‘(3) TAX DOES NOT APPLY TO BUSINESS IN-
COME.—The taxes imposed by this section shall not 
apply to the income of any business entity, except to 
the extent such income is distributed as compensa-
tion, dividends, or interest. 
‘‘(b) SPECIAL RULES AND DEFINITIONS.— 
‘‘(1) CERTAIN ANNUITIES.—The taxes imposed 
by subsection (a) shall not apply to any amount re-
ceived as an annuity under a qualified annuity plan 
described in section 403(a)(1), or from a qualified 
trust described in section 401(a) and exempt under 
section 253(a) if— 
‘‘(A) all of the personal services by reason 
of which the annuity is payable were either—
194 
‘‘(i) personal services performed out-
side the United States by an individual 
who, at the time of performance of such 
personal services, was a nonresident alien, 
or 
‘‘(ii) personal services by a non-
resident alien temporarily present in the 
United States for a period or periods not 
exceeding 90 days during a taxable year, 
whose compensation for such services did 
not exceed $3,000, and who performed 
such services for— 
‘‘(I) a nonresident alien indi-
vidual, foreign partnership, or foreign 
corporation, not engaged in a trade or 
business within the United States, or 
‘‘(II) for an office or place of 
business maintained in a foreign coun-
try or in a possession of the United 
States by an individual who is a cit-
izen or resident of the United States 
or by a domestic partnership or a do-
mestic corporation, and 
‘‘(B) at the time the first amount is paid 
as annuity under the annuity plan or by the
195 
trust, 90 percent or more of the employees for 
whom contributions or benefits are provided 
under such plan are citizens or residents of the 
United States. 
‘‘(2) PORTFOLIO INTEREST.— 
‘‘(A) IN
GENERAL.—‘Portfolio interest’ 
means— 
‘‘(i) interest on obligations in reg-
istered form if the United States person 
who would otherwise be required to with-
hold tax on such interest under section 
1441(a) receives a statement that the ben-
eficial owner of the obligation is not a 
United States person, and 
‘‘(ii) interest on obligations in nonreg-
istered form if appropriate precautions are 
taken to ensure that such obligations will 
be sold only to persons who are not United 
States persons and such interest is paid 
outside the United States. 
‘‘(B) EXCEPTIONS.—Under rules to be 
prescribed by the Secretary, portfolio interest 
does not include— 
‘‘(i) interest received by a 10-percent 
equity owner, or
196 
‘‘(ii) contingent interest. 
‘‘(3) DEPOSIT
INTEREST.—‘Deposit interest’ 
means interest on deposits which are— 
‘‘(A) deposits with persons carrying on a 
banking business (including savings and loans), 
and 
‘‘(B) amounts held by an insurance com-
pany under an agreement to pay interest there-
on. 
‘‘(4) OTHER EXCEPTIONS.—The taxes imposed 
by subsection (a) shall not apply to— 
‘‘(A) a percentage of any dividend paid by 
a business entity, 80 percent of whose gross re-
ceipts are not taken into account under chapter 
1 because they are from outside the United 
States, equal to the percentage of gross receipts 
not so taken into account, 
‘‘(B) gambling winnings (except to the ex-
tent that the Secretary determines by regula-
tion that the collection of the tax is administra-
tively feasible), 
‘‘(C) compensation paid by a foreign em-
ployer to a nonresident alien individual for the 
period he is temporarily present in the United 
States as a nonimmigrant under subparagraph
197 
(F) or (J) of section 101(a)(15) of the Immi-
gration and Nationality Act, as amended, 
‘‘(D) interest from a series E or series H 
savings bond if the individual acquired the bond 
while a resident of the Ryuku Islands or the 
Trust Territory of the Pacific Islands, or 
‘‘(E) amounts earned or payable to any 
person who is a bona fide resident of Puerto 
Rico, Guam, American Samoa, or the Northern 
Mariana Islands (and, therefore, is subject to 
the tax imposed by subchapter A). 
‘‘(c) EXPATRIATION TO AVOID TAX.— 
‘‘(1) IN GENERAL.—A nonresident alien indi-
vidual who at any time within the 10-year period im-
mediately preceding the close of the taxable year lost 
United States citizenship shall be taxable in the 
manner described in paragraph (2) unless none of 
the principal purposes of losing citizenship was 
avoidance of tax under subchapter A or subtitle B. 
‘‘(2) ALTERNATIVE TAX.—A nonresident alien 
individual described in paragraph (1) shall be sub-
ject to tax on the items taxable under subsection (a) 
as determined without regard to exceptions listed or 
based on definitions contained in subsection (b) 
using the rate schedule for single individuals under
198 
section 215. If the taxes determined under sub-
section (a) are greater than the tax determined 
under this subsection, the greater tax shall apply. 
‘‘SEC. 132. TAX TREATMENT OF CERTAIN COMMUNITY IN-
COME OF NONRESIDENT ALIENS. 
‘‘(a) GENERAL RULE.—In the case of a married cou-
ple one or both of whom are nonresident alien individuals 
and who have community income for the taxable year, 
such community income shall be treated as follows: 
‘‘(1) Compensation income shall be treated as 
income of the spouse who rendered the services, 
‘‘(2) Partnership distributions shall be treated 
as the related distributive shares of partnership in-
come would be treated under section 1402(a)(5), 
‘‘(3) Community income which is derived from 
the separate property of a spouse shall be treated as 
income of that spouse, and 
‘‘(4) All other such community income shall be 
treated as provided in the applicable community 
property law. 
‘‘(b) EXCEPTION WHERE ELECTION UNDER SEC-
TION 6013(G) IS IN EFFECT.—Subsection (a) shall not 
apply if an election under subsection (g) or (h) of section 
6013 (relating to election to treat nonresident alien indi-
viduals as residents of the United States) is in effect.