192 
‘‘(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. 
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‘‘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)). 
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194 
‘‘(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— 
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195 
‘‘(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 
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196 
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 
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‘‘(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 
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198 
(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 
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199 
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. 
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200 
‘‘SEC. 133. RELATIONSHIP WITH TREATIES. 
‘‘(a) STATEMENT OF POLICY.—It is the intention of 
the USA Tax Code to promote a worldwide tax system 
in which each nation taxes— 
‘‘(1) under an individual tax, only the income of 
individuals who are residents or citizens of that na-
tion, and 
‘‘(2) under a business tax only the business ac-
tivity in such nation. 
‘‘(b) EFFECT OF TREATIES.—No tax shall be im-
posed under section 131(a) on income that is exempt from 
tax by reason of a treaty between the nation of which the 
nonresident alien is a citizen or resident and the United 
States. If any such treaty requires that a lower rate of 
tax be imposed on some or all of the items of income sub-
ject to tax under section 331(a), such lower rate shall 
apply to such items in the case of persons to whom such 
treaty applies. 
‘‘(c) EFFECT OF UNILATERAL ACTION BY FOREIGN 
NATION.—No tax shall be imposed under section 331(a) 
on nonresident aliens who are citizens or residents of an-
other nation if— 
‘‘(1) such nation exempts from its income and 
withholding taxes nonresident alien individuals who 
are residents or citizens of the United States, 
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201 
‘‘(2) such nation has entered into a tax infor-
mation sharing agreement with the United States, 
and 
‘‘(3) the Secretary certifies that the preceding 
two requirements have been satisfied. 
‘‘Subchapter I—Trusts and Estates 
‘‘Sec. 140. Prepayment of tax by trusts and estates. 
‘‘Sec. 141. Application of tax. 
‘‘Sec. 142. Special rules for credits and deductions. 
‘‘Sec. 143. Definitions and rules applicable to subchapter I. 
‘‘Sec. 144. Deduction for trusts distributing current income only. 
‘‘Sec. 145. Inclusion of amounts in gross income of beneficiaries of trusts dis-
tributing current income only. 
‘‘Sec. 146. Deduction for estates and trusts accumulating income or distrib-
uting corpus. 
‘‘Sec. 147. Inclusion of amounts in gross income of beneficiaries of estates and 
trusts accumulating income or distributing corpus. 
‘‘Sec. 148. Special rules applicable to sections 146 and 147. 
‘‘Sec. 149. Charitable remainder trusts. 
‘‘Sec. 150. Definitions applicable to excess distribution rules. 
‘‘Sec. 151. Accumulation distribution allocated to preceding years. 
‘‘Sec. 152. Treatment of amounts deemed distributed by trust in preceding 
years. 
‘‘Sec. 153. Trust income, deductions, and credits attributable to grantors and 
others as substantial owners. 
‘‘Sec. 154. Definitions and rules. 
‘‘Sec. 155. Reversionary interests. 
‘‘Sec. 156. Power to control beneficial enjoyment. 
‘‘Sec. 157. Administrative powers. 
‘‘Sec. 158. Power to revoke. 
‘‘Sec. 159. Income for benefit of grantor. 
‘‘Sec. 160. Person other than grantor treated as substantial owner. 
‘‘Sec. 161. Foreign trusts having one or more United States beneficiaries. 
‘‘Sec. 162. Limitation on charitable deduction. 
‘‘Sec. 163. Income of an estate or trust in case of divorce, etc. 
‘‘Sec. 164. Recognition of gain on certain transfers to certain foreign persons 
and estates. 
‘‘Sec. 165. Treatment of funeral trusts. 
‘‘Sec. 166. Income in respect of a decedent. 
‘‘SEC. 140. PREPAYMENT OF TAX BY TRUSTS AND ESTATES. 
‘‘(a) PREPAYMENT OF TAX.—A trust or estate shall 
prepay the Simplified USA Tax for individuals in accord-
ance with the provisions of this subchapter. 
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‘‘(b) IMPOSITION OF TAX.—There is hereby imposed 
a tax on the taxable income of trusts and estates (as deter-
mined in accordance with this subchapter) a tax deter-
mined as follows: 
‘‘If taxable income is: 
The tax is: 
Not over $1,600 ............................
15% of taxable income.
Over $1,600, but not over $3,800 
$240, plus 25% of the excess over 
$1,600.
Over $3,800 ...................................
$790, plus 30% of the excess over 
$3,800. 
‘‘(c) INFLATION ADJUSTMENT.—The schedule in 
subsection (b) shall be adjusted for inflation in accordance 
with section 25. 
‘‘(d) BUSINESS ACTIVITIES.— 
‘‘(1) TAX ON BUSINESS ACTIVITY DETERMINED 
AT BUSINESS LEVEL.—If a trust engages in business 
activity (as defined in section 206(b)), it shall be 
considered a business entity with respect to such ac-
tivities for purposes of the business tax under chap-
ter 2. The business entity shall be considered an 
asset of the trust. 
‘‘(2) 
BUSINESS
ENTITY
AS
SOLE
BENE-
FICIARY.—If the only beneficiaries of a trust are 
business entities, no tax shall be imposed on such 
trust under this subchapter. 
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‘‘SEC. 141. APPLICATION OF TAX. 
‘‘(a) IN GENERAL.—The tax imposed by section 140 
shall apply to the taxable income of estates or of any kind 
of property held in trust, including— 
‘‘(1) income accumulated in trust for the ben-
efit of unborn or unascertained persons or persons 
with contingent interests, and income accumulated 
or held for future distribution under the terms of 
the will or trust; 
‘‘(2) income which is to be distributed currently 
by the fiduciary to the beneficiaries, and income col-
lected by a guardian of an infant which is to be held 
or distributed as the court may direct; 
‘‘(3) income received by estates of deceased per-
sons during the period of administration or settle-
ment of the estate; and 
‘‘(4) income which, in the discretion of the fidu-
ciary, may be either distributed to the beneficiaries 
or accumulated. 
‘‘(b) COMPUTATION AND PAYMENT.—The taxable in-
come of an estate or trust shall be computed in the same 
manner as in the case of an individual, except as otherwise 
provided in this subchapter. The tax shall be computed 
on such taxable income and shall be paid by the fiduciary. 
For purposes of this subsection, a foreign trust or foreign 
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