
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC862]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
  Subchapter N--Tax Based on Income From Sources Within or Without the 
                              United States
 
 PART I--SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN INCOME
 
Sec. 862. Income from sources without the United States


(a) Gross income from sources without United States

    The following items of gross income shall be treated as income from 
sources without the United States:
        (1) interest other than that derived from sources within the 
    United States as provided in section 861(a)(1);
        (2) dividends other than those derived from sources within the 
    United States as provided in section 861(a)(2);
        (3) compensation for labor or personal services performed 
    without the United States;
        (4) rentals or royalties from property located without the 
    United States or from any interest in such property, including 
    rentals or royalties for the use of or for the privilege of using 
    without the United States patents, copyrights, secret processes and 
    formulas, good will, trade-marks, trade brands, franchises, and 
    other like properties;
        (5) gains, profits, and income from the sale or exchange of real 
    property located without the United States;
        (6) gains, profits, and income derived from the purchase of 
    inventory property (within the meaning of section 865(i)(1)) within 
    the United States and its sale or exchange without the United 
    States;
        (7) underwriting income other than that derived from sources 
    within the United States as provided in section 861(a)(7); and
        (8) gains, profits, and income from the disposition of a United 
    States real property interest (as defined in section 897(c)) when 
    the real property is located in the Virgin Islands.

(b) Taxable income from sources without United States

    From the items of gross income specified in subsection (a) there 
shall be deducted the expenses, losses, and other deductions properly 
apportioned or allocated thereto, and a ratable part of any expenses, 
losses, or other deductions which cannot definitely be allocated to some 
item or class of gross income. The remainder, if any, shall be treated 
in full as taxable income from sources without the United States. In the 
case of an individual who does not itemize deductions, an amount equal 
to the standard deduction shall be considered a deduction which cannot 
definitely be allocated to some item or class of gross income.

(Aug. 16, 1954, ch. 736, 68A Stat. 276; Pub. L. 92-178, title III, 
Sec. 314(b), Dec. 10, 1971, 85 Stat. 528; Pub. L. 94-455, title X, 
Sec. 1036(b), title XIX, Sec. 1901(b)(26)(C), Oct. 4, 1976, 90 Stat. 
1633, 1798; Pub. L. 95-30, title I, Sec. 102(b)(10), May 23, 1977, 91 
Stat. 138; Pub. L. 97-34, title VIII, Sec. 831(a)(2), Aug. 13, 1981, 95 
Stat. 352; Pub. L. 99-514, title I, Sec. 104(b)(12), title XII, 
Sec. 1211(b)(1)(C), Oct. 22, 1986, 100 Stat. 2105, 2536; Pub. L. 100-
647, title I, Sec. 1012(e)(4), Nov. 10, 1988, 102 Stat. 3500; Pub. L. 
101-239, title VII, Sec. 7811(i)(2), Dec. 19, 1989, 103 Stat. 2409.)


                               Amendments

    1989--Subsec. (a)(6). Pub. L. 101-239 substituted ``865(i)(1)'' for 
``865(h)(1)''.
    1988--Subsec. (c). Pub. L. 100-647 repealed subsec. (c) which read 
as follows:
    ``(c) Cross reference.--For source of amounts attributable to 
certain aircraft and vessels, see section 861(e).''
    1986--Subsec. (a)(6). Pub. L. 99-514, Sec. 1211(b)(1)(C), 
substituted ``inventory property (within the meaning of section 
865(h)(1))'' for ``personal property''.
    Subsec. (b). Pub. L. 99-514, Sec. 104(b)(12), substituted ``the 
standard deduction'' for ``the zero bracket amount''.
    1981--Subsec. (a)(8). Pub. L. 97-34 added par. (8).
    1977--Subsec. (b). Pub. L. 95-30 provided that, in the case of an 
individual who does not itemize deductions, an amount equal to the zero 
bracket amount shall be considered a deduction which cannot definitely 
be allocated to some item or class of gross income.
    1976--Subsec. (a)(5), (6). Pub. L. 94-455, Sec. 1901(b)(26)(C), 
inserted ``or exchange'' after ``sale''.
    Subsec. (a)(7). Pub. L. 94-455, Sec. 1036(b), added par. (7).
    1971--Subsec. (c). Pub. L. 92-178 added subsec. (c).


                    Effective Date of 1989 Amendment

    Amendment by Pub. L. 101-239 effective, except as otherwise 
provided, as if included in the provision of the Technical and 
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such 
amendment relates, see section 7817 of Pub. L. 101-239, set out as a 
note under section 1 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendment

    Amendment by section 104(b)(12) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. 
L. 99-514, set out as a note under section 1 of this title.
    Amendment by section 1211(b)(1)(C) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, except as otherwise 
provided, see section 1211(c) of Pub. L. 99-514, set out as an Effective 
Date note under section 865 of this title.


                    Effective Date of 1981 Amendment

    Amendment by Pub. L. 97-34 applicable to dispositions after June 18, 
1980, in taxable years ending after such date, see section 831(i) of 
Pub. L. 97-34, set out as a note under section 897 of this title.


                    Effective Date of 1977 Amendment

    Amendment by Pub. L. 95-30 applicable to taxable years beginning 
after Dec. 31, 1976, see section 106(a) of Pub. L. 95-30, set out as a 
note under section 1 of this title.


                    Effective Date of 1976 Amendment

    Amendment by section 1036(b) of Pub. L. 94-455 applicable to taxable 
years beginning after Dec. 31, 1976, see section 1036(c) of Pub. L. 94-
455, set out as a note under section 861 of this title.
    Amendment by section 1901(b)(26)(C) of Pub. L. 94-455 effective for 
taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. 
L. 94-455, set out as a note under section 2 of this title.


                    Effective Date of 1971 Amendment

    Amendment by Pub. L. 92-178 applicable to taxable years ending after 
Aug. 15, 1971, but only with respect to leases entered into after such 
date, see section 314(c) of Pub. L. 92-178, set out as a note under 
section 861 of this title.


  Applicability of Certain Amendments by Pub. L. 99-514 in Relation to 
                   Treaty Obligations of United States

    For nonapplication of amendment by section 1211(b)(1)(C) of Pub. L. 
99-514 to the extent application of such amendment would be contrary to 
any treaty obligation of the United States in effect on Oct. 22, 1986, 
with provision that for such purposes any amendment by title I of Pub. 
L. 100-647 be treated as if it had been included in the provision of 
Pub. L. 99-514 to which such amendment relates, see section 1012(aa)(3), 
(4) of Pub. L. 100-647, set out as a note under section 861 of this 
title.


    Qualified Research and Experimental Expenditures; Allocation and 
       Apportionment; Definitions; Special Rules; Effective Dates

    For allocation and apportionment of qualified research and 
experimental expenditures for purposes of sections 861 to 863 of this 
title, see section 4009 of Pub. L. 100-647, set out as a note under 
section 861 of this title.


1-Year Modification in Regulations Providing for Allocation of Research 
                      and Experimental Expenditures

    For rule governing allocation under subsec. (b) of this section of 
amounts allowable as a deduction for qualified research and experimental 
expenditures during taxable years beginning after Aug. 1, 1986, and on 
or before Aug. 1, 1987, see section 1216 of Pub. L. 99-514, set out as a 
note under section 861 of this title.


 Allocation Under Section 861 of Research and Experimental Expenditures

    For purposes of subsec. (b) of this section, all amounts allowable 
as a deduction for qualified research and experimental expenditures are 
to be allocated to income from sources within the United States and 
deducted from such income in determining the amount of taxable income 
from sources within the United States for taxable years beginning after 
Aug. 13, 1983, and on or before Aug. 1, 1986, see section 126 of Pub. L. 
98-369, set out as a note under section 861 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 638, 818, 861, 863, 864, 865 
of this title.
