Title 26 — Internal Revenue Code
Part I · Chapter 1 — Normal Taxes and Surtaxes
§ 862. Income from sources without the United States
Statutory text
Gross income from sources without United States
The following items of gross income shall be treated as income from sources without the United States:
interest other than that derived from sources within the United States as provided in section 861(a)(1);
dividends other than those derived from sources within the United States as provided in section 861(a)(2);
compensation for labor or personal services performed without the United States;
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;
gains, profits, and income from the sale or exchange of real property located without the United States;
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;
underwriting income other than that derived from sources within the United States as provided in section 861(a)(7);
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; and
amounts received, directly or indirectly, from a foreign person for the provision of a guarantee of indebtedness of such person other than amounts which are derived from sources within the United States as provided in section 861(a)(9).
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.
Legislative history
Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.
Aug. 16, 1954, ch. 736, 68A Stat. 276 · 68A Stat. 276
Enacted · 26 U.S.C. § 862
Aug. 16, 1954, ch. 736, 68A Stat. 276
Source evidence
Code source credit
Aug. 16, 1954, ch. 736, 68A Stat. 276Revenue Act of 1971
Pub. L. 92–178 title III § 314(b) · 85 Stat. 494
Added · 26 U.S.C. § 862(c)
Pub. L. 92–178 added subsec. (c)
Source evidence
Code amendment note
Subsec. (c). Pub. L. 92–178 added subsec. (c).Enacted provision · exact public law section
(b) Clerical Amendment— Section 862 (relating to income from sources without the United States) is amended by adding at the end thereof the following new subsection: “(c) Cross Reference— “For source of amounts attributable to certain aircraft and vessels, see section 861(e).”Pub. L. 94–455 § 1901(b)(26)(C) · 90 Stat. 1520
Inserted · 26 U.S.C. § 862(a)(5); 26 U.S.C. § 862(a)(6)
Pub. L. 94–455, § 1901(b)(26)(C), inserted “or exchange” after “sale”
Source evidence
Code amendment note
Subsec. (a)(5), (6). Pub. L. 94–455, § 1901(b)(26)(C), inserted “or exchange” after “sale”.Enacted provision · exact public law section
(C) Paragraphs (5) and (6) of section 862(a) (relating to items treated as income from without the United States) 26 USC 863. and paragraphs (2) and (3) of section 863(b) (relating to sources of income) are each amended by striking out “sale” and inserting in lieu thereof “sale or exchange”.Pub. L. 94–455 § 1036(b) · 90 Stat. 1520
Added · 26 U.S.C. § 862(a)(7)
Pub. L. 94–455, § 1036(b), added par. (7)
Source evidence
Code amendment note
Subsec. (a)(7). Pub. L. 94–455, § 1036(b), added par. (7).Enacted provision · exact public law section
(b) Treatment as Foreign Source Income.— Section 862(a) (relating to gross income from sources without the United States) is 26 USC 862. amended by adding the following new paragraph: “(7) Underwriting income other than that derived from sources within the United States as provided in section 861(a)(7).”.Tax Reduction and Simplification Act of 1977
Pub. L. 95–30 title I § 102(b)(10) · 91 Stat. 126
Changed · 26 U.S.C. § 862(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
Source evidence
Code amendment note
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.Enacted provision · exact public law section
(10) Subsection (b) of section 862 (relating to income from sources without the United States) is amended by adding at the end thereof the following new sentence: “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.”Economic Recovery Tax Act of 1981
Pub. L. 97–34 title VIII § 831(a)(2) · 95 Stat. 175
Added · 26 U.S.C. § 862(a)(8)
Pub. L. 97–34 added par. (8)
Source evidence
Code amendment note
Subsec. (a)(8). Pub. L. 97–34 added par. (8).Enacted provision · exact public law section
(2) Section 862(a) (relating to income from sources without the United States) is amended— (A) by striking out “and” at the end of paragraph (5), (B) by striking out the period at the end of paragraph (6) and inserting in lieu thereof a semicolon, (C) by striking out “Underwriting” in paragraph (7) and inserting in lieu thereof “underwriting”, (D) by striking out the period at the end of paragraph (7) and inserting in lieu thereof “; and”, and (E) by adding at the end thereof the following new paragraph: “(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.”Tax Reform Act of 1986
Pub. L. 99–514 § 1211(b)(1)(C) · 100 Stat. 2085
Substituted · 26 U.S.C. § 862(a)(6)
Pub. L. 99–514, § 1211(b)(1)(C), substituted “inventory property (within the meaning of section 865(h)(1))” for “personal property”
Source evidence
Code amendment note
Subsec. (a)(6). Pub. L. 99–514, § 1211(b)(1)(C), substituted “inventory property (within the meaning of section 865(h)(1))” for “personal property”.Enacted provision · exact public law section
(C) Paragraph (6) of section 862(a).Tax Reform Act of 1986
Pub. L. 99–514 § 104(b)(12) · 100 Stat. 2085
Substituted · 26 U.S.C. § 862(b)
Pub. L. 99–514, § 104(b)(12), substituted “the standard deduction” for “the zero bracket amount”
Source evidence
Code amendment note
Subsec. (b). Pub. L. 99–514, § 104(b)(12), substituted “the standard deduction” for “the zero bracket amount”.Enacted provision · exact public law section
(12) Section 862.— Subsection (b) of section 862 (relating to taxable income from sources without the United States) is amended by striking out “the zero bracket amount” and inserting in lieu thereof “the standard deduction”.Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 title I § 1012(e)(4) · 102 Stat. 3342
Repealed · 26 U.S.C. § 862(c)
Pub. L. 100–647 repealed subsec. (c) which read as follows:
Source evidence
Code amendment note
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).”
Enacted provision · exact public law section
(4) Subsection (c) of section 862 is hereby repealed.Revenue Reconciliation Act of 1989
Pub. L. 101–239 title VII § 7811(i)(2) · 103 Stat. 2106
Substituted · 26 U.S.C. § 862(a)(6)
Pub. L. 101–239 substituted “865(i)(1)” for “865(h)(1)”
Source evidence
Code amendment note
Subsec. (a)(6). Pub. L. 101–239 substituted “865(i)(1)” for “865(h)(1)”.Enacted provision · exact public law section
(2) Sections 861(a)(6), 862(a)(6), 863(b)(2), and 863(b)(3) are each amended by striking “865(h)(1)” and inserting “865(i)(1)”.Creating Small Business Jobs Act of 2010
Pub. L. 111–240 title II § 2122(b) · 124 Stat. 2504
Added · 26 U.S.C. § 862(a)(9)
Pub. L. 111–240 added par. (9)
Source evidence
Code amendment note
Subsec. (a)(9). Pub. L. 111–240 added par. (9).Enacted provision · exact public law section
(b) Amounts Sourced Without the United States.— Subsection (a) of section 862 of the Internal Revenue Code of 1986 26 USC 862. is amended by striking “and” at the end of paragraph (7), by striking the period at the end of paragraph (8) and inserting “; and”, and by adding at the end the following new paragraph: “(9) amounts received, directly or indirectly, from a foreign person for the provision of a guarantee of indebtedness of such person other than amounts which are derived from sources within the United States as provided in section 861(a)(9).” .Effective date note
Amendment by Pub. L. 111–240 applicable to guarantees issued after Sept. 27, 2010, see section 2122(d) of Pub. L. 111–240, set out as a note under section 861 of this title.
10 of 11 references resolved to an enrolled provision · 1 partial
Editorial Notes
Amendments1971–2010 · 8 rounds
2010
Subsec. (a)(9). Pub. L. 111–240 added par. (9).
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, § 1211(b)(1)(C), substituted “inventory property (within the meaning of section 865(h)(1))” for “personal property”.
Subsec. (b). Pub. L. 99–514, § 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, § 1901(b)(26)(C), inserted “or exchange” after “sale”.
Subsec. (a)(7). Pub. L. 94–455, § 1036(b), added par. (7).
1971
Subsec. (c). Pub. L. 92–178 added subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 Amendment
Amendment by Pub. L. 111–240 applicable to guarantees issued after , see section 2122(d) of Pub. L. 111–240, set out as a note under section 861 of this title.
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 , 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 , 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 , 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 , 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 , 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 , 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 , 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 , 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 , and on or before , 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 , and on or before , see section 126 of Pub. L. 98–369, set out as a note under section 861 of this title.
Credits
1954–2010 · 9 acts
- 1954Aug. 16, 1954, ch. 736, 68A Stat. 276
- 1971Pub. L. 92–178, title III, § 314(b), , 85 Stat. 528
- 1976Pub. L. 94–455, title X, § 1036(b), title XIX, § 1901(b)(26)(C), , 90 Stat. 1633, 1798
- 1977Pub. L. 95–30, title I, § 102(b)(10), , 91 Stat. 138
- 1981Pub. L. 97–34, title VIII, § 831(a)(2), , 95 Stat. 352
- 1986Pub. L. 99–514, title I, § 104(b)(12), title XII, § 1211(b)(1)(C), , 100 Stat. 2105, 2536
- 1988Pub. L. 100–647, title I, § 1012(e)(4), , 102 Stat. 3500
- 1989Pub. L. 101–239, title VII, § 7811(i)(2), , 103 Stat. 2409
- 2010Pub. L. 111–240, title II, § 2122(b), , 124 Stat. 2568.
Show as published
(Aug. 16, 1954, ch. 736, 68A Stat. 276; Pub. L. 92–178, title III, § 314(b), , 85 Stat. 528; Pub. L. 94–455, title X, § 1036(b), title XIX, § 1901(b)(26)(C), , 90 Stat. 1633, 1798; Pub. L. 95–30, title I, § 102(b)(10), , 91 Stat. 138; Pub. L. 97–34, title VIII, § 831(a)(2), , 95 Stat. 352; Pub. L. 99–514, title I, § 104(b)(12), title XII, § 1211(b)(1)(C), , 100 Stat. 2105, 2536; Pub. L. 100–647, title I, § 1012(e)(4), , 102 Stat. 3500; Pub. L. 101–239, title VII, § 7811(i)(2), , 103 Stat. 2409; Pub. L. 111–240, title II, § 2122(b), , 124 Stat. 2568.)