“source within the United States”
26 U.S. Code § 861 – Income from sources within the United States
EDITORIAL: Note that the hyperlinks to terms on Cornell such as “United States” are NOT part of the U.S. code and are not OFFICIAL links to actual definitions. They are merely guesses. Thus, “United States” DOESN”T necessarily mean the GEOGRAPHICAL “United States” they link to at 26 U.S.C. §7701(a)(9).
References to the term “FDAP” derive from 26 U.S.C. §871(a)(1)(A) and 26 U.S.C. §1473(1)(A)(i).
Note they use the suspicious phrase “if it is income treated as derived from sources within the United States” but they don’t say WHO does the treating. Its the ABSOLUTE OWNER of the payment and not the government!
The term “income” as used here is NOT “income” as defined in the Sixteenth Amendment because that is PROFIT, not GROSS RECEIPTS (property). The tax is on the GROSS receipt of STATUTORY “income” as defined in 26 U.S.C. §643(b), and that “income” is earned by a trust or partnership and not a human being.
26 U.S. Code § 643 – Definitions applicable to subparts A, B, C, and D
(b)Income
For purposes of this subpart and subparts B, C, and D, the term “income”, when not preceded by the words “taxable”, “distributable net”, “undistributed net”, or “gross”, means the amount of income of the estate or trust for the taxable year determined under the terms of the governing instrument and applicable local law. Items of gross income constituting extraordinary dividends or taxable stock dividends which the fiduciary, acting in good faith, determines to be allocable to corpus under the terms of the governing instrument and applicable local law shall not be considered income.
Below is the definition of “U.S. Source” or “sources within the United States”:
26 CFR § 1.1473-1 – Section 1473 definitions.
§ 1.1473-1 Section 1473 definitions.
(a) Definition of withholdable payment—
(1) In general.
Except as otherwise provided in this paragraph (a) and § 1.1471-2(b) (regarding grandfathered obligations), the term withholdable payment means—
(i) Any payment of U.S. source FDAP income (as defined in paragraph (a)(2) of this section); and
(ii) For any sales or other dispositions occurring after December 31, 2018, any gross proceeds from the sale or other disposition (as defined in paragraph (a)(3)(i) of this section) of any property of a type that can produce interest or dividends that are U.S. source FDAP income.
(2) U.S. source FDAP income defined—
(i) In general—
(A) FDAP income defined. For purposes of chapter 4, the term FDAP income means fixed or determinable annual or periodic income that is described in § 1.1441-2(b)(1) or § 1.1441-2(c) (excluding income described in paragraph (a)(2)(vi) of this section or § 1.1441-2(b)(2) (such as gains derived from the sale of certain property)) and including the types of income enumerated in paragraphs (a)(2)(iii) through (v) of this section.
(B) U.S. source. The term U.S. source means derived from sources within the United States. A payment is derived from sources within the United States if it is income treated as derived from sources within the United States under sections 861 through 865 and other relevant provisions of the Code. In the case of a payment of FDAP income for which the source cannot be determined at the time of payment, see § 1.1471-2(a)(5).
(C) Exceptions to withholding on U.S. source FDAP income not applicable under chapter 4. Except as otherwise provided in paragraph (a)(4) of this section, no exception to withholding on U.S. source FDAP income for purposes other than chapter 4 applies for purposes of determining whether a payment of such income is a withholdable payment under chapter 4. Thus, for example, an exclusion from an amount subject to withholding under § 1.1441-2(a) or an exclusion from taxation under section 881 does not apply for purposes of determining whether such income constitutes a withholdable payment.