From here:

A flat tax of 30 percent was imposed on U.S. source capital gains in the hands of nonresident alien individuals physically present in the United States for 183 days or more during the taxable year.

Supposing I'm a fairly standard case of an non-resident alien international student living full time in the US, out of the following (omitting the all-US case), which ones would count as "U.S. source" for the purposes of this?

  1. I have a brokerage account in a non-US country, and earn profits from stock in a non-US company.
  2. I have a brokerage account in a non-US country, and earn profits from stock in a US company.
  3. I have a brokerage account in with a US provider, and earn profits from stock in a non-US company.
  • What is your citizenship? (Without knowing, answering would require knowing all of the US tax treaties with various countries in the world.) As far as the US-Canada tax treaty goes, the brokerage does not affect sourcing and the sourcing details are in the treaty article "Elimination of double taxation". – B Chin Apr 21 '17 at 5:03

The examples you provide in the question are completely irrelevant. It doesn't matter where the brokerage is or where is the company you own stocks in. For a fairly standard case of an non-resident alien international student living full time in the US - your capital gains are US sourced.

Let me quote the following text a couple of paragraphs down the line you quoted on the same page:

Gain or loss from the sale or exchange of personal property generally has its source in the United States if the alien has a tax home in the United States. The key factor in determining if an individual is a U.S. resident for purposes of the sourcing of capital gains is whether the alien's "tax home" has shifted to the United States. If an alien does not have a tax home in the United States, then the alien’s U.S. source capital gains would be treated as foreign-source and thus nontaxable.

In general, under the "tax home" rules, a person who is away (or who intends to be away) from his tax home for longer than 1 year has shifted tax homes to his new location upon his arrival in that new location. See Chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses

I'll assume you've read this and just want an explanation on what it means.

What it means is that if you move to the US for a significant period of time (expected length of 1 year or more), your tax home is assumed to have shifted to the US and the capital gains are sourced to the US from the start of your move.

For example: you are a foreign diplomat, and your 4-year assignment started in May. Year-end - you're not US tax resident (diplomats exempt), but you've stayed in the US for more than 183 days, and since your assignment is longer than 1 year - your tax home is now in the US. You'll pay the 30% flat tax.

Another example: You're a foreign airline pilot, coming to the US every other day flying the airline aircraft. You end up staying in the US 184 days, but your tax home hasn't shifted, nor you're a US tax resident - you don't pay the flat tax.

Keep in mind, that tax treaties may alter the situation since in many cases they also cover the capital gains situation for non-residents.

  • Yeah, I did see those paragraphs, but was under the impression that they seemed to presuppose some other notion of "U.S. source". Specifically, supposing not: if the first half of the first paragraph is meant to be read as "U.S. source capital gains are defined as ones from sale/exchange of personal property while having a tax home in the US", then the last sentence of the same paragraph is slightly mystifying as it seems to amount to "if you don't have a tax home in the US (=> don't have U.S. source capital gains), your (nonexistent) U.S. source capital gains are treated as foreign-source". – negativezero Jan 4 '16 at 8:40
  • Is it clear now? – littleadv Jan 4 '16 at 16:23

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