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Important
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For information call now:
(347) 989-4566
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Additional information
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Internal Revenue Service
Austin Service Center
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342
IN
1-800-829-1040
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Effectively Connected Income
If you are engaged in a U.S. trade or business, all income, gain, or loss for
the tax year that you get from sources within the United States (other than
certain investment income)
is treated as effectively connected income. This applies whether or not there is
any connection between the income and the trade or business being carried on in
the United States during the tax year. Two tests determine whether certain items
of investment income (such as interest, dividends, and royalties) are treated as
effectively connected with that business.
Personal Service Income
Transportation Income
Business Profits and Losses and Sales Transactions
Real Property Gain or Loss
In limited circumstances, some kinds
of foreign source income ( see
Foreign
Income) may be treated as effectively connected with a
trade or
business in the United Statess
Generally, you can receive
effectively connected income only if you are a
nonresident alien engaged in
trade or business in the United States
during the tax year. However, income
you receive from the sale or exchange of property, the performance of services,
or any other transaction in another tax year is treated as effectively connected
in that year if it would have been effectively connected in the year the
transaction took place or you performed the services.
Example.
Ted Richards, a nonresident alien, entered the United States in August 2009, to
perform personal services in the U.S. office of his overseas employer. He worked
in the U.S. office until December 25, 2009, but did not leave this country until
January 11, 2010. On January 8, 2010, he received his final paycheck for
services performed in the United States during 2009. All of Ted�s income during
his stay here is U.S. source income.
During 2009, Ted was engaged in the trade or business of performing personal
services in the United States. Therefore, all amounts paid to him in 2009 for
services performed in the United States during 2009 are effectively connected
with that trade or business during 2009.
The salary payment Ted received in January 2010 is U.S. source income to him in
2010. It is effectively connected with a trade or business in the United States
because he was engaged in a trade or business in the United States during 2009
when he performed the services that earned the income.
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