Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Sources of Income

Determining Income Source

Sale of Inventory and Depreciable Property

The source of income from the sale of inventory depends on whether the inventory was purchased or produced. When taxpayers sell inventory property that was purchased, the source of income is the place where title passes.

Income from the sale of inventory that was produced in a relevant possession and sold outside that possession (or vice versa) shall be allocated between sources in the U.S. and sources outside the U.S.