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

Sources of Income

Summary and Exercises

Summary (continued)

The rules for identifying the source of each type of income are as follows:

  • Where the services are performed determines the source of income from salaries and other compensation
  • The residence of the payer determines the source of interest income
  • Social Security Benefits are U.S. source income by definition IRC 861.
  • For pension distributions attributable to contributions, the place where the services were performed that earned the pension determines the source of pension distributions
  • For investment earnings on pension contributions, the location of the pension trust determines the source of investment earnings on pension contributions
  • The location of the payer determines the source of dividend income
  • The seller's tax home determines the source of income from selling personal property
  • The place where title passes determines the source of income from selling purchased inventory
  • Income from selling inventory produced is allocated between U.S. and non-U.S. sources
  • The location of the property determines the income source from rent and natural resource royalties
  • The location where the property is used determines the income source from royalties for patents or similar properties
  • The residence of shareholder determines the source of capital gains distributions paid by US Regulated Investment Company (RIC)
  • Where taxpayer performed the underlying services generally determines the source of unemployment compensations