Level One Analysis - Title 26 Overview

Level One Analysis - Title 26 Overview

TITLE 26 - INTERNAL REVENUE TITLE

SUBTITLES

A. Income Taxes Secs. 1-1552

B. Estate and Gift Taxes

C. Employment Taxes and Collection of Income Tax at source Secs. 3101-3510

D. Miscellaneous Excise Taxes

E. Alcohol, Tobacco, and Certain Other Excise Taxes

F. Procedure and Administration

G. The Joint Committee on Taxation

H. Financing o Presidential Election Campaign

SUBTITLE A - INCOME TAXES

Chapter 1. Normal Taxes and Surtaxes Secs. 1-1399

Sub-Chapters

A. Determination of Tax Liability Secs. 1-59

B. Computation of Taxable Income Secs. 61-291

C. Corporate Distributions and Adjustments

D. Deferred Compensation, etc.

E. Accounting Periods and Methods

F. Exempt Organizations

G. Corporations Used to Avoid Income Tax on Shareholders

H. Banking Institutions

I. Natural Resources

J. Estates, Trusts, Beneficiaries, and Decedents

K. Partners and Partnerships

L. Insurance Companies

M. Regulated Investment Companies and Real Estate Investment Trusts

N. Tax Based on Income from Sources Within or Without the United States Secs. 861-999

O. Gain or Loss on Disposition of Property

P. Capital Gains and Losses

Q. Readjustment of Tax Between Years and Special Limitations

R. Repealed

S. Tax Treatment of S Corporations and Their Shareholders

T. Cooperatives and their Patrons

U. Repealed [General Stock Ownership Corporations]

V. Title 11 Cases

Chapter 2. Tax on Self-Employment Income Secs. 1401-1403

Chapter 3. Withholding of Tax on Nonresident Aliens and Foreign Corporations Secs. 1441-1465

Sub-Chapters

A. Nonresident Aliens and Foreign Corporations

B. Application of Withholding Provisions

Chapter 4. Rules Applicable to Recovery of Excessive Profits on Government Contracts

Chapter 5. Tax on Transfers to Avoid Income Tax

Chapter 6. Consolidated Returns

SUBTITLE B - ESTATE AND GIFT TAX

SUBTITLE C - EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

Level Two Analysis - Subtitle A Overview

SUBTITLE A - INCOME TAXES

Chapter 1. Normal Taxes and Surtaxes

Sub-Chapters

A. Determination of Tax Liability

Parts

I. Tax on Individuals Secs. 1-5.

II. Tax on Corporations Secs. 11-12.

III. Changes in Rates During a Taxable Year

IV. Credits against Tax

V. [Part 5 is Missing]

VI. Alternative Minimum Tax

VII. Environmental Tax

B. Computation of Taxable Income

Parts

I. Definition of Gross Income, Adjusted Gross Income, Taxable Income, Etc. Secs. 61-67.

II. Items Specifically Included in Gross Income.

III. Items Specifically Excluded from Gross Income.

IV. Determination of Marital Status.

V. Deductions for Personal Exemptions.

VI. Itemized Deductions for Individuals and Corporations.

VII. Additional Itemized Deductions for Individuals.

VIII. Special Deductions for Corporations.

IX. Items Not Deductible.

X. Terminal Railroad Corporations and Their Shareholders.

XI. Special Rules Relating to Corporate Preerence Items.

N. Tax Based on Income from Sources Within or Without the United States

Parts

I. Determination of Sources of Income Secs. 861-865

II. Nonresident Aliens and Foreign Corporations Secs. 871-897

III. Income from Sources Without the United States Secs. 901-989

IV. Domestic International Sales Corporations Secs. 991-997

V. International Boycott Determinations Sec. 999

Level Three Analysis - Chapter 1

SUBTITLE A - INCOME TAXES

Chapter 1. Normal Taxes and Surtaxes

Sub-Chapter A. Determination of Tax Liability.

Part I. Tax on Individuals Secs. 1-5.

Sections

1. Tax imposed.

2. Definitions and special rules.

3. Tax tables for individuals.

4. Repealed.

5. Cross references relating to Tax on individuals.

Part II. Tax on Corporations Secs. 11-12.

Sections

11. Tax imposed.

12. Cross references relating to tax on corporations.

Part IV. Credits Against Tax.

Subpart A. Nonrefundable Personal Credits Secs. 21-26.

Subpart B. Foreign Tax Credits Secs. 27-29.

Subpart C. Refundable Tax Credits Secs. 31-35.

Sub-Chapter B. Computation of Taxable Income

Part I. Definition of Gross Income, Adjusted gross income, taxable income, Etc. Secs. 61-17.

Sections

61. Gross Income Defined.

62. Adjusted Gross Income Defined.

63. Taxable Income Defined.

64. Ordinary Income Defined.

65. Ordinary Loss Defined.

Sub-Chapter N. Tax Based on Income from Sources Within or Without the United States.

Part I. Determination of Sources of Income Secs. 861-865.

Sections

861. Income From Sources Within the United States.

862. Income From Sources Without the United States.

863. Items Not Specified in Section 861 or 862.

864. Definitions and Special Rules.

865. Source Rules for Personal Property Sales.

Part II. Nonresident Aliens and Foreign Corporations Secs. 871-897.

Subpart A. Nonresident Alien Individuals Secs. 871-879.

Sections

871. Tax on Nonresident Alien Individuals.

872. Gross Income.

873. Deductions.

874. Allowance of Deductions and Credits.

875. Partnerships, Beneficiaries of Estates or Trusts.

876. Alien Residents of Puerto Rico, Guam, American Samoa, or the Northern Mariana Islands.

877. Expatriation to Avoid Tax.

878. Foreign Educational, Charitable, and Certain Other Exempt Organizations.

879. Tax Treatment of Certain Community Income in the Case of Non-resident Alien Individuals.

Subpart B. Foreign Corporations Secs. 881-885.

Subpart C. Tax on Gross Transportation Income Secs. 887.

Subpart D. Miscellaneous Provisions Secs. 891-897.

Part III. Income from Sources Without the United States Secs. 901-989.

Subpart A. Foreign Tax Credit Secs. 901-908.

Sections

901. Taxes of Foreign Countries and of Possessions of United States.

906. Nonresident Alien Individuals and Foreign Corporations.

Subpart B. Earned Income Of Citizens of United States Secs. 911-912.

Sections

911. Citizens or residents of the United States living abroad

Subpart C. Taxation of Foreign Sales Corporations.

Subpart D. Possessions of the United States Secs. 931-936.

Sections

931. Income From Sources Within Guam, American Samoa, or the Northern Mariana Islands.

932. Coordination of United States and Virgin Islands Income Taxes.

933. Income From Sources Within Puerto Rico.

Subpart E. Repealed.

Subpart F. Controlled Foreign Corporations

Subpart G. Export Trade Corporations.

Subpart H. Repealed.

Subpart I. Admissibility of Documentation Maintained in Foreign Countries.

Subpart J. Foreign Currency Transactions.

Level Four Analysis - Conclusions

Chapter 1. Normal Taxes and Surtaxes

Subchapter A. Determination of Tax Liability

Part I. Tax on Individuals.

1. The tax is imposed on the taxable income of:

a. married individuals, with marriage defined at §7703;

b. a head of household, as defined at § 2(b);

c. unmarried individuals;

d. married individuals filing separate returns;

e. estates and trusts. (Sec. 1.)

2. There are three types of “individuals”:

a. Citizens wherever resident:

1) Must be born or naturalized in the United States; (Reg. 1.1-1(a)-(c))

2) Must be subject to the jurisdiction of the United States; (Reg. 1.1-1(a)-(c))

b. Aliens resident; (Sec. 7701(b); Reg. 1.1-1(a)-(b))

c. Aliens nonresident:

1) Taxed per Sec. 871; (Sec. 7701(b); Sec. 2(d); Reg. 1.1-1(a))

2) Taxed per Sec. 877; (Sec. 7701(b); Sec. 2(d); Reg. 1.1-1(a))

3) If bona fide resident of Puerto Rico for entire year is, except as provided by Sec. 933 with respect to Puerto Rican source income, subject to taxation as a resident alien. (Reg. 1.1-1(b))

3. The taxable income upon which the tax is imposed initially consists of all income and from whatever source it may be received, whether from within the United States or without the United States. Sec. 1; (Secs. 61-63; Reg. 1.1-1(b))

4. Individuals who have paid certain taxes to foreign governments and possessions of the United States are entitled to a credit. (Sec. 27)

5. Individuals are entitled to “refundable credits” against the tax imposed at Sec. 1 as follows:

1. Taxes that are collected at the source under Chapter 24, Secs. 3401-3404. (Sec. 31.);

2. Taxes that are withheld at the source upon nonresident aliens and foreign corporations per Chapter 3, Subchapter A, Secs. 1441-1446. (Sec. 33)

Chapter 1. Normal Taxes and Surtaxes

Subchapter N. Tax Based on Income From Sources Within or Without the United States

Part I. Determination of Sources.

1. Items of gross income that are to be treated as income from sources within the United States are:

a) Some interest; (Sec. 861(a)(1))

b) Some dividends; (Sec. 861(a)(2))

c) Some compensation for personal services dependent upon who performs the labor, where the labor is performed, and for whom the labor is performed (Sec. 861(a)(3))

d) Some rentals and royalties; (Sec. 861(a)(4))

e) Disposition of United States real property interests; (Sec. 861(a)(5))

f) Gains from the sale or exchange of certain personal property; (Sec. 861(a)(6))

g) Underwriting income as defined at Sec. 832(b)(3);(Sec. 861(a)(7))

h) Social Security benefits as defined in Sec. 86(d).(Sec. 861(a)(8))

2. Items of gross income that are to be treated as income from sources without the United States are:

a) Interest other than that dervied from sources within the United States; (Sec. 862(a)(1))

b) Dividends other than those derived from sources within the United States; (Sec. 862(a)(2))

c) Compensation for labor or personal services performed without the United States; (Sec. 862(a)(3))

d) Rentals or royalties from property located outside the United States, and others; (Sec. 862(a)(4))

e) Gains from the sale or exchange of real property located without the United States; (Sec. 862(a)(5))

f) Gains from the sale or exchange o certain personal property; (Sec. 862(a)(6))

g) Underwriting income other than that derived from sources within the United States as provided in Sec. 861(a)(7); (Sec. 862(a)(7))

h) Gains from the disposition of a United States real property interest as defined in Sec. 897(c) when the real property is located in the Virgin Islands. (Sec. 862(a)(8))

3. Items of gross income not specified by statute are to be allocated or apportioned to sources within and without the United States by Regulations. (Sec. 863)

4. Except as otherwise provided in the section, income from the sale of personal property is sourced:

a) In the United States if the seller of the property was a United States resident; (Sec. 865(a)(1))

b) Out of the United States if the seller of the property was not a Untied States resident. (Sec. 865(a)(2))

1) For purposes of this section, a “United States resident” is defined as one who has his tax home as defined in Sec. 911(d)(3) in the United States; (Sec. 865()(1)(A))

2) For purposes of this section, a “nonresident” is any person other than a United States resident. (Sec. 865(g)(1)(B))

Part II. Nonresident Aliens and Foreign Corporations.

Subpart A. Nonresident alien individuals

1. A tax of 30% is imposed on amounts received by a nonresident alien that are not associated with a trade or business but are otherwise received from sources within the United States. (Sec. 871(a)(1)(A))

2. A tax as provided in Section 1, 55 or 402(e)(1) shall apply to nonresident aliens on their taxable income which is effectively connected with the conduct of a trade or business within the United States. (Sec. 871(a)(1)(B))

3. As to nonresident aliens, the definition of gross income is modified to only include income which is derived from sources within the United States and which is not effectively connected with the conduct of a trade or business within the United States. (Sec. 872(a)(1))

4. As to nonresident aliens, they are entitled to certain exclusions, deductions and credits. (Secs. 872(b)-874)

5. There are special rules for nonresident aliens who were United States citizens but expatriated themselves for tax avoidance purposes. (Sec. 877)

Part III. Income From Sources Without the United States.

Subpart A. Foreign Tax Credit

1. If a taxpayer elects the benefit of this subpart, then the tax imposed by Chapter 1, subject to the limitation of Sec. 904, shall be credited with:

a. In the case of a citizen of the United States, the amount of taxes paid to a foreign government or to any possession of the United States; (Sec. 901(a)-(b)(1))

b. In the case of a resident of the United States and of an individual who is a bona fide full year resident of Puerto Rico, the amount of taxes paid to any possession of the United States; (Sec. 901(a)-(b)(2))

c. In the case of an alien resident of the United States and of an alien individual who is a bona fide full year resident of Puerto Rico, the amount of any tax paid to any foreign country; (Sec. 901(a)-(b)(3))

d. In the case of any nonresident alien individual not described in Sec. 876, the amount determined pursuant to Sec. 906.)

Subpart B. Earned Income of Citizens or Residents of the United States

1. At the election of a “qualified individual,” there shall be excluded from gross income of the “qualified individual”, and exempt from taxation under subtitle A:

a. The individual’s “foreign earned income”; (Sec. 911(a)(1))

b. The individual’s housing cost. (Sec. 911(a)(2))

c. “Foreign earned income” is basically the amount received from sources within a foreign country; (Sec. 911(b)(1))

d. A “qualified individual” is an individual whose tax home is in a foreign country and is:

1) A citizen of the United States who establishes to the satisfaction of the Secretary that he has been a bona fide resident of a foreign country or countries or an uninterrupted period which includes an entire taxable year; (Sec. 911(d)(1)(A))

2) A citizen or resident of the United States and who during any period of 12 consecutive months, is present in a foreign country or countries during at least 330 full days. (Sec. 911(d)(1)(B))

Subpart D. Possessions of the United States

1. In the case of an individual who is a bona fide resident of Guam, American Samoa, or the Northern Mariana Islands, his gross income does not include income derived from those possessions and income effectively connected with the conduct of a trade or business by such individual within those possessions. (Sec. 931(a)(1)-(2))

2. In the case of an individual who is a citizen or resident of the United States(other than a bona fide resident of the Virgin Islands) and has income derived from sources within the Virgin Islands or effectively connected with a trade or business within the Virgin Islands, has special provisions that apply as to how much of Chapter 1 imposed taxes is to be paid to the United States and how much to the Virgin Islands. (Sec. 932(a)-(b))

3. In the case of an individual who is a bona fide resident of the Virgin Islands, for purposes of calculating income tax liability to the United States, gross income does not include any amount included in gross income on the return to the Virgin Islands. (Sec. 932(c))

4. In the case of an individual who is a bona fide resident of Puerto Rico during the entire taxable year, there shall be excluded from gross income of the individual, and exempt from taxation under subtitle A, income derived rom sources within Puerto Rico (except amounts received for services performed as an employee of the United States or any agency thereof). (Sec. 933)