U.S. Tax Considerations for Foreign Persons

This practice note discusses the U.S. tax consequences of the activities of foreign individuals and entities in the U.S., also classified as inbound transactions. In general, foreign persons and entities are subject to U.S. federal income taxation on their U.S. source income. IRC Section 861 contains the U.S. source rules for most categories of U.S. taxable income. I.R.C. Section 862 explains that income not U.S. sourced is foreign sourced. Most categories of U.S. sourced income received by a foreign person in the U.S. are subject to U.S. tax at a rate of 30%. This practice note will explore several categories of foreign persons in the U.S. including individuals, corporations, partnerships, trusts, and estates. This practice note will also explore the more common types of passive income, such as interest income, dividend income, rental income, and performance of services (salary) income.

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