The Sourcing Rules: The Building Blocks of International Taxation

Author: Robert J. Misey

CPE Credit:  2 hours for CPAs
2 hours Federal Tax Related for EAs and OTRPs
2 hours Federal Tax Law for CTEC

The sourcing rules are the building blocks of the U.S. rules of international taxation. These rules are particularly important to foreign persons, who only pay tax on their U.S.-source income. They are also important to U.S. persons, who will want as much income as possible characterized as foreign-source to increase their foreign tax credit limitation. As a corollary, expenses must be allocated and apportioned between U.S.-source income and foreign-source income.

Presented by highly regarded international tax practitioner and former IRS attorney, Robert Misey, J.D., LL.M., M.B.A., this practical course provides insight and commentary on what you must do to advise clients to properly source their income.

Publication Date: May 2017

Designed For
Business tax and finance executives, directors, managers and staff; CPAs; Enrolled Agents; tax preparers and staff; accountants, attorneys and financial advisors who work with and advise service providers that have cross-border operations, activities, and issues.

Topics Covered

  • How sourcing impacts the tax paid by foreign persons
  • How sourcing impacts the foreign tax credits of U.S. persons
  • The sourcing of passive income: Interest, dividends, rents, and royalties
  • The sourcing of income on sales of real estate and personal property
  • The special rules for sourcing income on sales of inventory
  • The allocation and apportionment of expenses
  • The sourcing of compensation for services

Learning Objectives

  • Identify and apply a fundamental understanding of tax issues, consequences, and opportunities involved with the sourcing of income
  • Differentiate the U.S. rules of allocating and apportioning expenses
  • Recognize and apply how to properly advise clients so they can minimize their U.S. taxes
  • Identify situations where double taxation may still occur
  • Recognize scenarios where U.S. tax withholdings on income paid to a foreign person would apply
  • Identify exceptions to the U.S. sourcing rules for interest income
  • Differentiate examples of where sale of inventory is reported as foreign source income for U.S. tax purposes
  • Recognize scenarios where all income could be attributabuted to U.S. sources
  • Identify where compensation components of a defined benefit plan is sourced
  • Identify why taxation of athletes is complex
  • Recognize when an individual receives payment for services performed both within and outside the U.S. income is typically apportioned
  • Differentiate types of income sources in the U.S.
  • Recognize when a U.S. taxpayer cannot claim the foreign tax credit for foreign taxes
  • Identify why it may be difficult to allocate leased income
  • Describe when residency is established when sourcing income from the sale of personal property
  • Identify when payers are required to withhold FDAP income
  • Recognize when a foreign client does not pay tax
  • Differentiate proper methods to allocate deductions

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
Basic knowledge of U.S. international income taxation.

Advance Preparation
None

Registration Options
Quantity
Fees
Regular Fee $189

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