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SECTION 861. INCOME FROM SOURCES WITHIN THE UNITED STATES

(a) GROSS INCOME FROM SOURCES WITHIN UNITED STATES

The following items of gross income shall be treated as income from
sources within the United States:

(1) INTEREST

Interest from the United States or the District of Columbia, and
interest on bonds, notes, or other interest-bearing obligations of
noncorporate residents or domestic corporations not including--

(A) interest from a resident alien individual or domestic
corporation, if such individual or corporation meets the 80-
percent foreign business requirements of subsection (c)(1), and

(B) interest--

(i) on deposits with a foreign branch of a domestic
corporation or a domestic partnership if such branch is
engaged in the commercial banking business, and

(ii) on amounts satisfying the requirements of subparagraph
(B) of section 871(i)(3) which are paid by a foreign branch
of a domestic corporation or a domestic partnership.

(2) DIVIDENDS

The amount received as dividends--

(A) from a domestic corporation other than a corporation which
has an election in effect under section 936, or

(B) from a foreign corporation unless less than 25 percent of
the gross income from all sources of such foreign corporation
for the 3-year period ending with the close of its taxable year
preceding the declaration of such dividends (or for such part of
such period as the corporation has been in existence) was
effectively connected (or treated as effectively connected other
than income described in section 884(d)(2)) with the conduct of
a trade or business within the United States; but only in an
amount which bears the same ratio to such dividends as the gross
income of the corporation for such period which was effectively
connected (or treated as effectively connected other than income
described in section 884(d)(2)) with the conduct of a trade or
business within the United States bears to its gross income from
all sources; but dividends (other than dividends for which a
deduction is allowable under section 245(b)) from a foreign
corporation shall, for purposes of subpart A of part III
(relating to foreign tax credit), be treated as income from
sources without the United States to the extent (and only to the
extent) exceeding the amount which is 100/70th of the amount of
the deduction allowable under section 245 in respect of such
dividends, or

(C) from a foreign corporation to the extent that such amount is
required by section 243(e) (relating to certain dividends from
foreign corporations) to be treated as dividends from a domestic
corporation which is subject to taxation under this chapter, and
to such extent subparagraph (B) shall not apply to such amount,
or

(D) from a DISC or former DISC (as defined in section 992(a))
except to the extent attributable (as determined under
regulations prescribed by the Secretary) to qualified export
receipts described in section 993(a)(1) (other than interest and
gains described in section 995(b)(1)).

In the case of any dividend from a 20-percent owned corporation (as
defined in section 243(c)(2)), subparagraph (B) shall be applied by
substituting "100/80th" for "100/70th".

(3) PERSONAL SERVICES

Compensation for labor or personal services performed in the United
States; except that compensation for labor or services performed in
the United States shall not be deemed to be income from sources
within the United States if--

(A) the labor or services are performed by a nonresident alien
individual temporarily present in the United States for a period
or periods not exceeding a total of 90 days during the taxable
year,

(B) such compensation does not exceed $3,000 in the aggregate,
and

(C) the compensation is for labor or services performed as an
employee of or under a contract with--

(i) a nonresident alien, foreign partnership, or foreign
corporation, not engaged in trade or business within the
United States, or

(ii) an individual who is a citizen or resident of the
United States, a domestic partnership, or a domestic
corporation, if such labor or services are performed for an
office or place of business maintained in a foreign country
or in a possession of the United States by such individual,
partnership, or corporation.

In addition, compensation for labor or services performed in the
United States shall not be deemed to be income from sources within
the United States if the labor or services are performed by a
nonresident alien individual in connection with the individual's
temporary presence in the United States as a regular member of the
crew of a foreign vessel engaged in transportation between the United
States and a foreign country or a possession of the United States.