Dluney ESPN Yahoo www.swank op 2 www.deeps Tongon de Online teach MindTap- Mind Top El Online teach… obook Tax Drill – NRA Income Complete the following statements regarding a nonresident alien’s income For nonresident aliens, certain U.S.-source income that is not effectively connected with the conduct of U.S. trade or business is subject to a flat percent tax. Capital gains not effectively connected with the conduct of a U.S. trade or business are exempt from this taxas long as the nonresident alien individual was not present in the United States for days or more during the taxable year. Nonresident aliens are not permitted to carry forward capital losses. Feedback Check My Wors Generally, only the U.S.-source income of nonresident alien individuals and foreign corporations is su reflects the reach of the U.S. tax jurisdiction. The constraint, however, does not prevent the United S foreign-source income of nonresident allen Individuals and foreign corporations when that income is the conduct of a US, trade or business
The Correct Answer and Explanation is:
Completed Statements:
- For nonresident aliens, certain U.S.-source income that is not effectively connected with the conduct of U.S. trade or business is subject to a flat 30 percent tax.
- Capital gains not effectively connected with the conduct of a U.S. trade or business are exempt from this tax as long as the nonresident alien individual was not present in the United States for 183 days or more during the taxable year.
Explanation
The U.S. tax system distinguishes between resident and nonresident aliens for tax purposes. Nonresident aliens are taxed only on U.S.-source income and only in specific circumstances. When a nonresident alien earns income that is not effectively connected with a U.S. trade or business (NECI), such as interest, dividends, rents, and royalties, this income is typically subject to a flat 30% withholding tax, unless reduced or eliminated by an applicable tax treaty between the U.S. and the nonresident’s country of residence.
One key exclusion to this 30% flat tax rule is on capital gains. Nonresident aliens are generally not subject to U.S. capital gains tax on the sale of personal property, including stocks and securities, unless those gains are effectively connected with a U.S. trade or business or the individual has a substantial presence in the U.S. during the tax year. Specifically, if a nonresident alien is present in the U.S. for 183 days or more during the taxable year, their U.S.-source capital gains may become taxable.
Additionally, nonresident aliens cannot carry forward capital losses to offset future capital gains, which is a tax benefit generally available to U.S. taxpayers. This rule reflects the limited scope of the U.S. tax jurisdiction over foreign individuals who do not reside in or actively conduct business within the United States.
Lastly, while the U.S. primarily taxes U.S.-source income of nonresident aliens, it can also tax foreign-source income if that income is effectively connected to a U.S. trade or business. This ensures that income arising from business activity conducted within the United States is captured under U.S. tax rules, regardless of its geographic origin.
