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V. Section 882
A. Overview
A foreign corporation engaged in a trade or business within
the United States is taxable under section 11, 55, 59A, or
1201(a) on its taxable income that is effectively connected
income, see sec. 882(a)(1); such taxation is consistent with that
of a domestic corporation. A foreign corporation not engaged in
a trade or business within the United States is taxable at a flat
rate of 30 percent of the amount received from “interest (other
than original issue discount as defined in section 1273),
dividends, rents, salaries, wages, premiums, annuities,
compensations, remunerations, emoluments, and other fixed or
determinable annual or periodical gains, profits, and income”,
but only to the extent that the income is received from sources
within the United States (U.S. source income). Sec. 881(a)(1).
A foreign corporation is not taxable in the United States on its
income that is neither effectively connected income nor U.S.
source income. See id.
A foreign corporation that realizes U.S. source income that
is not effectively connected income may elect to treat the U.S.
source income as effectively connected income if the U.S. source
income is derived from real property located in the United
States. See sec. 882(d)(1). The Commissioner has ruled that a
foreign corporation may not make such an election for a taxable
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