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income from real property located in the United States may elect
to treat all such income as though it were effectively connected
with a trade or business within the United States. Under the
regulations, an election under section 871(d) is made by "filing
with the income tax return required under section 6012 and the
regulations thereunder * * * a statement to the effect that the
election is being made." Sec. 1.871-10(d)(1)(ii), Income Tax
Regs. Respondent has treated petitioner's rental income as
effectively connected with a trade or business within the United
States, and there is no question before the Court as to whether
petitioner's election is valid.
With these provisions in mind we now turn to section 874(a)
which, in pertinent part, provides:
Return Prerequisite to Allowance.--A nonresident alien
individual shall receive the benefit of the deductions
and credits allowed to him in this subtitle only by
filing or causing to be filed with the Secretary a true
and accurate return, in the manner prescribed in
subtitle F (sec. 6001 and following, relating to
procedure and administration), including therein all
the information which the Secretary may deem necessary
for the calculation of such deductions and credits. * *
*
Thus, in dealing with rental income, there are three
possible computations of tax liability facing a nonresident alien
individual: (1) If the rental income is not effectively
connected with a trade or business within the United States, and
no election is made under section 871(d), then the tax is
computed at the 30-percent rate on gross rental income under
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