-23-
Cf. id. at 26, 1966-2 C.B. at 1076-1077, where the Senate
committee noted as to nonresident aliens owning property in the
United States that
Taxing income on real property at a flat 30-percent
rate without the allowance of allocable
deductions--which in the case of this type of income
may be relatively large--may result in quite heavy tax
burdens on this type of income. Your committee agrees
with the House that the law in this area should be
clarified and doubts whether the disallowance of
deductions in such cases is appropriate. Moreover, the
disallowance of deductions in such cases would tend to
discourage foreign investment in U.S. realty.
2. Section 217 of the Revenue Act of 1918
a. Overview
Ten years before the Revenue Act of 1928, 45 Stat. 791,
Congress enacted in section 217 of the Revenue Act of 1918, ch.
18, 40 Stat. 1069, a provision applicable to nonresident aliens.
This provision was substantially similar to section 233 of the
Revenue Act of 1928, except that section 217 used the words
“nonresident alien individual” rather than the words “foreign
corporation”. Section 217 of the Revenue Act of 1918 provided:
NONRESIDENT ALIENS--ALLOWANCE OF DEDUCTIONS AND
CREDITS.
Sec. 217. That a nonresident alien individual
shall receive the benefit of the deductions and credits
allowed in this title only by filing or causing to be
filed with the collector a true and accurate return of
his total income received from all sources corporate or
otherwise in the United States, in the manner
prescribed by this title, including therein all the
information which the Commissioner may deem necessary
for the calculation of such deductions and credits:
* * *
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