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Free State Tax Service

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Free State Tax Service

Free state tax service 3. Free state tax service   Adjustments to Income Table of Contents Individual Retirement Arrangement (IRA) Contributions and DeductionsContributions to Kay Bailey Hutchison Spousal IRAs. Free state tax service Deductible contribution. Free state tax service Nondeductible contribution. Free state tax service You may be able to subtract amounts from your total income (Form 1040, line 22 or Form 1040A, line 15) or total effectively connected income (Form 1040NR, line 23) to get your adjusted gross income (Form 1040, line 37; Form 1040A, line 21; or Form 1040NR, line 36). Free state tax service Some adjustments to income follow. Free state tax service Contributions to your individual retirement arrangement (IRA) (Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32), explained later in this publication. Free state tax service Certain moving expenses (Form 1040, line 26; or Form 1040NR, line 26) if you changed job locations or started a new job in 2013. Free state tax service See Publication 521, Moving Expenses, or see Form 3903, Moving Expenses, and its instructions. Free state tax service Some health insurance costs (Form 1040, line 29 or Form 1040NR, line 29) if you were self-employed and had a net profit for the year, or if you received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Free state tax service For more details, see Publication 535, Business Expenses. Free state tax service Payments to your self-employed SEP, SIMPLE, or qualified plan (Form 1040, line 28 or Form 1040NR, line 28). Free state tax service For more information, including limits on how much you can deduct, see Publication 560, Retirement Plans for Small Business. Free state tax service Penalties paid on early withdrawal of savings (Form 1040, line 30 or Form 1040NR, line 30). Free state tax service Form 1099-INT, Interest Income, or Form 1099-OID, Original Issue Discount, will show the amount of any penalty you were charged. Free state tax service Alimony payments (Form 1040, line 31a). Free state tax service For more information, see Publication 504, Divorced or Separated Individuals. Free state tax service There are other items you can claim as adjustments to income. Free state tax service These adjustments are discussed in your tax return instructions. Free state tax service Individual Retirement Arrangement (IRA) Contributions and Deductions This section explains the tax treatment of amounts you pay into traditional IRAs. Free state tax service A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. Free state tax service Roth and SIMPLE IRAs are defined earlier in the IRA discussion under Retirement Plan Distributions . Free state tax service For more detailed information, see Publication 590. Free state tax service Contributions. Free state tax service   An IRA is a personal savings plan that offers you tax advantages to set aside money for your retirement. Free state tax service Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until distributed. Free state tax service    Although interest earned from your traditional IRA generally is not taxed in the year earned, it is not tax-exempt interest. Free state tax service Do not report this interest on your tax return as tax-exempt interest. Free state tax service General limit. Free state tax service   The most that can be contributed for 2013 to your traditional IRA is the smaller of the following amounts. Free state tax service Your taxable compensation for the year, or $5,500 ($6,500 if you were age 50 or older by the end of 2013). Free state tax service Contributions to Kay Bailey Hutchison Spousal IRAs. Free state tax service   In the case of a married couple filing a joint return for 2013, up to $5,500 ($6,500 for each spouse age 50 or older by the end of 2013) can be contributed to IRAs on behalf of each spouse, even if one spouse has little or no compensation. Free state tax service For more information on the general limit and the Kay Bailey Hutchison Spousal IRA limit, see How Much Can Be Contributed? in Publication 590. Free state tax service Deductible contribution. Free state tax service   Generally, you can deduct the lesser of the contributions to your traditional IRA for the year or the general limit (or Kay Bailey Hutchison Spousal IRA limit, if applicable) just explained. Free state tax service However, if you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Free state tax service Your deduction may be reduced or eliminated, depending on your filing status and the amount of your income. Free state tax service For more information, see Limit if Covered by Employer Plan in Publication 590. Free state tax service Nondeductible contribution. Free state tax service   The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Free state tax service You must file Form 8606, Nondeductible IRAs, to report nondeductible contributions even if you do not have to file a tax return for the year. Free state tax service    For 2014, the most that can be contributed to your traditional IRA is $5,500 ($6,500 if you are age 50 or older at the end of 2014). Free state tax service Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in New York

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City Street Address Days/Hours of Service Telephone*
Albany Clinton Ave. & N. Pearl St.
Albany, NY 12207

Monday - Friday 8:30 a.m. - 4:30 p.m.

 

Services Provided

(518) 427-4250
Bethpage 999 Stewart Ave.
Bethpage, NY 11714

Monday - Friday 8:30 a.m. - 4:30 p.m.
 

Services Provided

(516) 576-7428
Binghamton 15 Henry St.
Binghamton, NY 13901

Monday - Friday 8:30 a.m.-4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)

 

Services Provided

(607) 721-0338
Bronx 1200 Waters Place
Bronx, NY 10461

Monday - Friday 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(718) 536-3660
Brooklyn 2 Metro Tech, 1st floor
Brooklyn, NY 11201

Monday - Friday 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**
 

Services Provided

(718) 834-6559
Buffalo 130 South Elmwood Ave.
Buffalo, NY 14202

Monday - Friday 8:30 a.m.-4:30 p.m.

 

Services Provided

(716) 961-5100
Elmira 149 West Gray St.
Elmira, NY 14901

Monday - Friday 8:30 a.m.- 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00)

 

Services Provided

(607) 767-1012
Hauppauge 1180 Veterans Memorial Hwy.
Hauppauge, NY 11788

Monday - Friday 8:30 a.m.-4:30 p.m.


Services Provided

(631) 851-4726
Jamestown

201 West Third Street
Jamestown, NY 14701

 

 

Monday - Friday 8:30 a.m.- 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)

 

Services Provided

(716) 961-5100 
 Kingston 153 Sawkill Rd.
Kingston, NY 12401 

Monday - Friday 8:30 a.m.- 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)

 

Services Provided

(845) 339-5384
 New York (Harlem) 2283 Third Ave.
New York, NY 10035 

Monday - Friday 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(718) 536-3699 
 New York (Downtown) 290 Broadway
New York, NY 10007 

Monday - Friday 8:30 a.m.-4:30 p.m.
 

Services Provided

(212) 436-1000
 New York (Midtown) 110 W. 44th St.
New York, NY 10036 

Monday - Friday 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**
 

Services Provided  

(212) 719-6631 
 Poughkeepsie 191 Main St.
Poughkeepsie, NY 12601 

Monday - Friday 8:30 a.m.-4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)

 

Services Provided

(845) 452-2220 
 Queensbury 375 Bay Rd.
Queensbury, NY 12804 

Monday - Friday 8:30 a.m. - 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)

 

Services Provided

(518) 798-6047 
 Rego Park 59-17 Junction Blvd.
Rego Park, NY 11368 

Monday - Friday 8:30 a.m.-4:30 p.m.


 Services Provided

(718) 760-6019 
 Rochester 255 East Ave.
Rochester, NY 14604 

Monday - Friday 8:30 a.m.-4:30 p.m.
 

Services Provided

(585) 263-5840 
Staten Island/remote
Taxpayer Assistance
available at
Project Hospitality
514 Bay Street
Staten Island, NY 10304 

Monday - Friday 8:30 a.m.-4:30 p.m. 
 

Virtual Services Provided

(212) 436-1000 
 Syracuse One Park Place
300 South State Street
Syracuse, NY  13202 

Monday - Friday 8:30 a.m.-4:30 p.m.

 

Services Provided

(315) 448-0807 
 Utica 10 Broad St.
Utica, NY  13501 

Monday - Friday 8:30 a.m.-4:00 p.m.

 

 Services Provided

(315) 793-1952 
 West Nyack 242 W. Nyack Rd.
West Nyack, NY 10994 

Monday - Friday 8:30 a.m.-4:30 p.m. 
(Closed for lunch 1:00 p.m. - 2:00 p.m.)

 

Services Provided

(845) 627-1487 
 White Plains 210 E. Post Rd.
White Plains, NY 10601 

Monday - Friday 8:30 a.m.-4:30 p.m.


Services Provided

(914) 684-7302 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). 

For information on where to file your tax return please see Where to File Addresses

The Taxpayer Advocate Service: Within New York call:
 

 Albany  (518) 427-5413
 Brooklyn  (718) 834-2200
 Buffalo  (716) 961-5300
 Manhattan  (212) 436-1011

Call 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see  Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
1 Clinton Ave., Room 600
Albany, NY 12207

Internal Revenue Service
201 Como Park Blvd.
Cheektowaga, NY 14425

Internal Revenue Service
290 Broadway, 5th FL
New York, NY 10007

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Free State Tax Service

Free state tax service 2. Free state tax service   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. Free state tax service Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. Free state tax service S. Free state tax service or foreign source income. Free state tax service This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. Free state tax service S. Free state tax service Virgin Islands (USVI). Free state tax service Generally, the same rules that apply for determining U. Free state tax service S. Free state tax service source income also apply for determining possession source income. Free state tax service However, there are some important exceptions to these rules. Free state tax service Both the general rules and the exceptions are discussed in this chapter. Free state tax service U. Free state tax service S. Free state tax service income rule. Free state tax service   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. Free state tax service Table 2-1 shows the general rules for determining whether income is from sources within the United States. Free state tax service Table 2-1. Free state tax service General Rules for Determining U. Free state tax service S. Free state tax service Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. Free state tax service Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. Free state tax service For more information, see Regulations section 1. Free state tax service 863-1(b). Free state tax service Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. Free state tax service Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. Free state tax service Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. Free state tax service It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. Free state tax service Services performed wholly within a relevant possession. Free state tax service   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. Free state tax service However, there is an exception for income earned as a member of the U. Free state tax service S. Free state tax service Armed Forces or a civilian spouse. Free state tax service U. Free state tax service S. Free state tax service Armed Forces. Free state tax service   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. Free state tax service However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. Free state tax service Civilian spouse of active duty member of the U. Free state tax service S. Free state tax service Armed Forces. Free state tax service   If you are a bona fide resident of a U. Free state tax service S. Free state tax service possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. Free state tax service Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. Free state tax service S. Free state tax service possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. Free state tax service Services performed partly inside and partly outside a relevant possession. Free state tax service   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. Free state tax service Compensation (other than certain fringe benefits) is sourced on a time basis. Free state tax service Certain fringe benefits (such as housing and education) are sourced on a geographical basis. Free state tax service   Or, you may be permitted to use an alternative basis to determine the source of compensation. Free state tax service See Alternative basis , later. Free state tax service   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. Free state tax service In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. Free state tax service Time basis. Free state tax service   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). Free state tax service Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. Free state tax service The time period for which the income is made does not have to be a year. Free state tax service Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. Free state tax service Example. Free state tax service In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. Free state tax service Your Puerto Rico source income is $60,000, figured as follows. Free state tax service       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. Free state tax service   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. Free state tax service Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. Free state tax service You determine the period to which the income is attributable based on the facts and circumstances of your case. Free state tax service For more information on multi-year compensation, see Treasury Decision (T. Free state tax service D. Free state tax service ) 9212 and Regulations section 1. Free state tax service 861-4, 2005-35 I. Free state tax service R. Free state tax service B. Free state tax service 429, available at www. Free state tax service irs. Free state tax service gov/irb/2005-35_IRB/ar14. Free state tax service html. Free state tax service Certain fringe benefits sourced on a geographical basis. Free state tax service   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. Free state tax service Housing. Free state tax service Education. Free state tax service Local transportation. Free state tax service Tax reimbursement. Free state tax service Hazardous or hardship duty pay. Free state tax service Moving expense reimbursement. Free state tax service For information on determining the source of the fringe benefits listed above, see Regulations section 1. Free state tax service 861-4. Free state tax service Alternative basis. Free state tax service   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. Free state tax service If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. Free state tax service De minimis exception. Free state tax service   There is an exception to the rule for determining the source of income earned in a possession. Free state tax service Generally, you will not have income from a possession if during a tax year you: Are a U. Free state tax service S. Free state tax service citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. Free state tax service This exception began with income earned during your 2008 tax year. Free state tax service Pensions. Free state tax service   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. Free state tax service The contribution portion is sourced according to where services were performed that earned the pension. Free state tax service The investment earnings portion is sourced according to the location of the pension trust. Free state tax service Example. Free state tax service You are a U. Free state tax service S. Free state tax service citizen who worked in Puerto Rico for a U. Free state tax service S. Free state tax service company. Free state tax service All services were performed in Puerto Rico. Free state tax service Upon retirement you remained in Puerto Rico and began receiving your pension from the U. Free state tax service S. Free state tax service pension trust of your employer. Free state tax service Distributions from the U. Free state tax service S. Free state tax service pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. Free state tax service S. Free state tax service source income. Free state tax service Investment Income This category includes such income as interest, dividends, rents, and royalties. Free state tax service Interest income. Free state tax service   The source of interest income is generally determined by the residence of the payer. Free state tax service Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. Free state tax service   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. Free state tax service See Regulations section 1. Free state tax service 937-2(i) for more information. Free state tax service Dividends. Free state tax service   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. Free state tax service There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. Free state tax service For more information, see Regulations section 1. Free state tax service 937-2(g). Free state tax service Rental income. Free state tax service   Rents from property located in a relevant possession are treated as income from sources within that possession. Free state tax service Royalties. Free state tax service   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. Free state tax service   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. Free state tax service Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. Free state tax service The most common situations are discussed below. Free state tax service Real property. Free state tax service   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. Free state tax service The location of the property generally determines the source of income from the sale. Free state tax service For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. Free state tax service If, however, the home you sold was located in the United States, the gain is U. Free state tax service S. Free state tax service source income. Free state tax service Personal property. Free state tax service   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. Free state tax service Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. Free state tax service If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. Free state tax service   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. Free state tax service The rules applying to sales of inventory are discussed below. Free state tax service For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. Free state tax service Inventory. Free state tax service   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. Free state tax service The source of income from the sale of inventory depends on whether the inventory was purchased or produced. Free state tax service Purchased. Free state tax service   Income from the sale of inventory that you purchased is sourced where you sell the property. Free state tax service Generally, this is where title to the property passes to the buyer. Free state tax service Produced. Free state tax service   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. Free state tax service For information on making the allocation, see Regulations section 1. Free state tax service 863-3(f). Free state tax service Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. Free state tax service S. Free state tax service citizen or resident alien prior to becoming a bona fide resident of a possession. Free state tax service You are subject to these special rules if you meet both of the following conditions. Free state tax service For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. Free state tax service For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). Free state tax service If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. Free state tax service Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. Free state tax service S. Free state tax service tax return. Free state tax service (See chapter 3 for additional filing information. Free state tax service ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. Free state tax service These rules apply to dispositions after April 11, 2005. Free state tax service For details, see Regulations section 1. Free state tax service 937-2(f)(1) and Examples 1 and 2 of section 1. Free state tax service 937-2(k). Free state tax service Example 1. Free state tax service In 2007, Cheryl Jones, a U. Free state tax service S. Free state tax service citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. Free state tax service S. Free state tax service corporation listed on the New York Stock Exchange. Free state tax service On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. Free state tax service Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. Free state tax service On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. Free state tax service On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. Free state tax service Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. Free state tax service The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. Free state tax service This existing special rule applies if you are a U. Free state tax service S. Free state tax service citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. Free state tax service S. Free state tax service assets during the 10-year period beginning when you became a bona fide resident. Free state tax service The gain is U. Free state tax service S. Free state tax service source income that generally is subject to U. Free state tax service S. Free state tax service tax if the property is either (1) located in the United States; (2) stock issued by a U. Free state tax service S. Free state tax service corporation or a debt obligation of a U. Free state tax service S. Free state tax service person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). Free state tax service See chapter 3 for filing information. Free state tax service Special election. Free state tax service   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. Free state tax service Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. Free state tax service This election overrides both of the special rules discussed earlier. Free state tax service   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. Free state tax service Marketable securities. Free state tax service   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. Free state tax service Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. Free state tax service S. Free state tax service holding periods. Free state tax service   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. Free state tax service The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. Free state tax service This is your gain (or loss) that is treated as being from sources within the relevant possession. Free state tax service If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. Free state tax service Example 2. Free state tax service Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. Free state tax service S. Free state tax service and possession holding periods. Free state tax service Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. Free state tax service Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). Free state tax service By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Free state tax service Other personal property. Free state tax service   For personal property other than marketable securities, use a time-based allocation. Free state tax service Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. Free state tax service      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. Free state tax service Example 3. Free state tax service In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. Free state tax service On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. Free state tax service On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. Free state tax service She had owned the interest for a total of 1,720 days. Free state tax service Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. Free state tax service The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). Free state tax service By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Free state tax service Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. Free state tax service Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. Free state tax service These rules do not apply to amounts paid as salary or other compensation for services. Free state tax service See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. Free state tax service Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. Free state tax service These circumstances are listed below. Free state tax service You have an office or other fixed place of business in the relevant possession to which the income can be attributed. Free state tax service That office or place of business is a material factor in producing the income. Free state tax service The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. Free state tax service An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. Free state tax service The three kinds of income from sources outside the relevant possession to which these rules apply are the following. Free state tax service Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. Free state tax service Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. Free state tax service Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. Free state tax service Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. Free state tax service Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. Free state tax service Example. Free state tax service Marcy Jackson is a bona fide resident of American Samoa. Free state tax service Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. Free state tax service A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. Free state tax service Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. Free state tax service The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. Free state tax service However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. Free state tax service Prev  Up  Next   Home   More Online Publications