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1.861-4(b) Amount Includible In
Gross Income
1.861-4(b)(1) Taxable Years Beginning After December 31, 1975.
1.861-4(b)(1)(i) If a specific amount is paid
for labor or personal services performed in the United States, that amount (if
income from sources within the United States) shall be included in the gross
income. If no accurate allocation or segregation of compensation for labor or
personal services performed in the United States can be made, or when such labor
or service is performed partly within and partly without the United States,
the amount to be included in the gross income shall be determined on the basis
that most correctly reflects the proper source of income under the facts and
circumstances of the particular case. In many cases the facts and circumstances
will be such that an apportionment on the time basis will be acceptable, that
is, the amount to be included in gross income will be that amount which bears
the same relation to the total compensation as the number of days of performance
of the labor or services within the United States bears to the total number
of days of performance of labor or services for which the payment is made. In
other cases, the facts and circumstances will be such that another method of
apportionment will be acceptable.
1.861-4(b)(1)(ii) The application of this subparagraph may be illustrated by
the following examples:
Example (1)
B, a nonresident alien individual, was employed by M from March 1, 1976, to
June 12, 1976, a total of 104 days, for which he received compensation in the
amount of $12,240. During that period B was present in the United States 59
days. Under his contract B was subject to call at all times by his employer
and was in a payment status on a 7-day week basis. There was no specific agreement
as to the amount of pay for services performed within the United States; moreover,
he received his stipulated salary payments regardless of the number of days
per week he actually performed services. Under these circumstances the amount
of compensation to be included in gross income as income from sources within
the United States will be $6,943.85 ($12,240 x 59/104).
Example (2)
C, a citizen of the United States, was a resident of a foreign country during
his entire taxable year. He is employed by N, a domestic corporation, and paid
a salary of $17,600 per annum. Under his contract C is required to work only
on a 5-day week basis, Monday through Friday. During 1976 he was in the United
States for 6 weeks, performing services therein for N for 30 work days. During
the year he worked 240 days for N for which payment was made, determined by
eliminating his vacation period for which no payment was made. Under these circumstances
the amount of compensation for personal services performed in the United States
is $2,200 ($17,600 x 30/240).
1.861-4(b)(2) Taxable Years Beginning Before January 1, 1976.
If a specific amount is paid for labor or personal services performed in the
United States, that amount (if income from sources within the United States)
shall be included in the gross income. If no accurate allocation or segregation
of compensation for labor or personal services performed in the United States
can be made, or when such labor or service is performed partly within and partly
without the United States, the amount to be included in the gross income shall
be determined by an apportionment on the time basis; that is, there shall be
included in the gross income an amount which bears the same relation to the
total compensation as the number of days of performance of the labor or services
within the United States bears to the total number of days of performance of
labor or services for which the payment is made.
Sec.301.7701(b)-1 Resident Alien.
301.7701(b)-1(a) Scope.
Section 301.7701(b)-1(b) provides rules for determining whether an
alien individual is a lawful permanent resident of the United States. Section
301.7701(b)-1(c) provides rules for determining if an alien individual satisfies
the substantial presence test. Section 301.7701(b)-2 provides rules for determining
when an alien individual will be considered to maintain a tax home in a foreign
country and to have a closer connection to that foreign country. Section 301.7701(b)-3
provides rules for determining if an individual is an exempt individual because
of his or her status as a foreign government-related individual, teacher, trainee,
student, or professional athlete. Section 301.7701(b)-3 also provides rules
for determining whether an individual may exclude days of presence in the United
States because the individual was unable to leave the United States because
of a medical condition. Section 301.7701(b)-4 provides rules for determining
an individual's residency starting and termination dates. Section 301.7701(b)-5
provides rules for applying section 877 to a nonresident alien individual. Section
301.7701(b)-6 provides rules for determining the taxable year of an alien. Section
301.7701(b)-7 provides rules for determining the effect of these regulations
on rules in tax conventions to which the United States is a party. Section 301.7701(b)-8
provides procedural rules for establishing that an individual is a nonresident
alien. Section 301.7701(b)-9 provides the effective dates of section 7701(b)
and the regulations under that section. Unless the context indicates otherwise,
the regulations under sections 301.7701(b)-1 through 301.7701(b)-9 apply for
purposes of determining whether a United States citizen is also a resident of
the United States. (This determination may be relevant, for example, to the
application of section 861(a)(1) which treats income from interest-bearing obligations
of residents as income from sources within the United States.) The regulations
do not apply and sections 1.871-2 and 1.871-5 of this chapter continue to apply
for purposes of the bona fide residence test of section 911. See section 1.911-2(c)
of this chapter. For purposes of determining whether an individual is a resident
of the United States for estate and gift tax purposes, see section 20.0-1(b)(1)
and (2) and section 25.2501-1(b) of this chapter, respectively.
301.7701(b)-1(b) Lawful Permanent Resident
301.7701(b)-1(b)(1) Green Card Test.
An alien is a resident alien with respect to a calendar year if the
individual is a lawful permanent resident at any time during the calendar year.
A lawful permanent resident is an individual who has been lawfully granted the
privilege of residing permanently in the United States as an immigrant in accordance
with the immigration laws. Resident status is deemed to continue unless it is
rescinded or administratively or judicially determined to have been abandoned.
301.7701(b)-1(b)(2) Rescission Of Resident Status.
Resident status is considered to be rescinded if a final administrative or judicial
order of exclusion or deportation is issued regarding the alien individual.
For purposes of this paragraph, the term "final judicial order" means an order
that is no longer subject to appeal to a higher court of competent jurisdiction.
301.7701(b)-1(b)(3) Administrative Or Judicial Determination
Of Abandonment Of Resident Status.
An administrative or judicial determination of abandonment of resident
status may be initiated by the alien individual, the Immigration and Naturalization
Service (INS), or a consular officer. If the alien initiates this determination,
resident status is considered to be abandoned when the individual's application
for abandonment (INS Form 1-407) or a letter stating the alien's intent to abandon
his or her resident status, with the Alien Registration Receipt Card (INS Form
1-151 or Form 1-551) enclosed, is filed with the INS or a consular officer.
If INS replaces any of the form numbers referred to in this paragraph or section
301.7701(b)- 2(f), refer to the comparable INS replacement form number. For
purposes of this paragraph, an alien individual shall be considered to have
filed a letter stating the intent to abandon resident status with the INS or
a consular office if such letter is sent by certified mail, return receipt requested
(or a foreign country's equivalent thereof). A copy of the letter, along with
proof that the letter was mailed and received, should be retained by the alien
individual. If the INS or a consular officer initiates this determination, resident
status will be considered to be abandoned upon the issuance of a final administrative
order of abandonment. If an individual is granted an appeal to a federal court
of competent jurisdiction, a final judicial order is required.
301.7701(b)-1(c) Substantial
Presence Test
301.7701(b)-1(c)(1) In General.
An alien individual is a resident alien
if the individual meets the substantial presence test. An individual satisfies
this test if he or she has been present in the United States on at least 183
days during a three year period that includes the current year. For purposes
of this test, each day of presence in the current year is counted as a full
day. Each day of presence in the first preceding year is counted as one-third
of a day and each day of presence in the second preceding year is counted as
one-sixth of a day. For purposes of this paragraph, any fractional days resulting
from the above calculations will not be rounded to the nearest whole number.
(See section 301.7701(b)-9(b)(2) for transitional rules for calendar years 1985
and 1986.)
301.7701(b)-1(c)(2) Determination
Of Presence
301.7701(b)-1(c)(2)(i) PHYSICAL PRESENCE. For
purposes of the substantial presence test, an individual shall be treated as
present in the United States on any day that he or she is physically present
in the United States at any time during the day. (But see section 301.7701(b)-3
relating to days of presence that may be excluded.)
301.7701(b)-1(c)(2)(ii) UNITED STATES. For purposes of section 7701(b) and the
regulations thereunder, the term "United States" when used in a geographical
sense includes the states and the District of Columbia. It also includes the
territorial waters of the United States and the seabed and subsoil of those
submarine areas which are adjacent to the territorial waters of the United States
and over which the United States has exclusive rights, in accordance with international
law, with respect to the exploration and exploitation of natural resources.
It does not include the possessions and territories of the United States or
the air space over the United States.
301.7701(b)-1(c)(3) Current Year.
The term "current year" means any calendar
year for which an alien individual is determining his or her resident status.
301.7701(b)-1(c)(4) Thirty-one Day Minimum.
If an individual is not physically present
for more than 30 days during the current year, the substantial presence test
will not be applied for that year even if the three-year total is 183 or more
days. For purposes of the substantial presence test, it is irrelevant that an
individual was not present for more than 30 days in the first or second year
preceding the current year.
301.7701(b)-1(d) Application Of Section 7701(b)
To The Possessions And Territories
301.7701(b)-1(d)(1) Application To Aliens.
Section 7701(b) provides the basis for determining
whether an alien individual is a resident of a United States possession or territory
that administers income tax laws that are identical (except for the substitution
of the name of the possession or territory for the term "United States" where
appropriate) to those in force in the United States. If, after the application
of section 7701(b) and the regulations thereunder, an alien individual is a
resident of the United States and a resident of a United States possession or
territory, the principles of section 301.7701(b)-2(d) (relating to significant
contacts maintained by an individual with a foreign country) shall be applied
in order to establish that the individual is a resident alien of either the
United States or a United States possession or territory, but not both. See
section 1.933-1(a) of this chapter for determining whether an individual (including
a U.S. citizen or national) is a bona fide resident of Puerto Rico. See section
931 and the regulations thereunder for the determination of whether an individual
(including a U.S. citizen or national) is a bona fide resident of American Samoa.
301.7701(b)-1(d)(2) Non-application To Citizens.
Section 7701(b) does not provide the basis for determining whether a United
States citizen or national is a bona fide resident of a United States possession
or territory. For example, a United States citizen who is present in a United
States possession or territory for 183 days during a calendar year will not
automatically be a "bona fide resident" of that possession or territory. Whether
a United States citizen or national is a bona fide resident of a possession
or territory is determined under sections 931 through 933 and section 1.935-1
to the extent it remains effective after December 31, 1984.
301.7701(b)-1(e) Examples.
This section may be illustrated by the following examples:
Example 1.
B, an alien individual, is present in the United States for 122 days in the
current year. He was present in the United States for 122 days in the first
preceding calendar year and for 122 days in the second preceding calendar year.
In determining his status for the current year, B counts all 122 days in the
United States in the current year plus 1/3 of the 122 days in the United States
in the first preceding calendar year (40 2/3 days) and 1/6 of the 122 days in
the United States during the second preceding calendar year (20 1/3 days). The
total of 122 + 40 2/3 + 20 1/3 equals 183 days. B meets the substantial presence
test and is a resident alien for the current year.
Example 2.
C, an alien individual, is present in the United States for 25 days during the
current year. She was present in the United States for 365 days during the first
preceding year and 365 days during the second preceding year. The substantial
presence test does not apply because C is present in the United States for fewer
than 31 days during the current year.
Example 3.
D, an alien individual, is present in the United States for 170 days during
the current year. He was present in the United States for 30 days during the
first preceding year and 30 days during the second preceding year. In determining
his status for the current year, D counts all 170 days in the United States
in the current year plus 1/3 of the 30 days in the United States in the first
preceding calendar year (10 days) and 1/6 of the 30 days in the United States
during the second preceding calendar year (5 days). The total of 170 + 10 +
5 equals 185 days. D meets the substantial presence test and is a resident alien
for the current year notwithstanding the fact that he was present in the United
States for fewer than 31 days in each of the two preceding years.
[T.D. 8411, 57 FR 15237-15254, Apr. 27, 1992, corrected by 57 FR 28612, June
26, 1992, corrected by 57 FR 37189, August 18, 1992]
Sec.301.7701(b)-2 Closer Connection Exception.
301.7701(b)-2(a) In General.
An alien individual who meets the substantial
presence test may nevertheless be considered a nonresident alien for the current
year if the following conditions are satisfied --
301.7701(b)-2(a)(1) The individual is present in the United States for fewer
than 183 days in the current year;
301.7701(b)-2(a)(2) The individual maintains a tax home in a foreign country
during the current year; and
301.7701(b)-2(a)(3) Except as provided in paragraph (e) of this section, the
individual has a closer connection during the current year to a single foreign
country in which he or she maintains a tax home than to the United States.
301.7701(b)-2(b) Foreign Country.
For purposes of section 7701(b) and the regulations
thereunder, the term "foreign country" when used in a geographical sense includes
any territory under the sovereignty of the United Nations or a government other
than that of the United States. It includes the territorial waters of the foreign
country (determined in accordance with the laws of the United States), and the
seabed and subsoil of those submarine areas which are adjacent to the territorial
waters of the foreign country and over which the foreign country has exclusive
rights, in accordance with international law, with respect to the exploration
and exploitation of natural resources. It also includes the possessions and
territories of the United States.
301.7701(b)-2(c) Tax Home
301.7701(b)-2(c)(1) Definition.
For purposes of section 7701(b) and the regulations
under that section, the term "tax home" has the same meaning that it has for
purposes of section 162(a)(2) (relating to travel expenses while away from home).
Thus, an individual's tax home is considered to be located at the individual's
regular or principal (if more than one regular) place of business. If the individual
has no regular or principal place of business because of the nature of the business,
or because the individual is not engaged in carrying on any trade or business
within the meaning of section 162(a), then the individual's tax home is the
individual's regular place of abode in a real and substantial sense.
301.7701(b)-2(c)(2) Duration And Nature Of Tax Home.
The tax home maintained by the alien individual must be in existence for the
entire current year. The tax home must be located in the same foreign country
for which the individual is claiming to have the closer connection described
in paragraph (d) of this section.
301.7701(b)-2(d) Closer Connection To A Foreign
Country
301.7701(b)-2(d)(1) In General.
For purposes of section 7701(b) and the regulations
under that section, an alien individual will be considered to have a closer
connection to a foreign country than the United States if the individual or
the Commissioner establishes that the individual has maintained more significant
contacts with the foreign country than with the United States. In determining
whether an individual has maintained more significant contacts with a foreign
country than the United States, the facts and circumstances to be considered
include, but are not limited to, the following --
(i) The location of the individual's permanent home;
(ii) The location of the individual's family;
(iii) The location of personal belongings, such as automobiles, furniture, clothing
and jewelry owned by the individual and his or her family;
(iv) The location of social, political, cultural or religious organizations
with which the individual has a current relationship;
(v) The location where the individual conducts his or her routine personal banking
activities;
(vi) The location where the individual conducts business activities (other than
those that constitute the individual's tax home);
(vii) The location of the jurisdiction in which the individual holds a driver's
license;
(viii) The location of the jurisdiction in which the individual votes;
(ix) The country of residence designated by the individual on forms and documents;
and
(x) The types of official forms and documents filed by the individual, such
as Form 1078 (Certificate of Alien Claiming Residence in the United States),
Form W-8 (Certificate of Foreign Status) or Form W-9 (Payer's Request for Taxpayer
Identification Number).
301.7701(b)-2(d)(2) Permanent Home.
For purposes of paragraph (d)(1)(i) of this section, it is immaterial whether
a permanent home is a house, an apartment, or a furnished room. It is also immaterial
whether the home is owned or rented by the alien individual. It is material,
however, that the dwelling be available at all times, continuously, and not
solely for stays of short duration.
301.7701(b)-2(e) Special Rule.
An alien individual may demonstrate in one year that he or she has a closer
connection to two foreign countries (but no more than two) if he or she satisfies
all of the following conditions --
301.7701(b)-2(e)(1) The individual maintains a tax home beginning on the first
day of the current year in one foreign country;
301.7701(b)-2(e)(2) The individual changes his or her tax home during the current
year to a second foreign country;
301.7701(b)-2(e)(3) The individual continues to maintain his or her tax home
in the second foreign country for the remainder of the current year;
301.7701(b)-2(e)(4) The individual has a closer connection to each foreign country
than to the United States for the period during which the individual maintains
a tax home in that foreign country; and
301.7701(b)-2(e)(5) The individual is subject to taxation as a resident pursuant
to the internal laws of either foreign country for the entire year or subject
to taxation as a resident in both foreign countries for the period during which
the individual maintains a tax home in each foreign country.
301.7701(b)-2(f) Closer Connection Exception Unavailable.
An alien individual who has personally applied, or taken other affirmative steps,
to change his or her status to that of a permanent resident during the current
year or has an application pending for adjustment of status during the current
year will not be eligible for the closer connection exception. Affirmative steps
to change status to that of a permanent resident include, but are not limited
to, the following --
301.7701(b)-2(f)(1) The filing of Immigration and Naturalization Form I-508
(Waiver of Immunities) by the alien;
301.7701(b)-2(f)(2) The filing of Immigration and Naturalization Form I-485
(Application for Status as Permanent Resident) by the alien;
301.7701(b)-2(f)(3) The filing of Immigration and Naturalization Form I-130
(Petition for Alien Relative) on behalf of the alien;
301.7701(b)-2(f)(4) The filing of Immigration and Naturalization Form I-140
(Petition for Prospective Immigrant Employee) on behalf of the alien;
301.7701(b)-2(f)(5) The filing of Department of Labor Form ETA-750 (Application
for Alien Employment Certification) on behalf of the alien; or
301.7701(b)-2(f)(6) The filing of Department of State Form 0F-230 (Application
for Immigrant Visa and Alien Registration) by the alien.
301.7701(b)-2(g) Filing Requirements.
See section 301.7701(b)-8 with regard to the statement that must be filed by
an alien individual claiming the closer connection exception.
[T.D. 8411, 57 FR 15237-15254, Apr. 27, 1992, corrected by 57 FR 28612, June
26, 1992; 57 FR 37189, August 18, 1992; 58 FR 17516, Apr. 5, 1993.]
Sec.301.7701(b)-3 Days Of Presence In The United States That Are Excluded For
Purposes Of Section 7701(b).
301.7701(b)-3(a) In General.
In computing days of presence in the United
States, an alien is considered to be present if the individual is physically
present in the United States at any time during the day (see section 301.7701(b)-1(c)(2)(i)).
However, for purposes of section 7701(b) and the reductions under that section,
the following days shall be excluded and will not count as days of presence
in the United States --
301.7701(b)-3(a)(1) Any day that an individual is present in the United States
as an exempt individual;
301.7701(b)-3(a)(2) Any day that an individual is prevented from leaving the
United States because of a medical condition that arose while the individual
was present in the United States
301.7701(b)-3(a)(3) Any day that an individual is in transit between two points
outside the United States; and
301.7701(b)-3(a)(4) Any day on which a regular commuter residing in Canada or
Mexico commutes to and from employment in the United States.
301.7701(b)-3(b) Exempt Individuals
301.7701(b)-3(b)(1) In General.
An exempt individual is an individual who is
either a --
(i) Foreign government-related individual as defined in paragraph (b)(2) of
this section;
(ii) Teacher or trainee as defined in paragraph (b)(3) of this section;
(iii) Student as defined in paragraph (b)(4) of this section; or
(iv) Professional athlete as defined in paragraph (b)(5) of this section.
301.7701(b)-3(b)(2) Foreign Government-related
Individual
301.7701(b)-3(b)(2)(i) In General.
A foreign government-related individual is
an individual (and that individual's immediate family) who is temporarily present
in the United States --
(A) as a full-time employee of an international organization;
(B) by reason of diplomatic status; or
(C) by reason of a visa that the Secretary of the Treasury or his or her delegate
(after consultation with the Secretary of State when appropriate) determines
represents full-time diplomatic or consular status. An individual described
in this paragraph shall be considered to be temporarily present in the United
States if the individual is not a lawful permanent resident as described in
section 301.7701(b)-1(b)(1), regardless of the actual amount of time that the
individual is present in the United States.
301.7701(b)-3(b)(2)(ii) Definition Of International Organization.
The term "international organization" means any public international organization
that has been designated by the President by Executive Order as being entitled
to enjoy the privileges, exemptions, and immunities provided for in the International
Organizations Act (22 U.S.C. 288). An individual described in paragraph (b)(2)(i)
of this section will be a full-time employee of an international organization
if that individual's employment with the organization is consistent with an
employment schedule of a person with a standard full-time work schedule with
the organization.
301.7701(b)-3(b)(2)(iii) Full-time Diplomatic Or Consular Status.
An individual is considered to have full-time diplomatic or consular status
if --
(A) The individual has been accredited by a foreign government recognized de
jure or de facto by the United States;
(B) The individual intends to engage primarily in official activities for that
foreign government while in the United States; and
(C) The individual has been recognized by the President, or by the Secretary
of State, or by a consular officer acting on behalf of the Secretary of State,
as being entitled to such status.
301.7701(b)-3(b)(3) Teacher Or Trainee.
A teacher or trainee includes any individual
(and that individual's immediate family), other than a student, who is admitted
temporarily to the United States as a nonimmigrant under section 101(a)(15)
(relating to the admission of teachers and trainees into the United States)
of the Immigration and Nationality Act (8 U.S.C. 1101(a)(15)(J)) and who substantially
complies with the requirements of being admitted.
301.7701(b)-3(b)(4) Student.
A student is any individual (and that individual's
immediate family) who is admitted temporarily to the United States as a nonimmigrant
under section 101(a)(15)(F) or (M) (relating to the admission of students into
the United States) or section 101(a)(15)(J) (relating to the admission of teachers
and trainees into the United States) of the Immigration and Nationality Act
(8 U.S.C. 1101(a)(15)(F), (J), (M)) who substantially complies with the requirements
of being admitted. For rules concerning taxation of certain nonresident students
or trainees, see section 871(c) and section 1.871-9(a) of this chapter.
301.7701(b)-3(b)(5) Professional Athlete.
A professional athlete is an individual who
is temporarily present in the United States to compete in a charitable sports
event described in section 274(l)(1)(B). For purposes of computing the days
of presence in the United States, only days on which the athlete actually competes
in a charitable sports event described in section 274(l)(1)(B) shall be excluded.
Thus, days on which the individual is present to practice for the event, to
perform promotional or other activities related to the event, or to travel between
events shall be included for purposes of the substantial presence test.
301.7701(b)-3(b)(6) Substantial Compliance.
An individual described in paragraph (b)(3)
or (4) of this section will be deemed to comply substantially with the visa
requirements relevant to residence for tax purposes if the individual has not
engaged in activities that are prohibited by the Immigration and Nationality
Act the regulations thereunder and could result in the loss of F, J or M visa
status. An individual will not be deemed to comply substantially with the visa
requirements relevant to residence for tax purposes merely by showing that the
individual's visa has not been revoked. An independent determination of substantial
compliance may be made by the Internal Revenue Service for any individual claiming
to be an exempt individual under paragraph (b)(3) or (4) of this section. For
example, if an individual with an F visa (student visa) is found to have accepted
unauthorized employment or to have maintained a course of study that is not
considered by the Internal Revenue Service to be full-time, the individual will
not be considered to comply substantially with the individual's visa requirements
regardless of whether the individual's visa has been revoked.
301.7701(b)-3(b)(7) Limitation On Teacher Or Trainee And Student Exemptions
301.7701(b)-3(b)(7)(i) Teacher Or Trainee Limitation In General.
Except as otherwise provided, an individual shall not exclude days of presence
as a teacher or trainee if the individual has been exempt as a teacher, trainee,
or student for any part of two of the six preceding calendar years.
301.7701(b)-3(b)(7)(ii) Special Teacher Or Trainee Limitation For Section 872(b)(3)
Compensation.
If
(A) A teacher or trainee receives compensation in the current year and all of
that compensation is described in section 872(b)(3);
(B) That individual was present in the United States as a teacher or trainee
in any prior year within the last 6 years; and
(C) During each prior year (within the 6 year period) in which the individual
was present as a teacher or trainee, the individual received compensation all
of which was described in section 872(b)(3);
Then that individual shall include days of presence as a teacher or trainee
in the current year only if the individual has been exempt as a teacher, trainee,
or student for any part of four of the six preceding calendar years.
301.7701(b)-3(b)(7)(iii) Limitation On Student Exemption.
An individual will not be able to exclude days of presence as a student if the
individual has been exempt as a teacher, trainee, or student for any part of
more than five calendar years, unless it is established to the satisfaction
of the district director that the individual does not intend to reside permanently
in the United States and has substantially complied with the requirements of
the student visa providing for the individual's temporary presence in the United
States. For purposes of this paragraph (b)(7), the facts and circumstances to
be considered in determining if an individual has demonstrated an intent to
reside permanently in the United States include (but are not limited to) --
(A) Whether the individual has maintained a closer connection with a foreign
country as described in section 301.7701(b)-2; and
(B) Whether the individual has taken affirmative steps within the meaning of
paragraph (f) of section 301.7701(b)-2 to adjust the individual's status from
nonimmigrant to lawful permanent resident.
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