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301.7701(b)-3(b)(7)(iv) Transition Rule.
The rules in this paragraph (b)(7) relating to
stated periods of exempt status apply only for those stated periods that occur after
1984. Thus, for example, an alien who is present as a student during the calendar
years 1982-1990 will not be subject to the five year rule for students until 1990.
301.7701(b)-3(b)(7)(v) Examples.
The following examples illustrate the application of paragraphs (b)(7)(i) and (ii)
of this section:
Example 1.
B is temporarily present in the United States during the current year as a teacher,
within the meaning of section 101(a)(15)(J) of the Immigration and Nationality Act.
B does not receive compensation described in section 872(b)(3) in the current year.
B has been treated as an exempt student for the past three years. Although this
is the first year that B is seeking to be exempt as a teacher, he will not be considered
an exempt individual for the year because he has been exempt as a student for at
least two of the past six years.
Example 2.
C is temporarily present in the United States during the current year as a teacher
and receives compensation described in section 872(b)(3) in the current year. C
has been treated as an exempt teacher for the past two years but C's compensation
for those years was not described in section 872(b)(3). C will not be considered
an exempt individual for the current year because she has been exempt as a teacher
for at least two of the past six years.
Example 3.
The facts are the same as in Example 2, except that all of C's compensation for
the two preceding years was described in section 872(b)(3). C will be considered
to be an exempt individual for the current year because she has not been exempt
as a student, teacher or trainee for four of the six preceding calendar years.
Example 4.
D is temporarily present in the United States during the current year as a teacher,
within the meaning of section 101(a)(15)(J) of the Immigration and Nationality Act.
D does not receive compensation described in section 872(b)(3) in the current year.
D entered the United States in December of the second preceding year and intends
to remain in the United States until June of the current year. D will not be considered
an exempt individual for the current year because he has been exempt as a teacher
for at least two of the past six years.
301.7701(b)-3(b)(8) Immediate Family.
The immediate family of an exempt individual includes the individual's spouse and
unmarried children (whether by blood or adoption) but only if the spouse's or unmarried
children's visa status are derived from and dependent on the visa classification
of the exempt individual. For the purposes of this paragraph, the term "unmarried
children" means those children who are under 21 years of age, who reside regularly
in the household of the exempt individual, and who are not members of some other
household. The immediate family of an exempt individual does not include the attendants,
servants, and personal employees of that individual.
301.7701(b)-3(c) Medical Condition
301.7701(b)-3(c)(1) In General.
An individual will not be considered present on any day that the individual intends
to leave and is unable to leave the United States because of a medical condition
or medical problem that arose while the individual was present in the United States.
A day of presence will not be excluded if the individual, who was initially prevented
from leaving, is subsequently able to leave the United States and then remains in
the United States beyond a reasonable period for making arrangements to leave the
United States. A day will also not be excluded if the medical condition arose during
a prior stay in the United States (whether or not days of presence during the prior
stay were excluded) and the alien returns to the United States for treatment of
the medical condition or medical problem that arose during the prior stay.
301.7701(b)-3(c)(2) Intent To Leave The United States.
For purposes of paragraph (c)(1) of this section, whether an individual intends
to leave the United States on a particular day will be determined based on all the
facts and circumstances. Thus, if at the time an individual's medical condition
or medical problem arose, the individual was present in the United States for a
definite purpose which by its nature could be accomplished within the United States
during a period of time that would not cause the individual to be a resident under
the substantial presence test, the individual may be able to establish that he or
she intended to leave the United States. However, if the individual's purpose is
of such a nature that an extended period of time would be required for its accomplishment
(sufficient to cause the individual to be a resident under the substantial presence
test), the individual would not be able to establish the requisite intent to leave
the United States. If the individual is present in the United States for no particular
purpose or a purpose by its nature that does not require a specific period of time
to accomplish, the determination of whether the individual has the requisite intent
to leave the United States will depend on all the surrounding facts and circumstances.
In the case of an individual adjudicated mentally incompetent, proof of intent to
leave the United States may be determined by analyzing the incompetent's pattern
of behavior prior to the adjudication of incompetence. Generally, an individual
will be presumed to have intended to leave during a period of illness if the individual
leaves the United States within a reasonable period of time (time to make arrangements
to leave) after becoming physically able to leave.
301.7701(b)-3(c)(3) Pre-existing Medical Condition.
A medical condition or problem will not be considered to arise while the individual
is present in the United States, if the condition or problem existed prior to the
individual's arrival in the United States, and the individual was aware of the condition
or problem, regardless of whether the individual required treatment for the condition
or problem when the individual entered the United States.
301.7701(b)-3(c)(4) Examples.
The following examples illustrate the application of this paragraph (c):
Example 1.
B is in a serious automobile accident in the United States on March 25. B intended
to leave the United States on March 31 (as evidenced by an airline ticket), but
was unable to leave on that date as a result of the injuries suffered in the accident.
B recovered from the injuries and was able to leave and did leave the United States
on May 31. B's presence in the United States during the period from April 1 through
May 31 will not be counted as days of presence in the United States.
Example 2.
The facts are the same as in EXAMPLE 1, except that B's return flight (as evidenced
by an airline ticket) was scheduled for May 31. Because B did not intend to leave
the United States until May 31, B may not exclude any days of presence in the United
States.
301.7701(b)-3(d) Days In Transit.
An alien individual may exclude days of presence in the United States if the individual
is in transit between two foreign points, and is physically present in the United
States for fewer than 24 hours. For purposes of this paragraph, an individual will
be considered to be in transit if the individual pursues activities that are substantially
related to completing his or her travel to a foreign point of destination. For example,
an alien who travels between airports in the United States in order to change planes
en route to the individual's destination will be considered to be in transit. However,
if the individual attends a business meeting while he or she is present in the United
States, whether or not that meeting is within the confines of the airport, the individual
will not be considered to be in transit. For purposes of this paragraph, the term
"foreign point" means any areas that are not included within the definition of the
term "United States" provided in section 301.7701(b)-1(c)(2)(ii).
301.7701(b)-3(e) Regular Commuters From Mexico Or
Canada
301.7701(b)-3(e)(1) General Rule.
An alien individual will not be considered to be
present in the United States on days that the individual commutes to the United
States from the individual's residence in Mexico or Canada if the individual regularly
commutes from Mexico or Canada. An alien individual will be considered to commute
regularly if the individual commutes to the individual's location of employment
or self- employment in the United States from his or her residence in Mexico or
Canada on more than 75% of the workdays during the working period.
301.7701(b)-3(e)(2) Definitions.
301.7701(b)-3(e)(2)(i) The term "commutes" means
to travel to employment or self-employment and to return to one's residence within
a 24-hour period.
301.7701(b)-3(e)(2)(ii) The term "workdays" means days on which the individual works
in the United States or Canada or Mexico.
301.7701(b)-3(e)(2)(iii) The term "working period" means the period beginning with
the first day in the current year on which the individual is physically present
in the United States for purposes of engaging in employment or self-employment and
ending on the last day in the current year on which the individual is physically
present in the United States for purposes of engaging in that employment or self-
employment. If the nature of the employment or self-employment is such that it requires
the individual to be present in the United States only on a seasonal or cyclical
basis, the working period will begin with the first day of the season or cycle on
which the individual is present in the United States for purposes of engaging in
that employment or self-employment and end on the last day of the season or cycle
on which the individual is present in the United States for the purpose of engaging
in that employment or se1f- employment. Thus, there may be more than one working
period in a calendar year and a working period may begin in one calendar year and
end in the following calendar year.
301.7701(b)-3(e)(3) Examples.
The following examples illustrate the operation of this paragraph (e):
Example 1.
B lives in Mexico and is employed by Corporation X in its office in Mexico. B was
temporarily assigned to X's office in the United States. B's employment in the United
States office began on February 1, 1988, and continued through June 1, 1988. On
June 2, B resumed his employment in Mexico. On 59 days in the period beginning on
February 1, 1988, and ending on June 1, 1988, B travelled each morning from his
residence in Mexico to X Corporation's United States office for the purpose of engaging
in his employment with X Corporation. B returned to his residence in Mexico on each
of those evenings. On seven days in the period from February 1, 1988, through June
1, 1988, B worked in X's Mexico office. B is not considered to have been present
in the United States on any of the days that he travelled to X's United States office
for the purpose of engaging in employment with Corporation X because he commuted
to his place of employment within the United States on more than 75% of the workdays
during the working period (59 workdays in the United States/66 workdays in the working
period = 89.4%).
Example 2.
C, who lives in Canada, contracted with a resort located in the United States to
provide snow-skiing instructions for the resort's customers for two skiing seasons,
the first beginning on November 15, 1987, and ending on March 15, 1988, and the
second beginning on November 15, 1988, and ending on March 15, 1989. On 90 days
in each of the two skiing seasons, C travelled in the morning from Canada to the
resort to provide skiing instructions pursuant to the contract. C returned to Canada
on each of those evenings. On 20 days during each of the two skiing seasons, C worked
in Canada. C is not considered to have been present in the United States on any
of the days that she travelled to the United States to provide ski instructions
in either the first working period beginning on November 15, 1987, and ending on
March 15, 1988, or the second working period beginning on November 15, 1988, and
ending on March 15, 1989, because she commuted to her employment within the United
States on more than 75% of the workdays during each of the working periods (90 workdays
in the United States/110 workdays in the working period = 81.8%).
Example 3.
D, who lives in Canada, is the sole proprietor of a wholesale lumber business with
offices in both the United States and Canada. Beginning on January 4, 1988, and
ending on February 12, 1988, D commuted to work in his United States office on 30
days. Beginning on February 15, 1988, and ending on March 25, 1988, D commuted to
work in his Canadian office on 30 days. Beginning on March 28, 1988, and ending
on May 27, 1988, D commuted to work in his United States office on 45 days. subsequent
to May 27, D did not commute to the United States on any other days in 1988. D is
considered to have been present in the United States on each day that he travelled
to his office in the United States because D did not commute to the United States
office on more than 75% of the workdays during the working period beginning on January
4, 1988, and ending on May 27, 1988 (75 workdays in the United States/105 workdays
in the working period = 71.4%).
301.7701(b)-3(f) Determination Of Excluded Days Applies Beyond Year Of Determination.
If a day of presence is excluded under this section, then that day shall not be
taken into account in the current year or the first or second preceding year.
[T.D. 8411, 57 FR 15237-15254, Apr. 27, 1992, corrected by 57 28612, June 26, 1992,
corrected by 57 FR 37189, August 18, 1992]
§301.7701(b)-4 Residency Time Periods.
301.7701(b)-4(a) First Year Of Residency.
An alien individual who was not a United States
resident during the preceding calendar year and who is a United States resident
for the current year will begin to be a resident for tax purposes on the alien's
residency starting date. The residency starting date for an alien who meets the
substantial presence test is the first day during the calendar year on which the
individual is present in the United States. The residency starting date for an alien
who meets the lawful permanent resident test (green card test), described in paragraph
(b)(1) of section 301.7701(b)-1, is the first day during the calendar year in which
the individual is physically present in the United States as a lawful permanent
resident. The residency starting date for an alien who satisfies both the substantial
presence test and the green card test will be the earlier of the first day the individual
is physically present in the United States as a lawful permanent resident of the
United States or the first day during the year that the individual is present for
purposes of the substantial presence test. (See section 301.7701(b)- 9(b)(1) for
the transitional rule relating to the residency starting date of an alien individual
who was a lawful permanent resident in 1984. See also section 301.7701(b)-3 for
days that may be excluded.)
301.7701(b)-4(b) Last Year Of Residency
301.7701(b)-4(b)(1) General Rule.
An alien individual who is a United States resident
during the current year but who is not a United States resident at any time during
the following calendar year will cease to be a resident for tax purposes on the
individual's residency termination date. Generally, the residency termination date
will be the last day of the calendar year.
301.7701(b)-4(b)(2) Exceptions.
Notwithstanding paragraph (b)(1) of this section,
the residency termination date for an alien individual who meets the substantial
presence test is the last day during the calendar year that the individual is physically
present in the United States if the individual establishes that, for the remainder
of the calendar year, the individual's tax home was in a foreign country and he
or she maintained a closer connection (within the meaning of section 301.7701(b)-2(d))
to that foreign country than to the United States. Similarly, the residency termination
date for an alien who meets the green card test is the first day during the calendar
year that the alien is no longer a lawful permanent resident if the individual establishes
that, for the remainder of the calendar year, his or her tax home was in a foreign
country and he or she maintained a closer connection to that foreign country than
to the United States. The residency termination date for an alien who satisfies
both the substantial presence test and the green card test for the current year,
will be the later of the first day the individual is no longer a lawful permanent
resident of the United States or the last day the individual was physically present
in the United States if the alien establishes that, for the remainder of the calendar
year, his or her tax home was in a foreign country and he or she maintained a closer
connection to that foreign country than to the United States. It is immaterial whether
the individual's tax home was in the United States, or that the individual had a
closer connection to the United States than to the foreign country, prior to the
date of his or her departure from the United States or the date on which the individual
was no longer a lawful permanent resident, whichever is applicable.
301.7701(b)-4(c) Rules Relating To Residency Starting
Date And Residency Termination Date
301.7701(b)-4(c)(1) De Minimis Presence.
An alien individual may be present in the United
States for up to 10 days without triggering the residency starting date (for purposes
of the substantial presence test) or extending the residency termination date (for
purposes of the substantial presence test) if the individual is able to establish
that, during that period, the individual's tax home was in a foreign country and
he or she maintained a closer connection to that foreign country than to the United
States. Days from more than one period of presence may be disregarded for purposes
of determining an individual's residency starting date or termination date so long
as the total is not more than 10 days. However, an individual may not disregard
any days that occur in a period of consecutive days of presence, if all the days
that occur during that period cannot be excluded. An individual must include days
of presence for purposes of determining whether the individual meets the substantial
presence test even though the days may be disregarded for purposes of determining
the individual's residency starting date or residency termination date.
301.7701(b)-4(c)(2) Proration.
If an individual's residency starting date does
not fall on the first day of the tax year, or the individual's residency termination
date does not fall on the last day of the tax year, the individual's income tax
liability should be calculated in accordance with section 1.871-13 of this chapter
dealing with the taxation of individuals who change residence status during the
taxable year.
301.7701(b)-4(c)(3) Residency Starting Date For
Certain Individuals
301.7701(b)-4(c)(3)(i) In General.
If an alien individual (who otherwise does not
meet the substantial presence test or the green card test for the current year)
is physically present in the United States for at least 31 consecutive days during
the current year, and also for a period of continuous presence beginning with the
first day of that thirty-one day period (see paragraph (c)(3)(iii) of this section),
then the individual may elect to be treated as a resident during the current year.
The individual's residency starting date shall be the first day of that thirty-one
day period, if --
(A) The individual was not a resident of the United States under the substantial
presence test or the green card test in the year preceding the current year; and
(B) The individual is a resident of the United States in the subsequent year under
the substantial presence test (whether or not the individual is also a resident
of the United States under the green card test).
301.7701(b)-4(c)(3)(ii) Determination Of Presence.
Except as otherwise provided in paragraph (c)(3)(iii)
of this section, an individual shall be treated as present in the United States
on any day that the individual is physically present in the United States at any
time during the day.
301.7701(b)-4(c)(3)(iii) Thirty-one Day Period.
For purposes of this paragraph (c)(3), the term
"thirty-one day period" means any period of 31 consecutive days during which an
individual is physically present in the United States during each day of the period.
301.7701(b)-4(c)(3)(iv) Period Of Continuous Presence.
For purposes of this paragraph (c)(3), the term "continuous presence" means a period
of presence in the United States that includes 75 percent of the days in the current
year beginning with (and including) the first day of the individual's thirty-one
day period of presence. Only for purposes of the continuous presence requirement,
an individual will be deemed to be present in the United States for up to 5 days
on which the individual is absent from the United States. These days will not be
deemed to be days of presence for purposes of the thirty-one day period of presence
requirement. If an individual is present for more than one thirty-one day period
of presence and satisfies the continuous presence requirement with regard to each
period, the individual's residency starting date shall be the first day of the first
thirty-one day period of presence. If an individual is present for more than one
thirty-one day period of presence but satisfies the continuous presence requirement
only for a later thirty-one day period, the individual's residency starting date
shall be the first day of the later thirty-one day period of presence. For purposes
of this paragraph (c)(3), days of presence that are otherwise excluded under section
7701(b)(3)(D)(i) and section 301.7701(b)-3(a)(1) (exempt individual), (a)(2) (medical
condition), (a)(3) (in transit between two foreign points), and (a)(4) (regular
commuter) shall not be counted as days of presence for purposes of either the thirty-one
day period or continuous presence requirement.
301.7701(b)-4(c)(3)(v) Election Procedure
301.7701(b)-4(c)(3)(v)(A) Filing Requirements.
An alien individual shall make an election to be
treated as a resident under paragraph (c)(3) of this section by attaching a statement
(described in paragraph (c)(3)(v)(C) of this section) to the individual's income
tax return (Form 1040) for the taxable year for which the election is to be in effect
(the election year). The alien individual may not make this election until such
time as he has satisfied the substantial presence test for the year following the
election year. If an alien individual has not satisfied the substantial presence
test for the year following the election year as of the due date (not including
extensions) of the tax return for the election year, the alien individual may request
an extension of time for filing the return until a reasonable period after he or
she has satisfied such test, provided that the individual pays with his or her extension
application the amount of tax he or she expects to owe for the election year computed
as if he or she were a nonresident alien throughout the election year. An election
made under paragraph (c)(3) of this section may not be revoked without the approval
of the Commissioner or his delegate.
301.7701(b)-4(c)(3)(v)(B) Election On Behalf Of
A Dependent Child.
An individual may make an election on behalf of
a dependent child (as defined in paragraphs (1) and (2) of section 152(a), without
regard to section 152(b)(3)) If the individual is qualified to make an election
on his or her own behalf, the child qualifies to make an election under this paragraph
(c)(3), and the child is not required by section 6012 to file a United States income
tax return for the year for which the election is to be effective.
301.7701(b)-4(c)(3)(v)(C) Statement.
The statement required by paragraph (c)(3)(v)(A) of this section shall include the
name and address of the alien individual and contain a signed declaration that the
election is being made. If the individual is also making an election on behalf of
any dependent children, then the statement must include the required information
with respect to those children. The statement must specify --
(1) That the alien individual was not a resident in the year immediately preceding
the election year;
(2) That the alien individual is a resident under the substantial presence test
in the year following the election year;
(3) The individual's number of days of presence in the United States during the
year following the election year;
(4) The date or dates of the alien individual's thirty-one day period of presence
and period of continuous presence in the United States during the election year;
and
(5) The date or dates of absence from the United States during the election year
that are deemed to be days of presence.
301.7701(b)-4(c)(3)(vi) Penalty For Failure To Comply
With Filing Requirements
301.7701(b)-4(c)(3)(vi)(A) General Rule.
If an individual fails to comply with the election
procedure of paragraph (c)(3)(v) of this section, the individual must file his or
her income tax return for the current year as a nonresident alien.
301.7701(b)-4(c)(3)(vi)(B) Exception.
The penalty described in paragraph (c)(3)(vi)(A) of this section shall not apply
if the individual can show by clear and convincing evidence that he or she took
reasonable actions to become aware of the filing requirements and significant affirmative
steps to comply with the requirements. An individual who requests an extension of
time to file his or her income tax return pursuant to paragraph (c)(3)(v) of this
section will be considered to have taken significant affirmative steps to comply
with the requirement that the individual pay his or her tax determined as if the
individual were a nonresident alien if the individual paid with his or her extension
application at least 90 percent of the amount of the tax the individual actually
owed for the election year computed as if he or she were a nonresident alien throughout
the election year.
301.7701(b)-4(d) Examples.
The following examples illustrate the operation of this section:
Example 1.
B, a citizen of foreign country X, is an alien who has never before been a United
States resident for tax purposes. B comes to the United States on January 6, 1985,
to attend a business meeting and returns to country X on January 10, 1985. B is
able to establish a closer connection to country X for the period January 6-10.
On March 1, 1985, B moves to the United States and resides here until August 20,
1985, when he returns to country X. On December 12, 1985, B comes to the United
States for pleasure and stays here until December 16, 1985 when he returns to country
X. B is able to establish a closer connection to country X for the period December
12-16. B is not a United States resident for tax purposes during the following year
and can establish a closer connection to country X for the remainder of calendar
year 1985. B is a resident of the United States under the substantial presence test
because B is present in the United States for 183 days (5 days in January plus 173
days for the period March 1 - August 20 plus 5 days in December). B's residency
starting date is March 1, 1985, and his residency termination date is August 20,
1985.
Example 2.
The facts are the same as in EXAMPLE 1, except that B remains in the United States
until December 17, 1985, and is able to establish a closer connection to country
X for the period December 18 through 31. B's residency termination date is December
17, 1985.
Example 3.
C, a citizen of foreign country Y, is an alien who has never before been a United
States resident for tax purposes. C comes to the United States for the first time
on February 10, 1985, and attended a business conference until February 24, 1985,
when she returns to country Y. On April 20, 1985, C enters the United States as
a lawful permanent resident. On November 10, 1985, C ceases to be a lawful permanent
resident but stays on in the United States until November 20, 1985 when she returns
to country Y. On December 8, 1985, C comes to the United States and stays here until
December 17, 1985 when she returns to country Y. She can establish a closer connection
to country Y for that period. C is not a resident of the United States during the
following calendar year and can establish a closer connection to country Y for the
remainder of calendar year 1985. C qualifies as a United States resident under both
the green card test and the substantial presence test. C's residency starting date
under the green card test is April 2O, 1985. Under the substantial presence test,
C's residency starting date is February 10, 1985, because she is present for more
than ten days in February and cannot take advantage of the de minimis presence rule.
Therefore, C's residency starting date is February 10, 1985. C's residency termination
date under the green card test is November 10, 1985. Her residency termination date
under the substantial presence test is November 20, because B can disregard ten
days of presence in December. Thus, her residency termination date is November 20,
1985, the later of her residency termination date under the substantial presence
test or the green card test.
Example 4.
The facts are the same as in EXAMPLE 3, except that C is initially present in the
United States on business from February 5 to February 9, 1985. C is able to establish
a closer connection to country Y for that period. C may take advantage of only ten
days of de minimis presence and may exclude days from a continuous period of presence
only if she can exclude all the days that occur during that period. Thus, C may
choose either of the following periods of residency: residency starting date February
5, 1985, and residency termination date November 20, 1985, or residency starting
date April 20, 1985, and residency termination date December 17, 1985.
Example 5.
D, a citizen of foreign country Z, is an alien who has never before been a United
States resident for tax purposes. D comes to the United States on November 1, 1985
and is present in the United States on 31 consecutive days (from November 1 through
December 1, 1985). D returns to country Z on December 1 and does not come back to
the United States until December 17, 1985. He remains in the United States for the
rest of the year. During 1986, D is a resident of the United States under the substantial
presence test. D may elect to be treated as a resident of the United States for
1985 because he was present in the United States in 1985 for a 31 consecutive day
period of presence (November 1 through December 1, 1985) and for at least 75 percent
of the days following (and including) the first day of D's 31 consecutive day period
of presence (46 total days of presence in the United States/61 days in the period
from November 1 through December 31 = 75.4%). If D makes the election to be treated
as a resident, his residency starting date will be November 1, 1985.
Example 6.
The facts are the same as in EXAMPLE 5, except that D is absent from the United
States on December 24, 25, 29, 30 and 31. D may make the election to be treated
as a resident for 1985 because up to five days of absence will be deemed to be days
of presence for purposes of the continuous presence requirement.
Example 7.
F, a citizen of foreign country M, is an alien individual who has never before been
a United States resident for tax purposes. F comes to the United States on January
1, 1985 and remains in the United States through January 31, 1985, when she returns
to country M. F comes back to the United States on October 1, 1985 and is present
in the United States through November 1, 1985. From November 1, 1985 through December
31, 1985, F is present in the United States for 38 days. Although F satisfies two
31 consecutive day periods of presence, (January 1 through January 31 and October
1 through November 1), she satisfies the continuous presence requirement only with
regard to the later period of presence (69 total days of presence/92 days in the
period from October 1 through December 31 = 75%). Thus, if F makes the election
to be treated as a resident, his residency starting date is October 1, 1985.
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