Page 563

TITLE 26-INTERNAL REVENUE CODE ily present in the United States as a nonimmi- grant under subparagraph (F) or (J) of section 101(a)(15) of the Immigration and Nationality Act, as amended (8 U.S.C. 1101(a)(15)(F) or (J)), shall be treated as a nonresident alien individ- ual engaged in trade or business within the United States, and any income described in sec- tion 1441(b)(1) or (2) which is received by such individual shall, to the extent derived from sources within the United States, be treated as effectively connected with the conduct of a trade or business within the United States. (d) Election to treat real property income as income connected with United States business (1) In general A nonresident alien individual who during the taxable year derives any income- (A) from real property held for the pro- duction of income and located in the United States, or from any interest in such real, property, including (i) gains from the sale or exchange of such real property or an in- terest therein, (i) rents or royalties from mines, wells, or other natural deposits, and (iii) gains described in section 631(b) or (c), and (B) which, but for this subsection, would not be treated as income which is effective- ly connected with the conduct of a trade or business within the United States, may elect for such taxable year to treat all such income as income which is effectively connected with the conduct of a trade or busi- ness within the United States. In such case, such income shall be taxable as provided in subsection (b)(1) whether or not such individ- ual is engaged in trade or buisness with.-i the United States during the taxable year. An election under this paragraph for any taxable year shall remain in effect for all subsequent taxable years, except that it may be revoked with the consent of the Secretary with re- spect to any taxable year. (2) Election after revocation If an election has been made under para- graph (1) and such election has been revoked, a new election may not be made under such paragraph for any taxable year before the 5th taxable year which begins after the first taxable year for which such revocation is ef- fective, unless the Secretary consents to such new election. (3) Form and time of election and revocation An election under paragraph (1). and any revocation of such an election, may be made only in such manner and at such time as the Secretary may by regulations prescribe. (e) Gains from sale or exchange of certain intangible property For purposes of subsection (a)(1)(D), and for purposes of sections 881(a)(4), 1441(b), and 1442(a)- (1) Payments treated as contingent on use, etc. If more than 50 percent of the gain for any taxable year from the sale or exchange of any patent, copyright, secret process or formula, good will, trademark, trade brand, franchise, or other like property, or of any interest in any such property, is from payments which are contingent on the productivity, use, or disposition of such property, or interest, all of the gain for the taxable year from the sale or exchange of such property or interest shall be treated as being from payments which are contingent on the productivity, use, or dispo- sition of such property or interest. (2) Source rule In determining whether gains described in subsection (a)(1)(D) and section 881(a)(4) are received from sources within the United States, such gains shall be treated os rentals or royalties for the use of, or privilege of using, property or an interest in property. (f) Certain annuities received under qualified plans For purposes of this section, gross income does not include any amount received as an an. nuity under a qualified annuity plan described in section 403(a)(1), or from a qualified trust described in section 401(a) which is exempt from tax under section 501(a), if- (1) all of the personal services by reason of which such annuity is payable were either (A) personal services performed outside the United States by an individual who, at the time of performance of such personal ser- vices, was a nonresident alien, or (B) personal services described in section 864(b)(1) per- formed within the United States by such indi- vidual, and (2) at the time the first amount is paid as such annuity under such annuity plan, or by such trust, 90 percent or more of the employ- ees for whom contributions or benefits are provided under such annuity plan, or under the plan or plans of which such trust is a part, are citizens or residents of the United States. (g) Cross references (1) For tax treatment of certain amounts distributed by the United States to nonresident alien individuals, see section 402(a)(4). (2) For taxation of nonresident alien individuals who are expatriated United States citizens, see section 877. (3) For doubling of tax on citizens of certain foreign countries, see section 891. (4) For adjustment of tax in case of nationals or resi. dents of certain foreign countries, see section 896. (5) For withholding of tax at source on nonresident alien individuals, see section 1441. (6) For the requirement of making a declaration of es- timated tax by certain nonresident alien individuals, see section 6015(i). (7) For election to treat married nonresident alien in- dividual as resident of United States in certain cases, see subsections (g) and (h) of section 6013. (Aug. 16, 1954, ch. 736, 68A Stat. 278; Sept. 2, 1958, Pub. L. 85-866, title I, §§40(a), 41(a), 72 Stat. 1638, 1639; Apr. 22, 1960, Pub. L. 86-437, § 2(b), 74 Stat. 79; Sept. 21, 1961, Pub. L. 87-256, § 110(b), 75 Stat. 535; Feb. 26, 1964, Pub. L. 88- 272, title I, § 113(b), title II, § 201(d)(12), 78 Stat. 24, 32; Nov. 13, 1966, Pub. L. 89-809, title I, § 103(a)(1), 80 Stat. 1547; Dec. 10, 1971, Pub. L. 92-178, title III, § 313(a), (b), 85 Stat. 526, 527; Sept, 2, 1974, Pub. L. 93-406, title II, § 2005(c)(8), 88 Stat. 992; Oct. 4, 1976, Pub. L. 94-455, title X, § 1012(a)(2), title XIX, §§ 1901(b)(3)(I), 1906(b)(13)(A), 90 Stat. 1613, 1793, 1834.) Page 563