ART. 211-7. Exclusion of earnings of foreign ships from gross income.— So much of the income from sources within the United States of a nonresident alien individual as consists of earnings derived from the operation of a ship or ships documented under the laws of a foreign country which grants an equivalent exemption to citizens of the United States nonresident in such foreign country and to corporations organized in the United States, shall not be included in gross income. Foreign countries which either impose no income tax, or, in imposing such tax, exempt from taxation so much of the income of a citizen of the United States nonresident in such foreign country and of a corporation organized in the United States as consists of earnings derived from the operation of a ship or ships documented under the laws of the United States are considered as granting an equivalent exemption within the meaning of this article.

SEC. 212. DEDUCTIONS.

(a) General rule.-In the case of a nonresident alien individual the deductions shall be allowed only if and to the extent that they are connected with income from sources within the United States; and the proper apportionment and allocation of the deductions with respect to sources of income within and without the United States shall be determined as provided in section 119, under rules and regulations prescribed by the Commissioner with the approval of the Secretary.

(b) Losses.

(1) The deduction, for losses not connected with the trade or business if incurred in transactions entered into for profit, allowed by section 23 (e) (2) shall be allowed whether or not connected with income from sources within the United States, but only if the profit, if such transaction had resulted in a profit, would be taxable under this title.

(2) The deduction for losses of property not connected with the trade or business if arising from certain casualties or theft, allowed by section 23-(e) (3), shall be allowed whether or not connected with income from sources within the United States, but only if the loss is of property within the United States.

(c) Charitable, etc., contributions. The so-called "charitable contribution " deduction allowed by section 23 (o) shall be allowed whether or not connected with income from sources within the United States, but only as to contributions or gifts made to domestic corporations, or to community chests, funds, or foundations, created in the United States, or to the vocational rehabiliation fund.

ART. 212-1. Deductions allowed nonresident alien individuals.—In the case of a nonresident alien individual the deductions allowed by section 23 for business expenses, interest, taxes, losses in trade, bad debts, depreciation, and depletion are allowed only if and to the extent that they are connected with income from sources within the United States. (See also section 214.) In the case of such taxpayers, however, (1) losses sustained during the taxable year and

not compensated for by insurance or otherwise, if incurred in any transaction entered into for profit, though not connected with the trade or business, are (if otherwise allowable) deductible only if and to the extent that the profit if such transaction had resulted in a profit would have been taxable as income from sources within the United States; (2) losses sustained during the taxable year of property not connected with the trade or business if arising from fires, storms, shipwreck, or other casualty, or from theft, and if not compensated for by insurance or otherwise, are deductible only if the property was located within the United States; and (3) contributions or gifts made within the taxable year are deductible only if made to domestic corporations or to community chests, funds, or foundations, created in the United States of the type specified in section 23 (o), or to the vocational rehabilitation fund, subject to the limitation provided in section 23 (o).

Losses embraced under clause (2) of the preceding paragraph are deductible in full from items of gross income specified as being derived in full from sources within the United States, and, if greater than the sum of such items, the unabsorbed loss may be deducted from the income apportioned to sources within the United States under the provisions of article 119-12. Losses embraced under clause (1) are deductible in full (as provided in article 119-10 or article 119-11) when the profit from the transaction, if it had resulted in a profit, would have been taxable in full as income from sources within the United States, but should be deducted under the provisions of article 119-12 when the profit from the transaction, if it had resulted in profit, would have been taxable only in part.

SEC. 213. CREDITS AGAINST NET INCOME.

In the case of a nonresident alien individual the personal exemption allowed by section 25 (b) (1) of this title shall be only $1,000. The credit for dependents allowed by section 25 (b) (2) shall not be allowed in the case of a nonresident alien individual unless he is a resident of a contiguous country.

ART. 213-1. Credits to nonresident alien individual. The personal exemption allowed as a credit against net income by section 25 (b) (1) shall be $1,000 in the case of a nonresident alien individual irrespective of his status. The credit for dependents provided by section 25 (b) (2) is allowed to nonresident alien individuals only if they are residents of Canada or Mexico. If the status of the taxpayer as to dependents changes during the taxable year, the credit for dependents shall be determined as provided in article 25-5.

SEC. 214. ALLOWANCE OF DEDUCTIONS AND CREDITS.

(a) Return to contain information.-A nonresident alien individual shall receive the benefit of the deductions and credits allowed to him in this title only by filing or causing to be filed with the collector a true

and accurate return of his total income received from all sources in the United States, in the manner prescribed in this title; including therein all the information which the Commissioner may deem necessary for the calculation of such deductions and credits.

(b) Tax withheld at source. The benefit of the personal exemption and credit for dependents, may, in the discretion of the Commissioner and under regulations prescribed by him with the approval of the Secretary, be received by a nonresident alien individual entitled thereto, by filing a claim therefor with the withholding agent.

ART. 214-1. Allowance of deductions and credits to nonresident alien individuals. Unless a nonresident alien individual shall file, or cause to be filed with the collector, a true and accurate return of income from sources within the United States, regardless of amount, the tax shall be collected on the basis of the gross income (not the net income) from sources within the United States. Where a nonresident alien has various sources of income within the United States, so that from any one source or from all sources combined the amount of income shall call for the assessment of a surtax, and a return of income shall not be filed by him or on his behalf, the Commissioner will cause a return of income to be made and include therein the income of such nonresident alien from all sources concerning which he has information, and he will assess the tax and collect it from one or more of the sources of income of such nonresident alien within the United States, without allowance for deductions or credits. The benefit of the credits allowed against net income for the purpose of the normal tax may be claimed by a nonresident alien only in his individual return, except that the personal exemption (and credit for dependents in the case of a resident of Canada or Mexico) may be obtained by filing a claim therefor with the withholding agent in accordance with the provisions of articles 143-4 and 214–2.

ART. 214-2. Allowance of personal exemption to nonresident alien employee.—A nonresident alien employee may claim the benefit of the personal exemption (sections 25 (b) (1) and 213) by filing with his employer Form 1115 duly filled in and executed under oath. If the alien employee is a resident of Canada or Mexico, he may also obtain the benefit of the credit for dependents (sections 25 (b) (2) and 213) by filing Form 1115 with his employer. On the filing of such a claim the employer shall examine it. If on such examination it appears that the claim is in due form, that it contains no statement which to the knowledge of the employer is untrue, that such employee on the face of the claim is entitled to credit, and that such credit has not yet been exhausted, such employer need not until such credit is in fact exhausted withhold any tax from payments of salary or wages made to such employee. Every employer with whom claims on Form 1115 are filed by employees shall preserve such claims until

the following calendar year, and shall then file them, attached to his annual withholding return on Form 1042, with the collector on or before March 15. In case, however, when the following calendar year arrives such employer has no withholding to return, he shall forward all such claims directly to the Commissioner, with a letter of transmittal, on or before March 15. Where any tax is withheld the employer in every instance shall show on the pay envelope or shall furnish some other memorandum showing the name of the employee, the date, and the amount withheld. This article applies only to payments of compensation by an employer to an employee. (See also section 143.)

SEC. 215. CREDITS AGAINST TAX.

A nonresident alien individual shall not be allowed the credits against the tax for taxes of foreign countries and possessions of the United States allowed by section 131.

SEC. 216. RETURNS.

In the case of a nonresident alien individual the return, in lieu of the time prescribed in section 53 (a) (1), shall be made on or before the fifteenth day of the sixth month following the close of the fiscal year, or, if the return is made on the basis of the calendar year, then on or before the fifteenth day of June.

ART. 216-1. Return of income of nonresident alien individuals.-Returns in the case of nonresident alien individuals must be made on or before the 15th day of the sixth month following the close of the fiscal year or on or before the 15th day of June, if on the basis of the calendar year. A nonresident alien individual shall make or have made a full and accurate return on Form 1040 B of his income received from sources within the United States, regardless of amount, unless the tax on such income has been fully paid at the source. The responsible representatives or agents of nonresident aliens in connection with any sources of income which such nonresident aliens may have within the United States shall make a return of the income from such sources, and shall pay any normal tax or surtax assessed upon the income received by them in behalf of their nonresident alien principals, in all cases where the tax on income so in their receipt, custody, or control shall not have been withheld at the source. The agency appointment will determine how completely the agent is substituted for the principal for tax purposes. A bank or trust company which collects interest or dividends on deposited securities of a nonresident alien, executes ownership certificates in connection therewith, and sells such securities under special instructions shall not be deemed merely by reason of such acts to be the responsible representative or agent of the nonresident alien, and shall not be required to make a return of the income received by it in

connection with such deposited securities or to pay any tax thereon, except in cases where the amount of such income is $1,000 or over, unless specially appointed for that purpose or unless by reason of other facts it has become such responsible representative or agent. Where upon filing a return of income it appears that a nonresident alien is not liable for tax, but nevertheless a tax shall have been withheld at the source, in order to obtain a refund on the basis of the showing made by the return there should be attached to it a statement showing accurately the amounts of tax withheld, with the names and post-office addresses of all withholding agents. (See article 143-4.)

SEC. 217. PAYMENT OF TAX.

(a) Time of payment.-In the case of a nonresident alien individual the total amount of tax imposed by this title shall be paid, in lieu of the time prescribed in section 56(a), on the fifteenth day of June following the close of the calendar year, or, if the return should be made on the basis of a fiscal year, then on the fifteenth day of the sixth month following the close of the fiscal year.

(b) Withholding at source. For withholding at source of tax on income of nonresident aliens, see section 143.

ART. 217-1. Date on which tax shall be paid by nonresident alien individual. In the case of a nonresident alien individual the tax is to be paid on or before the 15th day of June following the close of the calendar year, or, where the return is made on the basis of a fiscal year, on or before the 15th day of the sixth month following the close of the fiscal year. As to payment of the tax in installments, see article 56-1.