[Code of Federal Regulations]
[Title 26, Volume 9]
[Revised as of April 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.861-7]

[Page 135]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.861-7  Sale of personal property.

    (a) General. Gains, profits, and income derived from the purchase 
and sale of personal property shall be treated as derived entirely from 
the country in which the property is sold. Thus, gross income from 
sources within the United States includes gains, profits, and income 
derived from the purchase of personal property without the United States 
and its sale within the United States.
    (b) Purchase within a possession. Notwithstanding paragraph (a) of 
this section, income derived from the purchase of personal property 
within a possession of the United States and its sale within the United 
States shall be treated as derived partly from sources within and partly 
from sources without the United States. See section 863(b)(3) and 
Sec. 1.863-2.
    (c) Country in which sold. For the purposes of part I (section 861 
and following), subchapter N, chapter 1 of the Code, and the regulations 
thereunder, a sale of personal property is consummated at the time when, 
and the place where, the rights, title, and interest of the seller in 
the property are transferred to the buyer. Where bare legal title is 
retained by the seller, the sale shall be deemed to have occurred at the 
time and place of passage to the buyer of beneficial ownership and the 
risk of loss. However, in any case in which the sales transaction is 
arranged in a particular manner for the primary purpose of tax 
avoidance, the foregoing rules will not be applied. In such cases, all 
factors of the transaction, such as negotiations, the execution of the 
agreement, the location of the property, and the place of payment, will 
be considered, and the sale will be treated as having been consummated 
at the place where the substance of the sale occurred.
    (d) Production and sale. For provisions respecting the source of 
income derived from the sale of personal property produced by the 
taxpayer, see section 863(b)(2) and paragraphs (b) of Secs. 1.863-1 and 
1.863-2.
    (e) Section 306 stock. For determining the source of gain on the 
disposition of section 306 stock, see section 306(f) and the regulations 
thereunder.