[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: 26CFR1.871-1]

[Page 326-327]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.871-1  Classification and manner of taxing alien individuals.

    (a) Classes of aliens. For purposes of the income tax, alien 
individuals are divided generally into two classes, namely, resident 
aliens and nonresident aliens. Resident alien individuals are, in 
general, taxable the same as citizens of the United States; that is, a 
resident alien is taxable on income derived from all sources, including 
sources without the United States. See Sec. 1.1-1(b). Nonresident alien 
individuals are taxable only on certain income from sources within the 
United States and on the income described in section 864(c)(4) from 
sources without the United States which is effectively connected for the 
taxable year with the conduct of a trade or business in the United 
States. However, nonresident alien individuals may elect, under section 
6013 (g) or (h), to be treated as U.S. residents for purposes of 
determining their income tax liability under Chapters 1, 5, and 24 of 
the code. Accordingly, any reference in Secs. 1.1-1 through 1.1388-1 and 
Secs. 1.1491-1 through 1.1494-1 of this part to non-resident alien 
individuals does not include those with respect to whom an election 
under section 6013 (g) or (h) is in effect, unless otherwise 
specifically provided. Similarly, any reference to resident aliens or 
U.S. residents includes those with respect to whom an election is in 
effect, unless otherwise specifically provided.
    (b) Classes of nonresident aliens--(1) In general. For purposes of 
the income tax, nonresident alien individuals are divided into the 
following three classes:
    (i) Nonresident alien individuals who at no time during the taxable 
year are engaged in a trade or business in the United States,
    (ii) Nonresident alien individuals who at any time during the 
taxable year are, or are deemed under Sec. 1.871-9 to be, engaged in a 
trade or business in the United States, and
    (iii) Nonresident alien individuals who are bona fide residents of 
Puerto Rico during the entire taxable year.

An individual described in subdivision (i) or (ii) of this subparagraph 
is subject to tax pursuant to the provisions of subpart A (section 871 
and following), part II, subchapter N, chapter 1 of the Code, and the 
regulations thereunder. See Secs. 1.871-7 and 1.871-8. The provisions of 
subpart A do not apply to individuals described in subdivision (iii) of 
this subparagraph, but such individuals, except as provided in section 
933 with respect to Puerto Rican source income, are subject to the tax 
imposed by section 1 or section 1201(b). See Sec. 1.876-1.
    (2) Treaty income. If the gross income of a nonresident alien 
individual described in subparagraph (1) (i) or (ii) of this paragraph 
includes income on which the tax is limited by tax convention, see 
Sec. 1.871-12.
    (3) Exclusions from gross income. For rules relating to the 
exclusion of certain items from the gross income of a nonresident alien 
individual, including annuities excluded under section 871(f), see 
Secs. 1.872-2 and 1.894-1.
    (4) Expatriation to avoid tax. For special rules applicable in 
determining the tax of a nonresident alien individual who has lost U.S. 
citizenship with a principal purpose of avoiding certain taxes, see 
section 877.
    (5) Adjustment of tax of certain nonresident aliens. For the 
application of

[[Page 327]]

pre-1967 income tax provisions to residents of a foreign country which 
imposes a more burdensome income tax than the United States, and for the 
adjustment of the income tax of a national or resident of a foreign 
country which imposes a discriminatory income tax on the income of 
citizens of the United States or domestic corporations, see section 896.
    (6) Citizens of certain U.S. possessions. For rules for treating as 
nonresident alien individuals certain citizens of possessions of the 
United States who are not otherwise citizens of the United States, see 
section 932 and Sec. 1.932-1.
    (7) Conduit financing arrangements. For rules regarding conduit 
financing arrangements, see Secs. 1.881-3 and 1.881-4.
    (c) Effective date. This section shall apply for taxable years 
beginning after December 31, 1966. For corresponding rules applicable to 
taxable years beginning before January 1, 1967, see 26 CFR 1.871-1 and 
1.871-7(a) (Revised as of January 1, 1971).

[T.D. 7332, 39 FR 44218, Dec. 23, 1974, as amended by T.D. 7670, 45 FR 
6928, Jan. 31, 1980; T.D. 8611, 60 FR 41004, Aug. 11, 1995]