[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: 26CFR1.883-1]

[Page 410]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.883-1  Exclusions from gross income of foreign corporations.

    (a) Earnings of foreign ships or aircraft--(1) Basic rule. So much 
of the income from sources within the United States of a foreign 
corporation as consists of earnings derived from the operation of a ship 
or ships documented, or of aircraft registered, under the laws of a 
foreign country which grants an equivalent exemption to citizens of the 
United States nonresident in that foreign country and to corporations 
organized in the United States shall not be included in gross income.
    (2) Equivalent exemption--(i) Ships. A foreign country which either 
imposes no income tax, or, in imposing that tax, exempts from taxation 
so much of the income of a citizen of the United States nonresident in 
that 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 is considered as granting 
an equivalent exemption for purposes of the exclusion from gross income 
of the earnings of a foreign ship or ships.
    (ii) Aircraft. A foreign country which either imposes no income tax, 
or, in imposing that tax, exempts from taxation so much of the income of 
a citizen of the United States nonresident in that foreign country and 
of a corporation organized in the United States as consists of earnings 
derived from the operation of aircraft registered under the laws of the 
United States is considered as granting an equivalent exemption for 
purposes of the exclusion from gross income of the earnings of foreign 
aircraft.
    (b) Income tax conventions. Generally, income of any kind which is 
exempt, under the provisions of an income tax convention to which the 
United States is a party, from any tax imposed by subtitle A (relating 
to income taxes) is not included in the gross income of a foreign 
corporation. However, see paragraph (a) of Sec. 1.894-1 for certain 
exceptions to this rule. Income on any tax which imposed by such 
subtitle is limited by an income tax convention is included in the gross 
income of a foreign corporation if it is not otherwise excluded from 
gross income. For the determination of the tax when the taxpayer has 
income upon which the tax is limited by an income tax convention, see 
Sec. 1.871-12.
    (c) Other exclusions. Income which is from sources without the 
United States, as determined under the provisions of sections 861 
through 863 and the regulations thereunder, is not included in the gross 
income of a foreign corporation unless such income is effectively 
connected for the taxable year with the conduct of a trade or business 
in the United States by that corporation. To determine specific 
exclusions in the case of other items which are from sources within the 
United States, see the applicable sections of the Code. For special 
rules under a tax convention for determining the sources of income and 
for excluding, from gross income, income from sources without the United 
States which is effectively connected with the conduct of a trade or 
business in the United States, see the applicable tax convention. For 
determining which income from sources without the United States is 
effectively connected with the conduct of a trade or business within the 
United States see section 864(c)(4) and Sec. 1.864-5.
    (d) Effective date. This section applies for taxable years beginning 
after December 31, 1966. For corresponding rules applicable to taxable 
years beginning before January 1, 1967, see 26 CFR 1.883-1 (Revised as 
of January 1, 1971).

[T.D. 6500, 25 FR 11910, Nov. 26, 1960, as amended by T.D. 7293, 38 FR 
32799, Nov. 28, 1973; 38 FR 34203, Dec. 12, 1973]

[[Page 411]]