Page:United States Statutes at Large Volume 100 Part 3.djvu/725

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2533

income described in section 904(d)(1)(E) of the Internal Revenue Code of 1954 (as in effect on the day before the date of the enactment of this Act). No taxes paid or accrued in a taxable year beginning after 1986 with respect to high withholding tax interest (as defined in section 904(d)(2)(B) of the Internal Revenue Code of 1986 as amended by this Act) may be treated as paid or accrued in a taxable year beginning before 1987.

Subtitle B—Source Rules i

SEC, 1211. DETERMINATION OF SOURCE IN CASE OF SALES OF PERSONAL PROPERTY.

(a) PERSONAL PROPERTY SOURCE RULES.—Part I of subchapter N of chapter 1 (relating to determination of source of income) is amended by adding at the end thereof the following new section: "SEC. 8 5 SOURCE RULES FOR PERSONAL PROPERTY SALES. 6. "(a) GENERAL RULE.—Except as otherwise provided in this section, income from the sale of personal property— "(1) by a United States resident shall be sourced in the United States, or "(2) by a nonresident shall be sourced outside the United States. "(b) EXCEPTION FOR INVENTORY PROPERTY.—In the case of income derived from the sale of inventory property— "(1) this section shall not apply, and "(2) such income shall be sourced under the rules of sections 861(a)(6), 862(a)(6), and 863(b). "(c) EXCEPTION FOR DEPRECIABLE PERSONAL PROPERTY.—

"(1) IN GENERAL.—Gain (not in excess of the depreciation adjustments) from the sale of depreciable personal property shall be allocated between sources in the United States and sources outside the United States— "(A) by treating the same proportion of such gain as sourced in the United States as the United States depreciation adjustments with respect to such property bear to the total depreciation adjustments, and "(B) by treating the remaining portion of such gain as sourced outside the United States. "(2) GAIN IN EXCESS OF DEPRECIATION.—Gain (in excess of the

depreciation adjustments) from the sale of depreciable personal property shall be sourced as if such property were inventory property. "(3) UNITED STATES DEPRECIATION ADJUSTMENTS.—For purposes of this subsection— "(A) IN GENERAL.—The term 'United States depreciation adjustments' means the portion of the depreciation adjustments to the adjusted basis of the property which are attributable to the depreciation deductions allowable in computing taxable income from sources in the United States. "(B) SPECIAL RULE FOR CERTAIN PROPERTY.—Except in the

case of property of a kind described in section 48(a)(2)(B), if, for any taxable year— "(i) such property is used predominantly in the United States, or

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