§ 872. Gross income

• (a) In the case of a nonresident alien individual, except where the context clearly indicates otherwise, gross income includes only—
  • (1) gross income which is derived from sources within the United States and which is not effectively connected with the conduct of a trade or business within the United States, and
  • (2) gross income which is effectively connected with the conduct of a trade or business within the United States.
• (b) The following items shall not be included in gross income of a nonresident alien individual, and shall be exempt from taxation under this subtitle:
  • (1) Gross income derived by an individual resident of a foreign country from the international operation of a ship or ships if such foreign country grants an equivalent exemption to individual residents of the United States.
  • (2) Gross income derived by an individual resident of a foreign country from the international operation of aircraft if such foreign country grants an equivalent exemption to individual residents of the United States.
  • (3) Compensation paid by a foreign employer to a nonresident alien individual for the period he is temporarily present in the United States as a nonimmigrant under subparagraph (F), (J), or (Q) of section 101(a)(15) of the Immigration and Nationality Act, as amended. For purposes of this paragraph, the term “foreign employer” means—
    • (A) a nonresident alien individual, foreign partnership, or foreign corporation, or
    • (B) an office or place of business maintained in a foreign country or in a possession of the United States by a domestic corporation, a domestic partnership, or an individual who is a citizen or resident of the United States.
  • (4) Income derived by a nonresident alien individual from a series E or series H United States savings bond, if such individual acquired such bond while a resident of the Ryukyu Islands or the Trust Territory of the Pacific Islands.
  • (5) Gross income derived by a nonresident alien individual from a legal wagering transaction initiated outside the United States in a parimutuel pool with respect to a live horse race or dog race in the United States.
  • (6) Income to which paragraphs (1) and (2) apply shall include income which is derived from the rental on a full or bareboat basis of a ship or ships or aircraft, as the case may be.
  • (7) The Secretary may provide that this subsection be applied separately with respect to income from different types of transportation.
  • (8) To the extent provided in regulations, a possession of the United States shall be treated as a foreign country for purposes of this subsection.