26 U.S.C. § 873

Deductions

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(a) General rule

In the case of a nonresident alien individual, the deductions shall be allowed only for purposes of section 871(b) and (except as provided by subsection (b)) only if and to the extent that they are connected with income which is effectively connected with the conduct of a trade or business within the United States; and the proper apportionment and allocation of the deductions for this purpose shall be determined as provided in regulations prescribed by the Secretary.

(b) ExceptionsThe following deductions shall be allowed whether or not they are connected with income which is effectively connected with the conduct of a trade or business within the United States:(1) Losses

The deduction allowed by section 165 for casualty or theft losses described in paragraph (2) or (3) of section 165(c), but only if the loss is of property located within the United States.

(2) Charitable contributions

The deduction for charitable contributions and gifts allowed by section 170.

(3) Personal exemption

The deduction for personal exemptions allowed by section 151, except that only one exemption shall be allowed under section 151 unless the taxpayer is a resident of a contiguous country or is a national of the United States.

For rule that certain foreign taxes are not to be taken into account in determining deduction or credit, see section 906(b)(1).

(Aug. 16, 1954, ch. 736, 68A Stat. 280; Pub. L. 89–809, title I, § 103(c)(1), Nov. 13, 1966, 80 Stat. 1550; Pub. L. 92–580, § 1(b), Oct. 27, 1972, 86 Stat. 1276; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–30, title I, § 101(d)(11), May 23, 1977, 91 Stat. 134; Pub. L. 98–369, div. A, title VII, § 711(c)(2)(A)(iv), July 18, 1984, 98 Stat. 945; Pub. L. 105–277, div. J, title IV, § 4004(b)(3), Oct. 21, 1998, 112 Stat. 2681–911.)Editorial NotesAmendments

1998—Subsec. (b)(1). Pub. L. 105–277 amended heading and text of par. (1) generally. Prior to amendment, text read as follows: “The deduction for losses allowed by section 165(c)(3), but only if the loss is of property located within the United States.”

1984—Subsec. (b)(1). Pub. L. 98–369 substituted “for losses” for “, for losses of property not connected with the trade or business if arising from certain casualties or theft,”.

1977—Subsec. (c). Pub. L. 95–30 struck out par. (1) which made a cross reference to section 142(b)(1) for disallowance of the standard deduction and struck out “(2)” at beginning of single remaining cross reference.

1976—Subsec. (a). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

1972—Subsec. (b)(3). Pub. L. 92–580 substituted exception that only one exemption be allowed under section 151 unless the taxpayer is a resident of a contiguous country or is a national of the United States, for exception that in the case of a non-resident alien individual who is not a resident of a contiguous country only one exception be allowed under section 151.

1966—Pub. L. 89–809 amended section generally, substituting “connected with income which is effectively connected with the conduct of a trade or business within the United States” for “connected with income from sources within the United States” in subsec. (a), striking out provisions relating to the deduction of losses not connected with a trade or business but incurred in transactions entered into for profit in subsec. (b), making the casualty loss deduction available even if the property giving rise to the loss is not effectively connected with the conduct of a trade or business in the United States if the property is located in this country, making the charitable contribution deduction available even though not related to the trade or business, and adding subsec. (c)(2) making a cross reference to section 906(b)(1) for rule that certain foreign taxes are not to be taken into account in determining deduction or credit.

Statutory Notes and Related SubsidiariesEffective Date of 1998 Amendment

Amendment by Pub. L. 105–277 applicable to taxable years beginning after Dec. 31, 1983, see section 4004(c)(1) of Pub. L. 105–277, set out as a note under section 172 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, see section 711(c)(2)(A)(v) of Pub. L. 98–369, set out as a note under section 165 of this title.

Effective Date of 1977 Amendment

Amendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title.

Effective Date of 1972 Amendment

Amendment by Pub. L. 92–580 applicable to taxable years beginning after Dec. 31, 1971, see section 1(c) of Pub. L. 92–580, set out as a note under section 152 of this title.

Effective Date of 1966 Amendment

Amendment by Pub. L. 89–809 applicable with respect to taxable years beginning after Dec. 31, 1966, see section 103(n)(1) of Pub. L. 89–809, set out as a note under section 871 of this title.

Notes of Decisions

Cited in 8 cases (1 in the last 5 years), 1930–2022 · leading case: Speck v. United States, 28 Fed. Cl. 254 (Fed. Cl. 1993).

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Speck v. United States, 28 Fed. Cl. 254 (Fed. Cl. 1993). · cites it 6× “Also, as discussed more fully below, because plaintiffs are non-resident aliens, a claim for an interest deduction for the Burlington, Ontario property in Canada, which is not an expense resulting from the conduct of a United States trade or business and is not proper pursuant…”

Remedios A. Flores, of the Est. of Jose M. Flores & Remedios A. Flores, Individually v. Gov't of Guam, 444 F.2d 284 (9th Cir. 1971). · cites it 2× “§ 873(a), which limits the deductions that may be taken by a nonresident alien of the United States to those expenses “connected witli income which is effectively connected with the conduct of trade or business within the United States;” (3) 26 U.S.C. § 873 (b). (3), which…”

Matter of Spiak, 2022 NY Slip Op 05190 (N.Y. App. Div. 2022). “This tax, and the required withholding, is at a flat rate of 30% ( see 26 USC §§ 871 [a]; 1441 [a]), and the Internal Revenue Code does not permit deductions from income subject to taxation under 26 USC § 871 (a) (1) ( see 26 USC § 873 [a]; Treas Reg 1.871-7 [a] [3]).”

Sang Park v. Comm'r of IRS, 722 F.3d 384 (D.C. Cir. 2013). “See 26 U.S.C. § 873 . In other words, once wins and losses are calculated — whether on a per-bet or per-session basis — non-resident aliens may not deduct losses from wins when doing their annual income taxes.”

Charron v. United States, 200 F.3d 785 (Fed. Cir. 1999). “26 U.S.C. § 873 (a). Section 162(a) permits taxpayers to deduct all “ordinary and necessary expenses” incurred in connection with such trade or business.”

Cesar E. Alvarez Et Ux. v. United States, 431 F.2d 1261 (5th Cir. 1970). “See 26 U.S.C.A. § 873 ; Treas.Reg. 1.871-1; Schnur v.”

Cong. Country Club v. United States, 44 F.2d 266 (Ct. Cl. 1930). “In conformity with the provisions of section 802 of the Revenue Act of 1921 and of section 502 of the Revenue Act of 1924 (26 USCA § 873), and the regulations of the commissioner, plaintiff, during the period February 1, 1924, to February 1, 1925, collected from its life…”

Bunker Hill Country Club v. United States, 10 F. Supp. 159 (Ct. Cl. 1935). “” Revenue Act 1928, § 414 (a), 26 USCA § 873 (a). The two provisions must be taken together in ascertaining the intent of Congress, and, when this is done, we are clear that the intention was to impose the tax under the circumstances shown to exist in the case at bar.”

— 26 U.S.C. § 873(a) — 1 case

Remedios A. Flores, of the Est. of Jose M. Flores & Remedios A. Flores, Individually v. Gov't of Guam, 444 F.2d 284 (9th Cir. 1971). “§ 873(a), which limits the deductions that may be taken by a nonresident alien of the United States to those expenses “connected witli income which is effectively connected with the conduct of trade or business within the United States;” (3) 26 U.S.C. § 873 (b). (3), which…”

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