J, an unmarried resident and citizen of Z, receives the following income from U.S.sources: (1) $1,850 dividend income from U.S.corporations, (2) $400 corporate bond interest income, (3) $550 interest income on a loan to a U.S.citizen, and (4) $2,795 interest income from a savings and loan association.Z does not have a tax treaty with the United States.J will receive cash from the U.S.sources of

Question

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J's U.S. source income is $1,850 + $400 + $550 + $2,795 = $5,595. However, under IRC Sec. 871(i), interest income from a loan to a U.S. citizen is not subject to U.S. withholding tax. Therefore, J's U.S. source income for withholding tax purposes is $5,595 - $550 = $5,045. The amount of withholding tax is 30% of $5,045, or $1,513.50. Therefore, J will receive cash from the U.S. sources of $5,595 - $1,513.50 = $4,755.

J, an Unmarried Resident and Citizen of Z, Receives the Following