Which of the following statements regarding the sourcing of gross income is true?

Question

Quizplus · Accepted Answer

Certain U.S.-source investment income earned by foreign persons not engaged in a U.S. trade or business may be subject to a U.S. withholding tax. This includes dividends, interest, rents, and royalties. However, the tax treaty in effect between the U.S. and the foreign person's country of residence may reduce or eliminate the withholding tax. Therefore, choice D is the correct option.

Option A is incorrect because foreign persons not engaged in a U.S. trade or business should correctly ascertain whether their income is U.S.-source or foreign-source because U.S.-source income may be subject to U.S. tax.

Option B is also incorrect because not all income is treated as foreign source.

Option C is incorrect because, in general, U.S.-source income received by foreign persons is indeed subject to withholding, except for when it is effectively connected with a U.S. trade or business.

Which of the Following Statements Regarding the Sourcing of Gross