Okay, folks, I see it is now the top of the hour. For those of you just joining, welcome to today's webinar, Form 1116, Certain Income Re-Sourced by Treaty. We're so glad you're joining us today. My name is Evette Davis, and I am a Senior Stakeholder Liaison with the Internal Revenue Service, and I will be your moderator for today's webinar, which is slated for approximately 100 minutes. This webinar offers up to two IRS continuing education credits. Certificates of completion will be emailed to the registration email address of qualifying participants as a PDF attachment. The email will be from the email address seen on this slide, that is CL.SL.Web.Conference.Team@IRS.gov. Please take a moment to add this email address to your contacts to ensure you receive the email with the certificate attached as a PDF. Before we begin, if there is anyone in the audience that's with the media, please send an email to the address on the slide. 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Just click on the Materials dropdown arrow on the left side of your screen to download your browser document. Okay, again, folks, welcome. We're so glad you've joined us for today's webinar. Before we move along with this session, let me make sure you are in the right place. Today's webinar is Form 1116, Certain Income Re-Source by Treaty. This webinar is scheduled for approximately 100 minutes. We want everyone to know that no personal taxpayer data was used for this presentation. All data shown is an example of what taxpayers and tax professionals may see. Now, folks, let's get excited, let me introduce today's speakers. Patti Marando and Jim Wu are both Senior Revenue Agents in Large Business and International, specifically in its Withholding, Exchange, International Individual Compliance division in the Foreign Tax Credit practice network. Both Patti and Jim joined the IRS in 2010. Both are technical specialists with extensive experience focusing on the Foreign Tax Credit for Individuals. Andrew Naughton is an Attorney in Branch 3 with the Foreign Tax Credit at the office of Associate Chief Counsel International, and he joined in the IRS in 2021. He, too, is extremely knowledgeable in all areas of the Foreign Tax Credit and has represented the government on tax panels at tax conferences. Now, folks, I'm going to turn it over to Patti to begin the presentation. Patti, you've got the floor. Thank you, Evette. Hello, everyone, and welcome to today's webcast. We recently held an event called the ABCs of the FTCs in January, and that should be available on our website's video portal. This covered an overview of how the FTC can provide relief to taxpayers who may be subject to double taxation. Today, we will look at the relief from another angle. This category involves examining the existence and rules of international agreements or treaties which impact the Foreign Tax Credit. Questions such as, when does foreign law control the credit calculation and when does U.S. law control? How do treaties impact the calculations, et cetera? Before we begin, let's look at some acronyms. We have FSTI, which is the Foreign Source Taxable Income. We have FTC, which is the Foreign Tax Credit. We have GILTI, which is the Global Intangible Low-Taxed Income. We have the Internal Revenue Code, the IRC. Let's move on now to today's topics. There are options of providing relief from double taxation. In a webinar overview last month, we touched on the FTC issues, including categories of income for the Foreign Tax Credit. Our purpose here today is to look to one of those categories and possibly provide another aspect of relief from that double taxation. That category is called Certain Income Re-Sourced by Treaty. Now, under the deduction method, foreign taxes may be deducted to reduce income and thus the domestic tax. As a rule, international tax treaties do not entertain this method as it fails to provide full relief from the double tax. No U.S. tax treaty relies on the deduction method. Under the credit method, a taxpayer may take a credit for foreign taxes paid or accrued against its domestic tax liability. And, of course, that's subject to limitations. And finally, there can be relief through the U.S. tax treaties. First, we will begin with the Foreign Tax Credit fundamentals as they will apply to today's topics. And in case you missed it, we just had a Foreign Tax Credit webinar in January titled, The ABCs of the FTCs for Individuals. We're not going to belabor this area. I know the webinar will be posted shortly to IRS.gov videos if it's not there already. We'll go to transition to and briefly go over the categories of income and point out the one category we will be focusing on. Next, we will focus on sourcing and how each class of income is subject to its own sourcing rules. Lastly, we look at the U.S. sourcing rules under the Internal Revenue Code and through the lens of a bilateral tax treaty. There can be situations where income is re-sourced from the U.S. to foreign. So we will discuss what that means and what it looks like. The sourcing rules apply to both the U.S. and foreign taxpayers. However, for this event, we are focusing on U.S. persons, which are citizens and residents. Next, we will talk about the Foreign Tax Credit fundamentals. The taxation of U.S. citizens and residents, domestic corporations, and domestic trusts and estates on income earned from both the U.S. and foreign sources often results in double taxation. And there are two main IRC sections for the Foreign Tax Credit. One section is to alleviate the potential double taxation. We have the Internal Revenue Code Section 901, which allows subject, of course, to limitations a credit for foreign taxes paid or deemed paid by the U.S. taxpayers. Under IRC Section 904, that credit is limited to a portion of the U.S. tax liability of worldwide income that is attributable to the taxpayers' foreign source income. Now, let's talk about categories of income. As you know, the 1040 encompasses our policy of taxing worldwide income, and it is then reduced for adjustments, expenses, itemized of standard deductions, et cetera, to arrive at the worldwide taxable income. The Form 1116 reflects the foreign portion of that worldwide income. As we discussed in the January webinar, each category requires a separate Form 1116, which is calculated similarly with foreign source gross income of that category, less any relevant foreign expenses to arrive at foreign source taxable income for that category. A similar calculation of the limitations is then computed for each category. The requirement for separate calculations of each category is to prevent the blending of the high and low tax rates for the various types of income. Let's look at the Form 1116 and the category we will focus on today. Here we see the front of Page 1 of the Form 1116. The upper section shows the seven categories of income, and we sometimes refer to these as baskets. The two most common are the passive and general categories. I'm going to say that again. The two most common are the passive and general categories. For these and others, we recommend that you see the instructions to the forms and Publication 514. We have what are called practice units published on IRS.gov and specifically one titled FTC Categorization of Income and Taxes into Proper Basket and that will go into greater detail on each category. We won't be discussing these other categories today, but we will provide links to the resources at the end of this session. Today, we're focusing on just one of those highlighted here, which is Category F, Certain Income Re-Sourced by Treaty. Evette, I believe it's time for our polling question number one. You've got it, Patti. It certainly is. Okay, audience, it is time for our first polling question, and I know you've got your listening ears on, so let's go ahead and get into this one. The question is, which two categories of income on Form 1116 are generally the most common? A, GILTI and passive; B, foreign branch and passive; C, lump sum distributions and passive; or D, general and passive. Take a moment, click the radio button you think best answers the question. Think about what you just heard Patti say, maybe even what you already know and make the best selection possible. Which two categories of income on Form 1116 are generally the most common? Okay, A, B, C, or D. Okay, folks, let's go ahead and stop the polling now, and let's share the correct response on the next slide. And the correct response is D, general and passive, and I see that 81% of you responded correctly. Okay, Patti, I think you've got their ears and their listening and they know what you're talking about, so I'm just going to turn it back over to you, and I think you're going to talk about sourcing rules, right? Yes. Thank you, Evette. We're going to take a minute now to talk about the sourcing of income under our tax laws in our Internal Revenue Code. We need to understand sourcing before we can talk about re-sourcing. The purpose of the source rules in the context of international taxation is, first, to establish a State's jurisdictional right to tax certain taxpayer's income who otherwise might not have a taxable nexus within that State. The source of income within the State is one of the primary basis for the State to assert income tax jurisdiction, others being citizenship of or residence within that State, and a permanent establishment or other fixed place of business within that State. Sourcing rules are used to establish the amount of Foreign Tax Credit relief deemed appropriate to prevent international double taxation. And let's continue with these sourcing rules. Each item we discuss is actually a lesson in itself. So let's first ask, what is sourcing? Sourcing is the process of determining whether income earned by U.S. taxpayer is U.S. or foreign sourced. For U.S. taxpayers, sourcing rules matter because Foreign Tax Credits are only available to offset U.S. income taxes on foreign source income. And now let's ask, why it's important to know the source of taxpayer's income? Regardless of whether an item of income is U.S. or foreign sourced, that item of income is taxable unless a statutory exception applies. The determination of U.S. or foreign source will affect the numerator of the Foreign Tax Credit limitation formula. And that limitation formula is in IRC Section 904. It is primarily important because the Foreign Tax Credit can only offset U.S. taxes on foreign source income, and that's an important concept. The Foreign Tax Credit can only offset U.S. taxes on foreign source income. A U.S. person as defined as a U.S. citizen or resident is subject to worldwide taxation on income from all sources. Internal Revenue Code 861 to 863 and IRC Section 865 address the sourcing rules for each class of income. However, they can be complicated and be aware they are subject to many exceptions. Keep in mind that many income tax treaties to which the U.S. is a party vary the sourcing rules contained in the regular Internal Revenue Code. Here, we see Code Sections 861 to 865. They and the regulations they're under control whether income earned by a taxpayer is U.S. or foreign sourced. IRC 861 is income from sources within the United States. IRC 862 is income from sources without the United States. We want to point out that 861 and 862 both address gross income under subsection A and taxable income under subsection B. Under 861B and 862B and the correspondence regulations, deductions are allocated and apportioned to items or classes of U.S. gross income and foreign source gross income to arrive at net income. IRC 863 income is other than those described in Section 861 and 862 and this includes income from sources partly within and partly without the U.S. IRC Section 863 is the code section for what is called a split source rule and applies to international economic activity. That is more defined as opposed to having some wages or income from performing personal services both to the U.S. or foreign sources. IRC 863 also talks about the ocean and space and certain foreign currencies. IRC 864 is not necessarily about sourcing, but it does provide definitions and special rules. IRC 865 are the rules for the sale of personal property. Now remember these are code sections to determine the sourcing, not the taxability. Other code sections determine whether or not the income is taxed. The next slide will give a brief overview of the most common items seen for individuals. It is not a complete listing and, of course, the code, the regs, the forms, instructions and publications as well as the Practice Units I met earlier should be reviewed. This chart is only a summary and depicts the general U.S. rules of sourcing of income. And I'm going to go through these common ones, but know that their sourcing rules can be complicated and keep in mind their subject to many exceptions within each. In fact, there's more exceptions than general rules. As we said today, the topic is beyond income tax treaties to which the U.S. is a party and how they may vary the sourcing rules contained in the Internal Revenue Code. So we have salary and wages and that is sourced where the services are performed. We have U.S. Social Security benefits and that is always U.S. source. Pensions are where the services are performed that earn the income, but it may depend on the location of the pension trust. Interest is the residence of the payer. Dividends the residence of the corporation. Rent is the location of the property. Royalties of the natural resources is the location of the property. Now, royalties for patents, et cetera, is where the property is used. The sale of real property is the location of the property. The sale of personal property is the seller's tax home. The sale of purchased inventory is where the property is sold. The sale of produced inventory is where the goods are produced and an apportionment may be necessary. Now, for a deeper discussion on the overall sourcing, as always, refer to the code, the regs, the instructions, and Publication 514, as well as various Practice Units published on sourcing on IRS.gov. Is that, I believe, it's time for our second polling question. Yes, Ms. Patti, it certainly is. Okay, audience, it is time for our second polling question, and here we go. When sourcing income for purposes of the Foreign Tax Credit: A, should you consult only the IRC and Regulations; B, consult only the tax treaty with a foreign country; C, consult both the IRC/Regulations and a tax treaty; or D, consult with a trusted friend? All right, think about what you just heard Patti say. Think about what you already know, and choose the radio button that best answers your question. Okay, I'll give you just a few more seconds to make your selection. When sourcing income for purposes of the Foreign Tax Credit, should you A, consult only the Internal Revenue Code and Regulations; B, consult only the tax treaty with a foreign country; C, consult both the IRC/Regulations and a tax treaty; or D, consult with a trusted friend? Okay, I want to make sure you have enough time to make that selection. So right now, let's go ahead and stop the polling and share the correct response on the next slide. And the correct response is C, consult both the Internal Revenue Code/Regulations and a tax treaty. And I see that 91% of you responded correctly. You all are on fire. This is amazing. You are definitely in the right place. Okay. So great job, Patti. I think now we're going to turn it over to Jim, and he's going to cover income tax treaty basics. So Jim, the floor is yours. All right. Thank you, Evette. And hello, everyone. Now that we've talked about some FTC basics and sourcing, another avenue for double taxation relief comes from the bilateral tax treaty. For our discussion today, we're going to refer to the 2016 U.S. Model Treaty. The U.S. has income tax treaties with a number of foreign countries. Each treaty is unique, so you need to refer to it to determine the eligibility to invoke any treaty provisions. An income tax treaty may provide a U.S. Foreign Tax Credit that goes beyond what is prescribed by the Internal Revenue Code. In these tax treaties, if a sourcing rule treats U.S. source as foreign source, and the taxpayer elects to apply this treatment, the income is treated as foreign source, even though under the code the income is U.S. source. This treaty resourcing rule provides relief for double taxation by allowing certain items of income to be re-sourced. All treaties are located on IRS.gov simply by typing treaties in the search box on the homepage, or you can type the name of a foreign country in the search box. If you first want to see if your particular country has a treaty with the United States, IRS.gov website is a good resource. Once you access the treaty document, you can determine if there is a resource provision for your type of income. Then you want to see if the taxpayer qualifies to invoke the treaty benefits. Again, if the re-sourcing of a particular income is available under the tax treaty, that income, even though treated as U.S. source under the code is considered foreign source. As far as the Form 1116, the taxpayer must compute a separate Foreign Tax Credit limitation for income re-source under a treaty using a separate Form 1116 for the re-sourced income. And according to IRC 6114, anytime the taxpayer takes a treaty position that overrides or modifies the tax law of the United States, this position should be disclosed on a Form 8833 in order to avoid a penalty for non-disclosure. This form asks for information such as what is the treaty country, what treaty article is being asserted and the IRC section overruled or modified by the tax treaty. The form also asks for a short explanation. Know, however, that not all treaty positions need to be disclosed on the Form 8833, so you need to refer to Treasury Regulation 301.6114-1 and/or the Form 8833 instructions for guidance. Now, I will cover income re-sourced by treaty. So what is income re-sourced by treaty? We've said this a couple of times, but it's worth repeating. Re-sourced income is income that absent a U.S. income tax treaty will be treated as U.S. source income, but it's treated as foreign source income under the treaty if the taxpayer qualifies to apply this treaty provision. The treaty re-sourcing rule generally conforms the FTC treatment of individual taxpayers working through either a foreign branch or a foreign disregarded entity. It conforms the treatment for the treatment already afforded to taxpayers operating through foreign corporations. Again, complete a separate Form 1116 for this category of re-sourced income by treaty. In the top section of the Form 1116, checkbox F to indicate that you are computing Foreign Tax Credit for certain income re-sourced by treaty. So, now, let's continue with income re-sourced by treaty. Let's look at an example that is from a Revenue Ruling. In Revenue Ruling 79-28, the taxpayer is a U.S. citizen who resided in Japan and worked as a crew member on international flights for a Japanese airline. The compensation received by this taxpayer for services performed as a crew member was treated as Japanese source income under the U.S.-Japan treaty even though under the code and regulations, the income would have been apportioned between the U.S. and Japan, because the services the taxpayer performed were in both countries. Remember, personal services income is sourced based on where it is performed. However, in this case, the tax treaty had a provision to re-sourced the U.S. source portion to Japan. Next, I will continue with an example of a court case related to re-sourced by treaty. Given that the U.S. in many cases, our treaty partners already provide a Foreign Tax Credit mechanism. Article 23's double taxation relief would essentially be redundant, except in cases where the treaty in question permits the treaty partner to tax U.S. source income of U.S. citizens or residents, or conversely permits the U.S. to tax treaty partner source income of treaty partner residents. Even without a treaty, U.S. income tax law provides a tax credit for foreign taxes paid with respect to foreign source income earned by a U.S. resident or citizen. But in some cases, a foreign government will assert taxing authority over income that U.S. tax law defined as U.S. source. A tax treaty may cede primary taxing jurisdiction over such income to the foreign country. If such income is not re-characterized as foreign source income, commonly referred to again as re-sourced income, the taxpayer would not be protected from double taxation. Moreover, most tax treaties have what is referred to as a savings clause that preserves the right of each country to tax its own citizens and treaty residents as if no tax treaty were in effect. So here we have a case, Filler versus Commissioner from 1980, which relied on a U.S.-France income tax treaty. This case illustrates how the absence of a resourcing provision in the applicable treaty results in double taxation. Filler was a U.S. citizen who resided and worked in France. He spent a few days a year on business in the U.S., which resulted in the allocation of a small portion of his income to U.S. source under the code, under the IRC. However, under the U.S.-France income tax treaty of 1967, later amended by the 1970 protocol, Article 15, or personal services article, of the applicable treaty, France asserted the right to tax the taxpayers' entire income on the basis of residency and would have had full jurisdiction to tax this income. The taxpayer maintained this double taxation with a violation of the treaty, in particular, Article 25, which is a mutual agreement procedure or a MAP. For those unfamiliar with MAP, it provides for an international administrative procedure of both countries' competent authority to resolve in inequitable situations. The tax court pointed out accordingly that Article 25 MAP is administrative and not judicial. Since the taxpayer was a resident of France, if they were to proceed under the MAP, it was incumbent upon the taxpayer to present the matter to the competent authority in France. The court also determined the Filler, the savings clause did not include Article 15 among the articles which take precedence over the savings clause. As a result, the tax court held that the U.S. retained the right to tax him as a U.S. citizen. The tax court further held that the relief from that double taxation article of the treaty neither prevented the U.S. from taxing the income nor required a credit for French taxes paid on the U.S. source income. This resulted in double taxation and wasn't a good result for the taxpayer. Evette, now it's time for our third polling question. Yes, sir. You are exactly right. Okay, folks, hopefully you are still engaged and you are ready to respond to this question. So now this is our third polling question, and this is really just to see what you think. Okay. So just think about it. All right. How many income tax treaties does the U.S. have with other countries? A, 25 or less; B, 50 or less; C, 75 or less; or D, 100 or less. Okay. Again, this is just to see what you think and see whether or not you already know this. Some of you may know and some of you may not and that's okay. All right. We just want to see what you think. How many income tax treaties does the U.S. have with other countries? A, 25 or less; B, 50 or less; C, 75 or less; or D, 100 or less. Okay, let's go ahead and close this polling now, and let's just share the correct response on the next slide. Okay. The correct response is actually, C, 75 or less. Now, let's see what percentage of you responded correctly. 35% of you responded correctly and that's okay. That's quite all right. That's why we are all here. And we just learned something new for the day, for the others of you who did not know. This is your one thing new to learn for the day. So the U.S. has 75 or less treaties with other countries. That's really good stuff. Thanks so much, Jim. Okay, folks, now I'm going to go ahead and pass it on to Andrew. And Andrew, I believe you're covering the Three-Bite Rule. Yes. Thank you very much, Evette. Good afternoon, everybody. We're going to start now with the Three-Bite Rule, which applies when the United States taxes an individual under the saving clause of an income tax treaty, and when the other contracting state to that treaty also taxes that individual, but on the basis of residence in that contracting state. Put another way, the Three-Bite Rule and the saving clause apply only when the operative treaty article says we don't have the right to tax, but the individual is a U.S. citizen or treaty resident. Generally, the saving clause found in most treaties allows the U.S. to tax its citizens as if there were no treaty in place. Without a remedy, though, a taxpayer might be subject to double tax. As an example, sometimes the treaty partner is given the right to tax a resident of that country under an applicable pension article. But the U.S. may also tax that person under the saving clause. The double taxation article of most income tax treaties generally requires one country to allow Foreign Tax Credits or an exemption of the underlying income for taxes paid to the other country. Therefore, there are special rules to allow relief from double taxation for U.S. citizens who are treaty residents in a foreign country that has a treaty in place with the U.S. These special rules are known as the Three-Bite Rule. It's also worth noting at this point that the saving clause is usually subject to specific and limited exceptions, such as the relief from double taxation article. And, again, double taxation is mitigated by credits and the relief from double taxation article of the treaty. Let's continue with the Three-Bite Rule. The double tax article generally contains a Three-Bite Rule to prevent the other State from bearing the full cost of U.S. tax on its citizens when the rate would be higher than the rate of tax, the U.S. could impose on U.S. source income derived by a treaty resident. So the Three-Bite Rule allocates the taxing rights of the two treaty countries on items of U.S. source income earned by U.S. citizens who are also treaty residents. There are exceptions, however, where the saving clause does not apply, such as the relief from double taxation article. The Three-Bite Rule applies when the United States taxes an individual on the basis of citizenship under the saving clause of the treaty, and the other country taxes the individual on the basis of treaty residence. And just note that this rule is based on a treaty with a provision like that in the U.S. Model Treaty. Let's move on now to some more information about the Three-Bite Rule. As I began to discuss in the previous slide, the Three-Bite Rule applies when the United States taxes an individual citizen under the saving clause and the other country taxes the individual on the basis of residence in that country. So here's the process of how the Three-Bite Rule works. Under the Three-Bite Rule, the first-bite at the apple is the U.S. right to tax U.S. source income under the treaty when it's derived by a resident of the treaty country. The other country in turn allows a Foreign Tax Credit for the tax the United States could impose if the taxpayer were not a U.S. citizen. The second-bite at the apple is given to the treaty partner with the second right to tax the item of income on the basis of residency, less a credit for the notional tax imposed by the U.S. in the first-bite as the source country imposing the tax on that income. The United States gives a Foreign Tax Credit for the residence-based tax paid to the treaty country, less the U.S.'s notional first-bite, but such a credit cannot reduce the U.S.'s first-bite to tax. This preserves the U.S.'s taxing jurisdiction. The U.S. re-sources the underlying income as foreign source to the extent necessary to allow a Foreign Tax Credit, as will be mentioned on the next slide. Now, I'll share some more information about the Three-Bite Rule. As I was just mentioning, with respect to the second-bite, in order for the U.S. to provide a credit for the tax paid to the other country on U.S. source income that income must be resourced to the foreign country to the extent necessary to avoid double taxation. This in turn will allow for sufficient Section 904 limitation within a specific category for the Foreign Tax Credit to offset that foreign tax on the foreign source income. And finally, with the Third-Bite, the United States may collect residual U.S. tax. For instance, if the U.S. tax rate is higher than that of the contracting states, and there is a residual amount leftover, the United States taxes this amount. It's also important to keep in mind that there won't always be a third-bite. The third bite will occur only if the U.S. tax rate is higher than the Resident State tax rate. Evette, I think, it's time for our fourth polling question. I think, you're right, Andrew. Okay, folks, it is time for our fourth polling question, and here we go. The three-bite rule applies when the United States taxes an individual on the basis of: A, source of income; B, citizenship of the taxpayer; C, both A and B; or D, none of the above. Okay, take a moment, look at the question, think about what you just heard from Andrew, and click the radio button that best answers the question. Okay, I just want to give you a few more seconds to look over the question and click the button for your choice. The three-bite rule applies when the United States taxes an individual on the basis of: A, source of income; B, citizenship of the taxpayer; C, both A and B; or D, none of the above. Okay, let's go ahead and stop the polling now and share the correct answer on the next slide. And the correct response is, C, both A and B. Now, let's see what percentage of you responded correctly. We are on fire. 91% of you responded correctly. Andrew, they are definitely following you and they are understanding what's happening. So I'm going to go ahead and turn it back over to you to share an example of the application of the Three-Bite Rule. It's yours. Thank you, Evette. I was explaining it somewhat abstractly, so I think it would be helpful at this point, despite the excellent showing on our polling questions, to have a more concrete example of the application of the Three-Bite Rule. So let's walk through an example. In this scenario, individual A is a U.S. citizen who is also a resident of country M. The year in question, a U.S. corporation paid $10,000 in dividends to individual A. In this example, the U.S. tax rate is 35%, and the Country M tax rate is 25%. After taking all of individual A's income and deductions into account, the dividends ultimately were subject to a 35% U.S. tax for the year. And they were also subject to a 25% income tax in Country M for the year. Now, I'll continue with the example of the application of the Three-Bite Rule. In individual A's case, Article 10(1) of the U.S. country M income tax treaty contains a provision allowing country M to tax U.S. source dividends paid to residents of country M. Also, Article 10(2) of the U.S. country M income tax treaty says the U.S. can also tax U.S. source dividends paid to a resident of country M up to 15% of the gross amount of the dividend. However, because individual A is a U.S. citizen, the saving clause of the income tax treaty between the U.S. and country M allows the U.S. to tax individual A as if there were no treaty at all. Now, I will continue with the example. In the case of individual A, Article 23(4) of the applicable treaty has a version of the Three-Bite Rule in place, which for our purposes is identical to the one in the U.S. Model Treaty. Article 23(4) allows the U.S. to take the first-bite out of this dividend income. So the first-bite is the tax the United States could collect on individual A's dividends if the United States' right to tax were not based on the saving clause of the applicable treaty. Individual A is thus taxed under Bite 1 as if you were not a U.S. citizen. Now, referring back to Article 10(2) of the applicable treaty between the U.S. and country M, we find that the U.S. may tax only 15% of the gross amount of the dividend income. In this case, 15% of the $10,000 dividend yields $1,500. Let's continue with the example. Next, country M gets the second-bite. Bite 2 equals the tax that country M could collect on individual A's dividends under Article 10(1) of the U.S. country M treaty, less the credit that country M is required to provide for the tax that the U.S. got under the first-bite. We compute this amount by taking country M's tax rate of 25% and multiplying it by the amount of the dividend, which is $10,000 in this scenario. We then subtract from that amount $2,500, $1,500, which is the credit provided by country M for the tax that the U.S. got under the first-bite and this yields $1,000, and this $1,000 is the second-bite. Let's continue with the example. As I just mentioned on the previous slide, country M gets the second-bite, and now the dividends will be re-sourced to country M to the extent necessary in order to prevent double taxation. It's also crucial to mention at this point that the U.S. cannot give a Foreign Tax Credit for U.S. source income to recall the provisions of the Section 904 limitation. So income must be re-sourced to the extent necessary in order to avoid double taxation re-sourced from U.S. source to foreign source income. Before proceeding, we need to note that Section 861(a)(2) provides that dividends received from a U.S. corporation will be treated as income from U.S. sources. Therefore, under this resourcing provision, the dividends will have to be re-sourced as foreign source that is to country M to the extent necessary to avoid double taxation. However, income re-sourced by the Three-Bite Rule does not get placed in the treaty basket. To finish the computation, we divide $1,000 by - we take 35% of $1,000 to get $2,857. Let's continue with the example. Finally, let's talk about the third-bite. The U.S. gets the third-bite, and it equals any U.S. tax remaining after the U.S. gives credit for the country M tax, which country M received in Bite 2. The third-bite also takes into consideration any tax the U.S. got in the first-bite. So, ultimately, the total U.S. tax equals $2,500, which is composed of the $1,500 under the first-bite and then the $1,000 residual under Bite 3. Evette, it's time for our next polling question. You've got it, Andrew. Okay, folks, audience this is the time for our fifth and final polling question. Which bite or bites does the U.S. get? A, the first-bite; B, the second-bite; C, the third-bite; or D, the first- and third-bite. Okay, think about what you just heard. Think about what Andrew just said. Think about what you already know. And click the radio button that best answers this question. I want to make sure I give you enough time to respond to the question, which bite or bites does the U.S. get? A, the first-bite; B, the second-bite; C, the third-bite; or D, the first- and third-bite. Okay, make your best choice now, click the radio button that best answers the question. Okay, all right, folks, we're going to go ahead and stop the polling now. And let's share the correct response on the next slide. And the correct response is D, the first- and third-bite. Now, let's see what percentage of you responded correctly. Okay, Andrew, it looks like 77% of our audience responded correctly. Can you give us some information to clarify why the correct response is D, the first- and third-bite? Certainly. Recall that the first-bite grants the United States to tax its citizens on the basis of the source of the income. And the third-bite allows the United States to impose a notional tax amount. That is to say, if there's any residual amount of income, that generally occurs if the tax rate in the U.S. is higher than that of the contracting party's tax rate to tax on the basis of citizenship. So the U.S. is able to tax under the first-bite as well as under the third-bite. Excellent. Thank you, Andrew. We appreciate that explanation. Okay, folks, now let's go ahead and turn it back over to Patti. I believe Patti is going to cover resources. Patti, the floor is yours. Thank you. Well, listed here are some of the resources that you may find helpful. We have Publication 54 is the Tax Guide for U.S. Citizens and Residents Aliens Abroad. Publication 514, which is the Foreign Tax Credit for the Individuals. We have Publication 901, U.S. Tax Treaties. And we have the form and the instructions for the Form 1116. We also have Taxpayer Assistance within the United States, and we have Taxpayer Assistance outside of the United States. So let's back to you, Evette. All right. Thank you so much, Patti. Hello, again, everybody. It's me, your moderator, Evette Davis, and I'll be moderating the Q&A session. Before we get started with the Q&A session, I do want to take a moment to thank everyone for attending today's presentation, Form 1116, Certain Income Re-Sourced by Treaty. Earlier I mentioned that we want to know what questions you have for our presenters. Here is your opportunity. If you haven't input your questions, there is still time, folks. So go ahead and click on the dropdown arrow next to ask questions field, type in your question and click Send. Patti, Jim, and Andrew are all staying on with us to answer your questions. Now, one thing before we get started, we're going to try our best to get to all the questions submitted, but if we don't have time, again know that we are getting to as many questions as we have time for. Okay, let's go ahead and get started, so we can get to as many questions as possible. All right. Let me look through here. And thank you all so much for submitting your questions. Those of you who have already sent those questions in, we've got some great questions in here for you all, Patti, Andrew, and Jim. So let's go to Patti first. Okay, Patti, I'm coming your way. The first question is this, do I have to file a Form 8833 for each year I take a treaty position? Patti? Oh, I could answer that one. So the taxpayers require to file a treaty-based position disclosure, and they use to Form 8833, and that needs to be attached to the tax return for every year that treaty position applies. What the 8833 includes is the article of the treaty. It'll ask you the amount and the type of income that's exempt. It's going to ask you the treaty country, and it's going to ask you the tax code that you are going to modify. And so, yeah, you need to file each year that you take a treaty position. Okay, excellent. Thank you so much, Patti. And I do see another question here in reference to the 8833, so I'm going to stick with you, okay, if you don't mind. This person is asking, what type of penalty is there for not filing the Form 8833? Yes, the penalty is pretty steep for not filing the 8833. It's a $1,000 penalty for each year that a taxpayer fails to disclose his treaty position. Now, this can be abated if the taxpayer can show reasonable cause, but we all agree, a $1,000 penalty for each year they failed to disclose that is sufficient. Okay, sounds good. Thank you so much, Patti, for that. Okay, Jim, let's come on down the aisle and come to you with this next question, if you don't mind. This question is, when there is a conflict between the code and a tax treaty, which one has supremacy? The tax code? That's a very good question. And I will go to Code Section 7852(b). That's 7852(b). And according to that Code Section, neither the code nor a tax treaty has a preferential status. So then how does that answer the question? Well, in practice, there is what's called a later in time doctrine, which means that whichever was enacted first, be it the code or the tax treaty, whichever was enacted at a later date should prevail or take precedence. However, I just want to say here that this is not a hard and fast rule. So you will need to do some additional research on the issue at hand when there's a conflict between the code and the treaty for a particular scenario, just to be sure. Okay, excellent. Thank you so much, Jim. I appreciate that. Okay, folks, the next question that I see here, and I'm not sure which one is going to answer this, I believe it's Jim. You mentioned the savings clause, they're asking for you to explain that a little bit. Sure. So what is the savings clause? Well, simply put, the savings clause in a treaty from the U.S. standpoint means with respect to U.S. citizens, the U.S. reserves the right to tax its citizens as if the treaty were not in effect. So as a result, the taxpayer would be taxed under the provisions of the IRC unaffected by the treaty. And so it doesn't matter if the U.S. citizen is considered a tax resident in a treaty country based on the treaty. The savings clause reserves the right for the U.S. to tax its citizens regardless of any treaty provision. Got it. Excellent. Thank you so very much for that explanation, Jim. We appreciate you so very much. Okay, so now let's move over. Let's look at, let's see, the next question we have. Let's go to this particular question. All right, Patti, I think you can answer this one for us. It says, I have a client that worked in Canada 2009 to 2021. Over that time, he has accumulated a Foreign Tax Credit of $12,000. He no longer works in Canada. Can he continue to offset his U.S. tax liability by filing the Form 1116 and using these Foreign Tax Credits? Well, I hate to be the bearer of bad news, but the Foreign Tax Credits are only available to offset U.S. income taxes on foreign source income. So in this particular case, it looks like the taxpayer no longer has foreign source income, so he cannot avail himself of the Foreign Tax Credit at this time. But he can carry it forward for a certain number of years due to its limitation. But once that time limitation runs out, he loses that Foreign Tax Credit. Ooh, bad news indeed. That is bad news. Oh, my goodness. If he has foreign income down the road, he can offset it. As long as it's within that type of category, if it's general, et cetera. So yeah, it's bad news. I'm sorry. Sorry, folks. Okay, thanks, Patti. You're just delivering the information. It's okay. We don't make the rules, right? All right. Okay, this is another question. If I find that there is a re-sourcing provision in the tax treaty, what is the next step to determine if my taxpayer is eligible? I think, Jim, that's you. Yes, I can try to answer that question. I think once you have ascertained that there's that such re-sourcing provision in a tax treaty. I think the next logical step you want to take is, you want to check the taxpayer's residency status in the foreign country to see if, in fact, the taxpayer meets the criteria laid out in the treaty in terms of being a resident, a tax resident of that foreign country. And, of course, you also want to determine the taxpayer's status with respect to the U.S. as well, whether that taxpayer is a U.S. citizen, a legal resident, or altogether a non-resident of the United States. Okay, got it. Okay, excellent. Thank you so much, Jim. Okay, Patti and Jim, I think I've picked on you enough. Let's move on to this next question, and I believe this one is for Andrew. And the question is this, can the Foreign Tax Credit be used against U.S. taxes for U.S. source income that is taxed by a foreign State? It's a good question. And it gets to one of the core principles of the Foreign Tax Credit. The short answer is no, but there are a few exceptions. And as a general matter, under Section 904, the Foreign Tax Credit is limited to U.S. tax that would otherwise be imposed on foreign source income. And of course, under Section 904, there are various separate limitation categories into which foreign source income is placed and divided depending on the type of income that is earned. In the case of individuals, generally speaking, that will be passive income or general basket income, wage income as opposed to investment income. But the Foreign Tax Credit is only going to offset the taxes that are imposed on foreign source income, otherwise, there's no real specter of double taxation. However, in the case of a U.S. citizen living abroad, there is the possibility that he or she may be taxed by both the United States and the foreign jurisdiction on U.S. source income. And the most common example of this would be dividend income. And that's because dividend income is sourced based on where the dividend is received. And if the dividend is received from a U.S. corporation of which the taxpayer is a shareholder, then the source of that dividend income will be U.S. source. And because of the worldwide nature of U.S. taxation, the individual is taxed by the United States on the basis of source. And the foreign jurisdiction may also tax that individual by virtue of residency in that treaty country. So what the Three-Bite Rule does is it provides a resourcing provision that allows for this U.S. source income, this dividend income that normally would not be eligible to have a Foreign Tax Credit to offset foreign taxes imposed on it be treated nonetheless as foreign source for the limited purpose of the Section 904 limitation, which allows for the Foreign Tax Credit mechanism to operate. So the short answer is no, the Foreign Tax Credit cannot be used against U.S. taxes for U.S. source income that's taxed by a foreign State, except under this - this is one example of an exception to that general rule under the Three-Bite Rule. Awesome. Great information, Andrew. Thank you so much for that detailed explanation. I know we've got some folks out there taking notes furiously, trying to keep up with all this good information, so thank you again. Okay, folks, the next question is, what happens if there is no tax treaty with a particular foreign country? Is there potential for double taxation? I think, Patti, did you talk about that, or Jim, which one did you talk about that? I could answer that. As we discussed in our previous January webinar, the ABCs of FTCs, there's always that potential of double taxation when there's not a tax treaty in effect. And I seem like I'm the bearer of bad news lately. There is that double taxation, because there's no offsetting treaty position to say differently. So there's the bearer of bad news, but we do have the webinar, the ABCs of FTCs that we did in January that covered that in some detail. So those that want to, they can refresh themselves with that once it's uploaded to the portal, if it's not already. All right, Patti, I think we need to find you some more questions here. But that's okay, good information nonetheless. All right, so this is another question. Let's just, I think you may be able to answer this one as well, Patti. Does the U.S. have a treaty with Armenia? Well, I don't know the tax treaties and which countries are at the top of my head. I do know some general ones. And this is where I'm going to plug our IRS.gov website. If you want to go to our IRS.gov and in the search box do a search of U.S. tax treaties, most current treaties will appear and come up. So you could actually check to see which countries we have tax treaties with. And that's at IRS.gov in the search box type in treaties. Excellent. Thank you, Patti. And also, folks, just remember the webinar that Patti mentioned about the ABCs with FTCs, go to IRSVideos.gov to get and view that particular webinar that they presented in January. Okay. That's www.irsvideos.gov, so that you can view that ABCs of FTCs webinar that Patti just mentioned. Okay. All right. Here is another question. Let's go over to Jim. I believe you were talking a little bit about this as well. Does the U.S. resident mean permanent residents? Like is in a green card holder only? What do you say, Jim? What is the law? Yes. For tax purposes, for U.S. tax purposes, certainly a U.S. resident for tax purposes include a permanent resident or so-called a green card holder, but not exclusively because if you have a foreign person living and working in the United States and if that person meets what is called a Substantial Presence Rule, then that person become a U.S. tax resident for U.S. tax purposes and could be taxed on a worldwide basis. So that substantial presence test is a test. It's just a sort of like a math. It takes into account the number of days this person has lived or he's present in the United States going back 3 years and the 3 years include, of course, the year in question of the current tax year. So yeah, not only does a U.S. resident for tax purposes include a permanent green card holder, but it could also include someone who, if foreign person who's been in the United States for a long period of time and meeting the Substantial Presence Rule. Excellent. Okay. Thank you, Jim. That was great. Hopefully again, folks, you're taking some really good notes. We've got the experts on the line here with us today. So let's move on to the next question. This person is asking, can you elaborate on the Three-Bite Rule? When you say resident State, does this mean State tax? And now, Andrew, I know you kind of went into that a little bit on your last explanation, but can you kind of give us some more information on the Three-Bite Rule? Sure. I think what the person is asking is, what is meant by resident State? Now, State has a couple of meanings depending on context. It doesn't mean State tax, in other words, residency for State tax purposes of, say, New Jersey, but rather it's resident State meaning which foreign State is the U.S. taxpayer a resident of. So if there's a treaty between the United States and the United Kingdom, for example, even though the U.S. citizen may have previously been a resident of New Jersey for State tax purposes or residency purposes, resident State purposes here, he is a resident of the United Kingdom. And this matters for purposes of being able to calculate the various bites of the Three-Bite Rule where the United States taxes on the basis of source of income and citizenship and the United Kingdom taxes on the basis of this U.S. expats residency in the United Kingdom. Okay. So I'm looking at another question here, Andrew, and thank you for that in references of Three-Bite Rule, and they're asking, is the Three-Bite Rule a kind of ordering rule that determines which jurisdiction gets to tax income first? Yes, that's another good question. The Three-Bite Rule determines the order in which the U.S. and the treaty country with which the U.S. is a treaty partner will be able to tax income. And the bites of the Three-Bite Rule refer to the three instances in which the U.S. or the foreign jurisdiction can tax the income. With each of the successive bites, the jurisdiction that's not taxing the income may have to offer a credit to ensure that the income is not ultimately subject to double taxation. Okay. Thank you very much. Okay. So this question is, well, let me just read it. If I find that there is a re-sourcing provision in a tax treaty, what is the next step to determine if my taxpayer is eligible? Jim? Evette, I think we've answered a similar question before. And I think I've pointed out that after they have taxed - you have determined that there is such a provision for re-sourcing and tax treaty. The next thing you want to do, you want to understand, you want to make sure what is the status, residency status of the taxpayer, both with respect to the foreign country and the United States. To see if some of the criteria or the criteria laid out in a tax treaty has been met by the taxpayer to take advantage of the treaty provision. Okay, awesome. Okay, so now this is a question about the 8833. Let's see. And it may be, I don't know if Jim or Patti can respond to this one. Is a Form 8833 required each time a taxpayer asserts a treaty position? I can take that one as well. I would just simply say that a Form 8833 is not required in all situations for the taxpayer to assert the treaty provision. Not every time the taxpayer has to include or fill out a Form 8833, but I would say that just to be certain, you want to look up Treasury Regulation 301.6114-1. And I'll repeat that again, Treasury Reg. 301.6114-1. And also you can look up the Form instructions and it goes into some detail. Okay. Good resources. Hopefully everybody was able to write that down. Thank you so much. Thank you, Jim. Okay, so now the next question is, what countries allow a taxpayer to treat U.S. income as a foreign source? Patti? In order to know which countries would income as foreign source, you would have to look at the individual tax treaties. So, again, you know, you go to the IRS.gov and you do a search of the treaty and you look it up. And you want to look it up each year that you have this issue because treaties change, sometimes they add to it, sometimes the treaty is no longer in effect. So, you want to go read the treaties, always read the pubs, read the instructions on the Form 1116. But go to the actual treaties and they'll tell you which country can be re-sourced. You know the countries that your taxpayers are in. Okay, awesome. Okay, thank you so very much for that, Patti. Okay, so this question, let's see, I'm going to throw it out there and see which one of you picks it up. All right. This is asking, is the sale of stock source the same as the sale of personal property? I can take that one Evette. Okay, awesome. Thank you, Jim. Yes, the sale of stock is a sale of personal property, because a stock is considered a personal property. But you want to look up a Code Section 865 and it goes into the sourcing rule for personal property, and especially you want to look under Code Section 865(g), because it provides an exception to the general rule and it's very important to understand the sourcing rule, including the sourcing rule for stock, which is a personal property to answer the question. There's one point that I would just add to that, Jim is absolutely right. Sometimes the gain on the sale of exchange of stock, which can normally be treated, a sale of personal property under 865 can actually be re-characterized as a dividend under Section 1248 and the source rules for dividends would come into play. This is an older provision that dates back to 1962. And at the time, it was passed was a way to ensure parity between sales of stock and dividends received when there was a differential in the rate of tax imposed on each different item of income. So you always have to take into consideration whether or not the gain on the sale of exchange or stock is going to be reclassified as a dividend under Section 1248. This occurs much more frequently in the corporate context rather than in the individual context, but nonetheless is an important provision to be aware of. Excellent. Thank you, Jim and Andrew. Thank you so much. I appreciate you jumping in there and giving us a little bit more information. Okay, folks, let's move on to the next question. Let's go to Patti with these next couple of questions here. And I know you talked about this a little bit, Patti, but they're asking specifically where can they find the sourcing rules? I'll be happy to help you. As we stated, you could find the sourcing rules in the code Section 861 to 865, which 864 is actually the definition. You could also find sourcing rules in the regs, the instructions and the Publication 514. You always want to read your tax treaty to see if the specific income should be treated differently, but it's actually in the codes and the regs, your sourcing rules. And like I said earlier, and I'm going to reiterate, treaties change all the time, like just recently, the Hungarian tax treaty was terminated. So you want to always check the most recent information for the treaty. Awesome. Thank you, Patti. And while I've got you here, there's another question about the 8833. How do they file that form? That's easy. Basically, the form 8833 should be filed with your tax return. And if you don't have a filing requirement, because you've taken the treaty position, you should file it at the service center where you would normally file a return. So, basically, you attach it to the Form 1040, 1040-NR, whatever form you're filling out. And then if you don't have to fill out a form, then of course, you file the 8833 with the service center that you would normally file at. Okay, so just another question in addition to that, Patti. We always promote electronic filing in the IRS. Is this something that can be electronically filed? That I am not aware of. They've gotten more progressive, what could be electronically filed. It depends on the tax software that they have. I am not in that unit that handles electronic filed returns, so I'm not the person to answer that. And the preparers out there probably know better than I on whether it could be or not. Yeah, they do know a lot of stuff. I would say that the form instruction for the Form 8833 should make that point clear. Awesome. Always go back to the instructions, folks. Always go back to the instructions. Thank you so much, both of you. All right, let's move on to the next question. Folks, again, I hope you are taking notes, because we're getting some bits of information that you probably wouldn't be able to get unless you have these three experts at your office. So you can ask them those direct questions. Okay, so Andrew, I'm going to come back to you. There seems to be a lot of questions in reference to the Three-Bite Rule. And just give us a little bit more on the Three-Bite Rule. And this particular person says that you said the Three-Bite re-sourced income does not go into the treaty basket. They're asking if you could just elaborate on that for them. Sure. Even though there is a separate basket from the four general limitation categories for income re-sourced by treaty, there's a different rule with respect to income that's re-sourced under the Three-Bite Rule. And this is outlined in the Section 904-4 regulations, and income that's re-sourced under the Three-Bite Rule doesn't actually go into the treaty basket. This was a rule that was added in a recent TD. And it's effective, I believe, for tax years after 2018 or specifically 12/31/2017. So the income would be placed into the assigned to the basket that reflects the kind of income that was earned before any re-sourcing occurs. So if it's dividend income, it would be passive. If it were wage income, it would be general. If it were dividend income that was taxed at a higher rate of taxation, it might be kicked out of passive and put into general. Okay. All right. Thank you so much, Andrew. I appreciate that response. I appreciate you all so much for providing such detailed information for us. Okay, and just another question here. If either one of you, any of you can answer this particular question. I know you've given us a lot of resources. Can you tell the folks where they can go to find additional information on certain income re-sourced by a treaty? Can you tell us the website once again? Can you tell us some publications once again? Just kind of give us something that the folks can go to and pull up to find out information on this. Because I know at IRS.gov there are links to a lot of different information for different specific topics. Can you help us with that? I'm going to reiterate again the IRS.gov search for tax treaties. There's also, if I recall, I don't have it off the top of my head. I apologize for that. There's also a chart that will tell you by country and what article numbers to look up. And when you look up IRS.gov search for treaties, that summary chart should appear. And it'll tell you like dividends and it'll have a column for each country and what article to look at. And I know reading treaties are complicated. I had one instructor many, many years ago that told me cross out the names contract and State, and other contracting State, and put in the country's name to make it a little bit clearer so that you could understand reading those treaties. That helps somewhat. But like I said, you're going to have to look at the individual treaties mostly. And that chart may help you zoom in a little bit. And Jim, you may know the name of the chart. Can you say again, sorry, I didn't hear you. You may know that the name of that summary chart that breaks out what article in country. I know it's under IRS.gov. I'm not really sure with that question. It's like a summary of all the tax treaties and what article Oh, you're talking about Table 1. So yeah, there's a table actually that sort of summarizes all the treaties with the different countries that we have treaties with and the treaty rate for certain types of income. It's sort of like in different columns. And that I would say if you go to IRS.gov. And in the same search box, you can type in, say, Table 1, say Tax Treaty Table. And it should pull that up. Is that what you're referring to, Patti? Yes, Jim. That's the one I was referring to. And it's a good source, but also go to the treaty because the treaty may have been updated and the chart may not have been updated. So it's always great to do that double check. You guys are amazing. Thank you so very much. It's always good to get some detailed resources, because after these webinars, we need to have some resources that we can take with us and some things that we can go back to. And this is just wonderful. So thank you both so very much. I appreciate that. We all appreciate that. Okay. So let's see. We've got a couple more questions here. Andrew, I'll come down your aisle, all right. And this question states, is the Three-Bite Rule a kind of ordering rule that determines which jurisdiction gets to income tax first? And I believe we asked this once before, but if you could just kind of clarify the response, that would be great. Sure. One other point that this question is getting at, I think, and is also kind of a complicating feature of the Three-Bite Rule is, is the re-sourcing provision. As I previously mentioned, Three-Bite Rule not only determines the priority of each jurisdiction to tax income, that is the U.S. and the other treaty country, but it also contains a re-sourcing provision that a Foreign Tax Credit is actually available to offset some or all of the foreign tax imposed on income that would otherwise be U.S. source. And the most common example that I've brought our attention to is dividends as they frequently are received from a U.S. corporation and source turns on where the corporation issuing the dividend is located. So recall also that the Foreign Tax Credit can only offset tax on foreign source income. So absent some re-sourcing provision, the specter of double taxation will always lurk. That is the U.S. will tax on the basis of source and the foreign jurisdiction will tax on the basis of residency. But if the income is U.S. source, the United States is not going to offer a Foreign Tax Credit without the income being foreign sourced. So this income is going to have to be re-sourced as foreign in order for the Foreign Tax Credit mechanism to work. And specifically by re-sourcing the income as foreign, the Section 904 limitation in the appropriate basket will be increased by the amount of the income that's re-sourced such that a credit can potentially offset that income. Awesome. You are amazing. Thank you so much, Andrew. Okay, I believe I do have one more question for you if you can just hold tight for me. Okay, so this question is, it says, a U.S. resident or citizen has income from non-tax treaty countries, then those taxpayers include foreign income and get Foreign Tax Credits or do they or do they not? Who wants that one? Can you repeat the question? No worries, that's okay. All right, so this person is asking, it says, U.S. resident or citizen has income from non-tax treaty countries, then can those taxpayers include foreign income and get Foreign Tax Credits. Is this correct or is this not correct? That is correct. But some of that income may be taxed by both the U.S. and the foreign country. So, they do run the risk of double taxation. It'll be treated as if they had filed a 1040-NR. They can take the Foreign Tax Credit, but they have to, of course, include the foreign income. So those tax treaties are always advantageous to the taxpayer. Awesome. You guys are amazing. Once again, thank you so very much. Okay, audience, you guys are amazing as well. Those questions were wonderful and that's all the time we have for questions. I do want to take a moment and thank our presenters for sharing their knowledge and expertise and for answering your questions. But before we close the Q&A session, Patti, can you start us off yourself with some key points that you want the attendees to remember from today's webinar. I sure can. I must be tired of my voice by now. Anyway, we'd like you to walk away with that. The U.S. generally taxes its citizens and residences on their worldwide income. The sourcing of income is important, because the Foreign Tax Credit is limited to the lesser of the foreign tax paid or accrued or the U.S. tax liability on foreign source income. Hey Jim, do you want to share any other key points? Yes, I do, Patti. Thank you. So I would say my key point, or the key points to take away from me is the Foreign Tax Credit or the FTC, is just one mechanism is the most important mechanism to alleviate double taxation, but there's another form that we discussed today and that comes from invoking re-source, income re-source provision in a tax treaty and that also can provide some relief and if the tax credit does invoke the treaty provisions they may benefit from income that's being re-sourced to the foreign country based on the treaty provision. And I'm going to turn over now to Andrew. Andrew, do you have some key points? What are your take away? Sure. Thanks, Jim. Few key points to take away. A treaty saving clause generally allows the U.S. to tax its citizens and residents as if there were no treaty. The application of the saving clause may lead to instances of double taxation absent other relief. However, there are exceptions to the saving clause including Article 23, which contains Three-Bite Rule. And the Three-Bite Rule prioritizes the taxing rights of the two treaty countries. That's all the key points we have and I'll turn it over to you, Evette. Awesome. Thanks to the three of you once again. Okay, audience, we are planning additional webinars throughout the year. To register for an upcoming webinar, please visit IRS.gov, keyword search webinars and select Webinars for the Tax Professionals or Webinars for Small Businesses. When appropriate, we will be offering certificates and CE credits for upcoming webinars. We do invite you to visit our Video Portal at www.irsvideos.gov. There, you can view archived versions of our webinars. Again, continuing education credits or certificates of completion are not offered if you view an archived version of any of our webinars on the IRS Video Portal. Another big thank you to Patti, Jim and Andrew for a great webinar and for sharing their expertise. I also want to thank you, our attendees, for attending today's webinar, Form 1116, Certain Income Re-Sourced by Treaty. If you attended today's webinar for at least 100 minutes after the official start time, you will receive a certificate of completion for two IRS CE credits. If you stayed on for at least 50 minutes from the official start time of the webinar, you will receive one IRS CE credit. You could use the certificate of completion to possibly receive credit with your credentialing organization for these IRS CE credits. Again, the time we spent chatting before the webinar started does not count towards the 50 or 100 minutes. Audience, this is important for you to know. Certificates of completion will be emailed to qualifying participants to their registration email as a PDF attachment. The email will come from the email address seen on the slide, CL.SL.Web.Conference.Team@IRS.gov. Please add this email address to your contacts to ensure you receive the email with the certificate attached. Okay, if you're eligible for continuing education from the IRS and registered with your valid PTIN, your credit will be posted in your IRS PTIN account. If you provided a PTIN and qualified for CE credit, your first name and last name and PTIN have to match exactly with the information in your IRS PTIN account. If it does not match, it will reject and we will not be able to upload your CE credit. If that happens, we have to wait for you to email us with the corrected information. If you qualified and you have not received your certificate and/or credit by February 27, please email us at cl.sl.web.conference.team@irs.gov. Again, our email address is shown on the slide. If you are interested in finding out who your local Stakeholder Liaison may be, you can send us an email using the same email address you see on the slide and we'll be glad to send that information to you. We would appreciate it if you would take just a few minutes to complete a short evaluation before you exit. If you'd like to have more sessions like this one, let us know. If you have thoughts on how we can make them better, please let us know that as well. If you have any requests for future webinar topics or pertinent information you'd like to see, perhaps in an IRS Fact Sheet, Tax Tip or FAQ, on IRS.gov, then please include your suggestion in the comments section of the survey. Click the survey button on the right side of your screen to begin. If it doesn't come up, check to make sure you disabled your pop-up blocker. So folks, it has been a pleasure to be here with you. And on behalf of the Internal Revenue Service and our speakers, we would like to thank you for attending today's webinar. It is important for the IRS to stay connected with the tax professional community, individual taxpayers, industry associations, along with federal, state, and local government organizations. You make our job a lot easier by sharing the information that allows for proper tax reporting. Thanks again for your time and attendance. And we wish you much success in your business or practice. You may exit the webinar at this time.