The tax home concept can affect whether the capital gain income of a nonresident alien student will be taxable in the United States (U.S.). A nonresident alien (NRA) who is present in the U.S. for 183 days or more is taxed on U.S. source capital gains only if the NRA’s tax home is in the U.S.. This provision affects mainly foreign government-related individuals, foreign students and foreign scholars, all individuals who typically remain in the U.S. for long periods of time as NRAs. Most foreign government-related individuals are employed before they come to the U.S., and most are employed in the U.S. after they arrive in the U.S., thus establishing their tax home in the U.S. upon their arrival in the U.S. (unless their stay in the U.S. is expected to last less than one year). Likewise, most foreign scholars (teachers/researchers) are employed before they come to the U.S. and are employed in the U.S. after they arrive in the U.S., thus establishing their tax home in the U.S. upon their arrival in the U.S. (unless their stay in the U.S. is expected to last less than one year). Many foreign students, however, are not employed or engaged in a trade or business before they arrive in the U.S., and many of them are not employed in the U.S. after they arrive in the U.S.. In this situation the issue arises as to what constitutes a foreign student's tax home--his residence or his place of employment? The activity of being a student does not constitute a trade or business under the Internal Revenue Code, and thus, in and of itself, cannot establish a tax home. If the student receives a scholarship or similar payment, he or she may have a U.S. trade or business. In general, an NRA who is not engaged in trade or business within the U.S., and who is temporarily present in the U.S. as a nonimmigrant on an F, J, M, or Q visa, is treated as an NRA individual engaged in trade or business within the U.S., and any U.S.-source scholarship income, which is received by such individual, is treated as effectively connected with the conduct of a trade or business within the U.S.. This means that a nonimmigrant temporarily present in the U.S. in F, J, M or Q status is considered to be engaged in a U.S. trade or business for the purpose of taxing any income from scholarships or fellowships he or she may have. The tax home of nonimmigrants temporarily present in the U.S. in F, J, M, or Q status, and who have U.S.-sourced scholarship/fellowship income, is in the U.S. if such nonimmigrants intend to remain in the U.S. for a period longer than 1 year. The tax home of an NRA who is a foreign university degree candidate, and who is in the U.S. during his or her summer vacation under an on-the-job training program intended to supplement his or her education but not required by the university in his native country with which the U.S. has no tax treaty, is the location of his or her training. If an NRA student has no employment or trade or business or activity in the U.S. and receives no scholarship or fellowship income, then he or she may have no U.S. tax home at all. For a more detailed discussion of “tax home,” refer to section 1, Travel, in Publication 463, Travel, Entertainment, Gift, and Car Expenses. Based on all the above, the following statements can be made with respect to the issue of the tax home of NRA students: An NRA student temporarily present in the U.S. in F, J, M, or Q status who, at the time of his arrival in the U.S., intended to remain in the U.S. for a period longer than 1 year, and who is employed in the U.S. (or self-employed even if illegally under the immigration law) has established his tax home in the U.S. beginning on the date his employment or self-employment begins if such employment or self-employment is expected to last for a period longer than 1 year. Such a NRA student shall be taxable on his or her U.S.--sourced capital gains income in any calendar year in which his presence in the U.S. equals or exceeds 183 days. An NRA student temporarily present in the U.S. in F, J, M, or Q status who, at the time of his or her arrival in the U.S., who intends to remain in the U.S. for a period longer than 1 year, and who is the recipient of a U.S. source scholarship or fellowship has established his or her tax home in the U.S. beginning on the first date he or she is eligible to receive such scholarship or fellowship income if his or her eligibility to receive such scholarship or fellowship income is expected to last for a period longer than 1 year. The NRA student shall be subject to U.S. tax on his or her U.S. source capital gain income in any calendar year in which his or presence in the U.S. equals or exceeds 183 days. An NRA student temporarily present in the U.S. in any nonimmigrant status who is not employed (or self-employed even if illegally under the immigration law) and is not the recipient of a U.S. source scholarship or fellowship, has not established a tax home in the U.S.. The NRA student shall not be taxable on his or her U.S. source capital gain income in any calendar year in which his or her presence in the U.S. does not equal or exceed 183 days. References/Related topics Foreign students and scholars Nonresident aliens - sourcing of income
