US Internal Revenue Service: i1040nr--2000

8/14/2019 US Internal Revenue Service: i1040nr--2000

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2000 Department of the TreasuryInternal Revenue ServiceInstructions for Form1040NRU.S. Nonresident Alien Income Tax Return

Section references are to the Internal Revenue Code unless otherwise noted.

General Instructions

What's New for 2000?

TIP

For details on these and other changes,seePub. 553or seeWhat's Hotatwww.irs.gov.

Student Loan Interest Deduction

If you paid interest on a qualified student loan,you may be able to deduct up to $2,000 of theinterest on line 25. See the instructions for line

25 on page 9 for details.

IRA Deduction Allowed to More PeopleCovered by Retirement Plans

You may be able to take an IRA deduction ifyou were covered by a retirement plan andyour modified adjusted gross income is lessthan the amount shown below that applies toyou.q $42,000 if you checked filing status box 1,2, 3, 4, or 5.q $62,000 if qualifying widow(er) (filing statusbox 6).

See the instructions for line 24 on page 9.

Business Standard Mileage Rate

The rate for business use of a vehicle during2000 is 321/2 cents a mile.

Child Tax CreditNew Definition ofFoster Child

New rules apply to determine who is a fosterchild for purposes of the child tax credit. Fordetails, see Qualifying Child for Child TaxCredit on page 6.

Paid Preparer Authorization

If you want to allow the IRS to discuss your2000 tax return with the paid preparer whosigned it, check the Yes box in the areawhere you sign your return. See page 17 fordetails.

Other Information

Did You Convert an IRA to a Roth IRAin 1998?

If you did and you chose to report the taxableamount over 4 years, see 1998 Roth IRAConversions on page 8 to find out the taxableamount you must report in 2000 on line 16b.

What To Look for in 2001Student Loan Interest Deduction. You maybe able to deduct up to $2,500 of the interestyou pay on a qualified student loan.

IRA Deduction Allowed to More PeopleCovered by Retirement Plans. You may beable to take an IRA deduction if you arecovered by a retirement plan and your 2001modified adjusted gross income is less than theamount shown below that applies to you.q $43,000 if you checked filing status box 1,2, 3, 4, or 5.q $63,000 if qualifying widow(er) (filing statusbox 6).

Items To Note

Form 1040NR-EZ. You may be able to useForm 1040NR-EZ if your only income from U.S.sources is wages, salaries, tips, taxablerefunds of state and local income taxes, andscholarship or fellowship grants. Also, youcannot claim any dependents and, if married,you cannot claim an exemption for yourspouse. For more details, see Form1040NR-EZ and its instructions.

Other Reporting Requirements. If you meetthe closer connection to a foreign countryexception to the substantial presence test, youmust file Form 8840. If you exclude days ofpresence in the United States for purposes ofthe substantial presence test, you must fileForm 8843. This rule does not apply toforeign-government-related individuals whoexclude days of presence in the United States.Certain dual-resident taxpayers who claim taxtreaty benefits must file Form 8833. Adual-resident taxpayer is one who is a residentof both the United States and another countryunder each country's tax laws.

Additional Information

If you need more information, our freepublications may help you. Pub. 519, U.S. TaxGuide for Aliens, will be the most important, butthe following publications may also help.

Pub. 525, Taxable and Nontaxable Income

Pub. 529, Miscellaneous Deductions

Pub. 552, Recordkeeping for Individuals

Pub. 597, Information on the UnitedStates-Canada Income Tax Treaty

Pub. 901, U.S. Tax Treaties

Pub. 910, Guide to Free Tax Services(includes a list of all publications)

These free publications and the forms andschedules you will need are available onrequest from the Internal Revenue Service.You may download them from the IRS WebSite at www.irs.gov. Also see TaxpayerAssistance on page 18 for other ways to getthem (as well as information on receiving IRSassistance in completing the forms).

Resident Alien or NonresidentAlien

If you are not a citizen of the United States,specific rules apply to determine if you are aresident alien or a nonresident alien for taxpurposes. Generally, you are considered aresident alien if you meet either the green cardtest or the substantial presence test for2000. If you do not meet either of these testsfor 2000 but you meet the substantial presencetest for 2001, you may be able to choose to betreated as a resident alien for part of 2000. But

you must have been physically present in theUnited States for at least 31 days in a rowduring 2000 to do so. This choice does notapply if you met either the green card test orthe substantial presence test for 1999. Formore details, see Pub. 519.

You are considered a nonresident alien forthe year if you are not a U.S. resident undereither of these tests. You are also considereda nonresident alien if you otherwise meet thesubstantial presence test but you come underany of the three exceptions described below.

For more details on resident andnonresident status, the tests for residence andthe exceptions to them, see Pub. 519.

Green Card Test. You are a resident for taxpurposes if you were a lawful permanent

resident (immigrant) of the United States at anytime during 2000.

Substantial Presence Test. You areconsidered a U.S. resident if you meet thesubstantial presence test for 2000. You meetthis test if you were physically present in theUnited States for at least:

1. 31 days during 2000 and

2. 183 days during the period 2000, 1999,and 1998, counting all the days of physicalpresence in 2000 but only 1/3 the number ofdays of presence in 1999 and only 1/6 thenumber of days in 1998.

Generally, you are treated as present in theUnited States on any day that you arephysically present in the country at any timeduring the day.

Exceptions:

1.Exempt individual. You do not countdays for which you are an exempt individual.In general, an exempt individual is someonewho is a:

a. Foreign-government-related individual,

b. Teacher or trainee,

c. Student, or

d. Professional athlete who is temporarilyin the United States to compete in a charitablesports event.

Note: Alien individuals with Q visas aretreated as either students, teachers, or trainees

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and, as such, are exempt individuals forpurposes of the substantial presence test ifthey otherwise qualify. Qvisas are issued toaliens participating in certain internationalcultural exchange programs.

2.Medical condition. You do not countany day that you intended to leave the UnitedStates but were unable to leave because of amedical condition or medical problem thatarose while you were present in the UnitedStates.

Note: This exception does not apply topre-existing medical conditions or problems.

For more details, see Pub. 519.3.Closer connection to foreign country.

Even though you would otherwise meet thesubstantial presence test, you are not treatedas having met that test for 2000 if you:

a. Were present in the United States forfewer than 183 days during 2000,

b. Establish that during 2000 you had a taxhome in a foreign country, and

c. Establish that during 2000 you had acloser connection to one foreign country inwhich you had a tax home than to the UnitedStates unless you had a closer connection totwo foreign countries.

Who Must File

File Form 1040NR if any of the following fourconditions applies to you.

1. You were a nonresident alien engagedin a trade or business in the United Statesduring 2000. You must file even if

a. None of your income came from a tradeor business conducted in the United States,

b. You have no U.S. source income, or

c. Your income is exempt from U.S. tax.

In any of the above three cases, do notcomplete the schedules for Form 1040NR.Instead, attach a list of the kinds of exclusionsyou claim and the amount of each.

Exception. If you were a nonresident alienstudent, teacher, or trainee who was

temporarily present in the United States underan F, J, M, or Q visa, you must file Form1040NR (or Form 1040NR-EZ) only if youhave income that is subject to tax under section871 (that is, the income items listed on lines 8through 21 on page 1 of Form 1040NR and onlines 70a through 79 on page 4 of Form1040NR).

2. You were a nonresident alien notengaged in a trade or business in the UnitedStates during 2000 and not all U.S. tax that youowe was withheld from your income.

3. You represent a deceased person whowould have had to file Form 1040NR.

4. You represent an estate or trust that hasto file Form 1040NR.

Exception for Children Under Age 14. If your

child was under age 14 on January 1, 2001,had income only from interest and dividendsthat are effectively connected with a U.S. tradeor business, and that income totaled less than$7,000, you may be able to elect to report yourchild's income on your return. But you must useForm 8814 to do so. If you make this election,your child does not have to file a return. Formore details, see Form 8814.

Filing a Deceased Person's Return. Thepersonal representative must file the return fora deceased person who was required to file areturn for 2000. A personal representative can

be an executor, administrator, or anyone whois in charge of the deceased person's property.

Filing for an Estate or Trust. If you are filingForm 1040NR for a nonresident alien estateor trust, change the form to reflect theprovisions of Subchapter J, Chapter 1, of theInternal Revenue Code. You may find it helpfulto refer to Form 1041 and its instructions.

Simplified Procedure for ClamingCertain Refunds

You may use this procedure only if you meetall of the following conditions for the tax year.q You were a nonresident alien.q You were not engaged in a trade or businessin the United States at any time.q You had no income that was effectivelyconnected with the conduct of a U.S. trade orbusiness.q Your U.S. income tax liability was fullysatisfied through withholding of tax at source.q You are filing Form 1040NR solely to claima refund of U.S. tax withheld at source.

Example. X is a nonresident alienindividual. The only U.S. source income hereceived during the year was dividend incomefrom U.S. stocks. The dividend income wasreported to him on Forms 1042-S. On one ofthe dividend payments, the withholding agent

incorrectly withheld at a rate of 30% (insteadof 15%). X is eligible to use the simplifiedprocedure.

If you meet all of the above conditions forthe tax year, complete Form 1040NR asfollows.

Page 1. Enter your name, U.S. taxpayeridentification number (TIN), country ofcitizenship, and all address informationrequested at the top of page 1. Leave the restof page 1 blank.

Page 4, lines 70a through 79. Enter theamounts of gross income you received fromdividends, interest, royalties, pensions,annuities, and other income. If any income youreceived was subject to backup withholding orwithholding at source, you must include allgross income of that type that you received.The amount of each type of income should beshown in the column under the appropriateU.S. tax rate, if any, that applies to that typeof income in your particular circumstances.

If you are entitled to a reduced rate of, orexemption from, withholding on the incomepursuant to a tax treaty, the applicable rate ofU.S. tax is the same as the treaty rate. Usecolumn (e) if the applicable tax rate is 0%.

Example. Y is a nonresident alienindividual. The only U.S. source income hereceived during the year was as follows:q 4 dividend paymentsq 12 interest payments

All payments were reported to Y on Form(s)

1042-S. On one of the dividend payments, thewithholding agent incorrectly withheld at a rateof 30% (instead of 15%). There were no otherwithholding discrepencies. Y must report allfour dividend payments. He is not required toreport any of the interest payments.

Note: Payments of gross proceeds from thesale of securities or regulated futures contractsare generally exempt from U.S. tax. If youreceived such payments and they weresubjected to backup withholding, specify thetype of payment on line 79 and show theamount in column (e).

Line 80. Enter the total amount of U.S. taxwithheld at source (and not refunded by thepayer or withholding agent) for the income youincluded on lines 70a through 79.

Lines 81 through 83. Complete these linesas instructed on the form.

Page 5. You must answer all questions thatapply. For item M, you must identify theincome tax treaty and treaty article(s) underwhich you are applying for a refund of tax. Also,enter the type of income (for example,dividends, royalties) and amount in theappropriate space. You must provide the

information required for each type of income forwhich a treaty claim is made.

Note: If you are claiming a reduced rate of,or exemption from, tax based on a tax treaty,you must generally be a resident of theparticular treaty country within the meaning ofthe treaty and you cannot have a permanentestablishment or fixed base in the UnitedStates.

Page 2, lines 49 and 54. Enter your totalincome tax liability.

Lines 62a and 64. Enter the total amountof U.S. tax withheld (from line 80).

Lines 65 and 66a. Enter the differencebetween line 54 and line 64. This is your totalrefund.

Signature. You must sign and date yourtax return. See Reminders on page 17.

Documentation. You must attach acceptableproof of the withholding for which you areclaiming a refund. If you are claiming a refundof backup withholding tax based on your statusas a nonresident alien, you must attach a copyof the Form 1099 that shows the income andthe amount of backup withholding. If you areclaiming a refund of U.S. tax withheld atsource, you must attach a copy of the Form1042-S that shows the income and the amountof U.S. tax withheld.

Additional Information

Portfolio Interest. If you are claiming a refundof U.S. tax withheld from portfolio interest,

include a description of the relevant debtobligation, including the name of the issuer,CUSIP number (if any), interest rate, and thedate the debt was issued.

Withholding on Distributions. If you areclaiming an exemption from withholding on adistribution from a U.S. corporation with respectto its stock because the corporation hadinsufficient earnings and profits to supportordinary income treatment, you must attach astatement that identifies the distributingcorporation and provides the basis for theclaim.

If you are claiming an exemption fromwithholding on a distribution from a mutual fundor real estate investment trust (REIT) withrespect to its stock because the distribution

was designated as long-term capital gain or areturn of capital, you must attach a statementthat identifies the mutual fund or REIT andprovides the basis for the claim.

If you are claiming an exemption fromwithholding on a distribution from a U.S.corporation with respect to its stock because,in your particular circumstances, thetransaction qualifes as a redemption of stockunder section 302, you must attach a statementthat describes the transaction and presents thefacts necessary to establish that the paymentwas either (1) a complete redemption, (2) adisproportional redemption, or (3) notessentially equivalent to a dividend.

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When To FileIndividuals. If you were an employee andreceived wages subject to withholding, fileForm 1040NR by the 15th day of the 4th monthafter your tax year ends. A return for the 2000calendar year is due by April 16, 2001.

If you did not receive wages as an employeesubject to U.S. income tax withholding, fileForm 1040NR by the 15th day of the 6th monthafter your tax year ends. A return for the 2000calendar year is due by June 15, 2001.

Estates and Trusts. If you file for a

nonresident alien estate or trust that has anoffice in the United States, file the return by the15th day of the 4th month after the tax yearends. If you file for a nonresident alien estateor trust that does not have an office in theUnited States, file the return by the 15th dayof the 6th month after the tax year ends.

Note: If the regular due date for filing falls ona Saturday, Sunday, or legal holiday, file by thenext business day.

Extension of Time To File. If you cannot fileyour return by the due date, you should fileForm 4868. You must file Form 4868 by theregular due date of the return.

Note: Form 4868 does not extend the time topay your income tax. The tax is due by theregular due date of the return.

Where To File

File Form 1040NR with the Internal RevenueService Center, Philadelphia, PA 19255, U.S.A.

Private Delivery Services

You can use certain private delivery servicesdesignated by the IRS to meet the timelymailing as timely filing/paying rule for taxreturns and payments. The most recent list ofdesignated private delivery services waspublished by the IRS in August 1999. The listincludes only the following:q Airborne Express (Airborne): Overnight AirExpress Service, Next Afternoon Service, andSecond Day Service.q DHL Worldwide Express (DHL): DHL SameDay Service, and DHL USA Overnight.q Federal Express (FedEx): FedEx PriorityOvernight, FedEx Standard Overnight, andFedEx 2Day.q United Parcel Service (UPS): UPS Next DayAir, UPS Next Day Air Saver, UPS 2nd DayAir, and UPS 2nd Day Air A.M.

The private delivery service can tell you howto get written proof of the mailing date.

CAUTION

!Private delivery services cannot deliveritems to P.O. boxes. You must use theU.S. Postal Service to mail any item to

an IRS P.O. box address.

Election To Be Taxed as aResident Alien

You can elect to be taxed as a U.S. resident forthe whole year if all of the following apply toyou.q You were married.q Your spouse was a U.S. citizen or residentalien on the last day of the tax year.q You file a joint return for the year of theelection using Form 1040, 1040A, or 1040EZ.

To make this election, you must attach thestatement described in Pub. 519 to your return.Do not use Form 1040NR.

Your worldwide income for the whole yearmust be included and will be taxed under U.S.tax laws. You must agree to keep the records,books, and other information needed to figurethe tax. If you made the election in an earlieryear, you may file a joint return or separatereturn for 2000. If you file a separate return,use Form 1040 or Form 1040A. Yourworldwide income for the whole year must beincluded whether you file a joint or separatereturn.

CAUTION

!Nonresident aliens who make thiselection may forfeit the right to claimbenefits otherwise available under a

U.S. tax treaty. For more details, see Pub. 901or refer to the specific treaty.

Dual-Status Taxpayers

Note: If you elect to be taxed as a residentalien (discussed earlier), the specialinstructions and restrictions discussed heredonotapply.

Dual-Status Tax Year

A dual-status year is one in which you changestatus between nonresident and resident alien.Different U.S. income tax rules apply to eachstatus.

Most dual-status years are the years ofarrival or departure. Before you arrive in theUnited States, you are a nonresident alien.After you arrive, you may or may not be aresident, depending on the circumstances.

If you become a U.S. resident, you stay aresident until you leave the United States. Youmay become a nonresident alien when youleave, if, after leaving (or after your last day oflawful permanent residency if you met thegreen card test) and for the remainder of thecalendar year of your departure, you have acloser connection to a foreign country than tothe United States, and, during the nextcalendar year, you are not a U.S. residentunder either the green card test or thesubstantial presence test. See Pub. 519.

What and Where To File for aDual-Status Year

If you were a U.S. resident on the last day ofthe tax year, file Form 1040. Write Dual-StatusReturn across the top and attach a statementshowing your income for the part of the yearyou were a nonresident. You may use Form1040NR as the statement; write Dual-StatusStatement across the top. File your return andstatement with the Internal Revenue ServiceCenter, Philadelphia, PA 19255, U.S.A.

If you were a nonresident on the last dayof the tax year, file Form 1040NR. WriteDual-Status Return across the top and attacha statement showing your income for the partof the year you were a U.S. resident. You mayuse Form 1040 as the statement; writeDual-Status Statement across the top. Fileyour return and statement with the InternalRevenue Service Center, Philadelphia, PA19255, U.S.A.

Statements. Any statement you file with yourreturn must show your name, address, andidentifying number (defined on page 5).

Former U.S. long-term residents arerequired to file Form 8854 with their dual-statusreturn for the last year of U.S. residency. Todetermine if you are a former U.S. long-termresident, see page 5.

Income Subject to Tax for Dual-StatusYear

As a dual-status taxpayer not filing a jointreturn, you are taxed on income from allsources for the part of the year you were aresident alien. Generally, you are taxed onincome only from U.S. sources for the part ofthe year you were a nonresident alien.However, all income effectively connected withthe conduct of a trade or business in the UnitedStates is taxable.

Income you received as a dual-status

taxpayer from sources outside the UnitedStates while a resident alien is taxable, even ifyou became a nonresident alien after receivingit and before the close of the tax year.Conversely, income you received from sourcesoutside the United States while a nonresidentalien is not taxable in most cases, even if youbecame a resident alien after receiving it andbefore the close of the tax year. Income fromU.S. sources is taxable whether you receivedit while a nonresident alien or a resident alien.

Restrictions for Dual-Status Taxpayers

Standard Deduction. You may not take thestandard deduction.

Head of Household. You may not use theHead of HouseholdTax Table column or Tax

Rate Schedule.Joint Return. You may not file a joint return.However, see Election To Be Taxed as aResident Alien on this page.

Tax Rates. If you were married and anonresident of the United States for all or partof the tax year and you do not make theelection to be taxed as a resident alien asdiscussed earlier, you must use the Tax Tablecolumn or Tax Rate Schedule for Married FilingSeparatelyto figure your tax on incomeeffectively connected with a U.S. trade orbusiness. If married, you may not use theSingleTax Table column or Tax RateSchedule.

Deduction for Exemptions. As a dual-statustaxpayer, you usually will be entitled to your

own personal exemption. Subject to thegeneral rules for qualification, you are allowedexemptions for your spouse and dependents infiguring taxable income for the part of the yearyou were a resident alien. The amount you mayclaim for these exemptions is limited to yourtaxable income (determined without regard toexemptions) for the part of the year you werea resident alien. You may not use exemptions(other than your own) to reduce taxable incometo below zero for that period.

Special rules apply for exemptions for thepart of the tax year a dual-status taxpayer is anonresident alien if the taxpayer is a residentof Canada, Mexico, Japan, or the Republic ofKorea (South Korea); a U.S. national; or astudent or business apprentice from India. See

Pub. 519.Education Credits. You may not take aneducation credit unless your filing status ismarried filing jointly.

How To Figure Tax for Dual-StatusYear

When you figure your U.S. tax for a dual-statusyear, you are subject to different rules for thepart of the year you were a resident and thepart of the year you were a nonresident.

All income for the period of residence andall income that is effectively connected with atrade or business in the United States for theperiod of nonresidence, after allowable

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deductions, is added and taxed at the samerates that apply to U.S. citizens and residents.Income that is not effectively connected with atrade or business in the United States for theperiod of nonresidence is subject to the flat30% rate or lower treaty rate. No deductionsare allowed against this income.

If you were a resident alien on the last dayof the tax year, add to the tax from the TaxTable, Tax Rate Schedules, Capital Gain TaxWorksheet, Schedule D (Form 1040), or Form8615 the tax on the noneffectively connectedincome. Enter the total tax on Form 1040, line

40. Next to line 40 show the two amounts. Ifyou are filing Form 1040NR, enter the tax fromthe Tax Table, Tax Rate Schedules, CapitalGain Tax Worksheet, Schedule D (Form 1040),or Form 8615 on line 39 and the tax on thenoneffectively connected income on line 49.

Credits. You are allowed a credit against yourU.S. income tax liability for certain taxes youpaid, are considered to have paid, or that werewithheld from your income. These include:

1. Tax withheld from wages earned in theUnited States and taxes withheld at the sourcefrom various items of income from U.S. sourcesother than wages. This includes U.S. taxwithheld on dispositions of U.S. real propertyinterests.

When filing Form 1040, show the total tax

withheld on line 58. Enter amounts from theattached statement (Form 1040NR, lines 55,62a, 62b, 63a, and 63b) to the left of line 58and identify and include in the amount on line58.

When filing Form 1040NR, show the totaltax withheld on lines 55, 62a, 62b, 63a, and63b. Enter the amount from the attachedstatement (Form 1040, line 58) to the left of line55 and identify and include in the amount online 55.

2. Estimated tax paid with Form 1040-ESor Form 1040-ES (NR).

3. Tax paid with Form 1040-C. When filingForm 1040, include the tax paid with Form1040-C with the total payments on line 65.Identify the payment in the area to the left ofthe entry.

As a dual-status taxpayer, you generallymay claim tax credits using the same rules thatapply to resident aliens.

How To Report Income on Form1040NR

Community Income

If either you or your spouse (or both you andyour spouse) were nonresident aliens at anytime during the tax year and you hadcommunity income during the year, treat thecommunity income according to the applicablecommunity property laws except as follows:q

Earned income of a spouse, other than tradeor business or partnership distributive shareincome. The spouse whose services producedthe income must report it on his or her separatereturn.q Trade or business income, other thanpartnership income. Treat this income asreceived by the husband unless the wifeexercises substantially all of the managementover the trade or business.q Partnership income (or loss) received froma trade or business carried on by thepartnership. Treat this income (or loss) asreceived by the spouse who is the partner andreport it on that spouse's return.

q Income derived from the separate propertyof one spouse that is not earned income, tradeor business income, or partnership distributiveshare income. The spouse with the separateproperty must report this income on his or herseparate return.

See Pub. 555 for more details.

Kinds of Income

You must divide your income for the tax yearinto the following three categories.

1. Income effectively connected with a U.S.trade or business. This income is taxed at thesame rates that apply to U.S. citizens. Reportit on page 1 of Form 1040NR. Pub. 519describes this income in greater detail.

2. U.S. income not effectively connectedwith a U.S. trade or business. This income istaxed at 30% unless a treaty between yourcountry and the United States has set a lowerrate that applies to you. Report this income onpage 4 of Form 1040NR and figure the tax onit. Then, report the tax on line 49. Pub. 519describes this income more fully.

Note: Use line 52 to report the 4% tax on U.S.source gross transportation income.

3. Income exempt from U.S. tax. Completeitems L and M on page 5 of Form 1040NR and,if applicable, line 22 on page 1.

Dispositions of U.S. Real PropertyInterests

Gain or loss on the disposition of a U.S. realproperty interest by a nonresident alienindividual is treated as if the alien individualwere engaged in a trade or business in theUnited States and as if the gain or loss wereeffectively connected with the conduct of thattrade or business. Losses of individuals shallbe taken into account only to the extent theywould be taken into account under section165(c). See section 897 and its regulations.

Report gains and losses on the dispositionof U.S. real property interests on Schedule D(Form 1040) and Form 1040NR, line 14. Also,net gains may be subject to the alternative

minimum tax. See the instructions for line 40.The nonrecognition rules (not recognizing

gain or loss) apply only when a U.S. realproperty interest is exchanged for an interestthe sale of which would be subject to U.S. tax.

Money and the fair market value of propertyreceived in exchange for an interest in apartnership, trust, or estate, will, to the extentattributable to a U.S. real property interest heldby the partnership, trust, or estate, beconsidered as received from the sale orexchange of the U.S. real property interest.

Gains or losses from the disposition of aU.S. real property interest by a partnership,trust, or estate generally are passed throughand must be reported on the income tax returnof each partner or beneficiary.

U.S. Real Property Interests. A U.S. realproperty interest is any interest (other than aninterest solely as a creditor) in real propertylocated in the United States or the VirginIslands, or any interest in a domesticcorporation that is a U.S. real property holdingcorporation. Generally, real property includes:q Land and unsevered natural products ofthe land, such as growing crops and timber,and mines, wells, and other natural deposits.q Improvements on land, including buildings,other inherently permanent structures, andstructural components of these.

q Personal property associated with the useof real property, such as farming, forestry,mining, or construction equipment, or propertyused in lodging facilities or rented office space.See Pub. 519 for exceptions.

A corporation is a U.S. real property holdingcorporation if the fair market value of its U.S.real property interests is 50% or more of thefair market value of its U.S. real propertyinterests, interests in foreign real property, plusany other of its assets that are used or held foruse in a trade or business. For special rules,see sections 897(c)(4) and (5).

An interest in a foreign corporation is a U.S.real property interest only if the corporationelected to be treated as a domesticcorporation.

An interest in a domestic corporation is nota U.S. real property interest if at the date ofdisposition of the interest in the corporation:(a) the corporation did not hold any U.S. realproperty interests and (b) all the U.S. realproperty interests held by the corporationduring the shorter of the periods described insection 897(c)(1)(A)(ii):

1. Were disposed of in a transaction inwhich all gain realized was recognized or

2. Ceased to be U.S. real property interestsbecause of the application of section897(c)(1)(B) to one or more other corporations.

Stock Regularly Traded. A U.S. real propertyinterest does not include any class of stock ofa domestic corporation that is regularly tradedon an established securities market, unless youheld more than 5% of that class of stock at anytime during the shorter of the periods describedin section 897(c)(1)(A)(ii).

Section 897(h) provides special rules for areal estate investment trust.

Virgin Islands Real Estate. Gain or loss ondispositions of real property interests located inthe U.S. Virgin Islands is reported on returnsfiled with the Virgin Islands tax authorities. Taxon these dispositions is paid to the VirginIslands tax authorities.

Income You May Elect To Treat asEffectively Connected With a U.S.Trade or Business

You may elect to treat some items of incomeas effectively connected with a U.S. trade orbusiness. The election applies to all incomefrom real property, or an interest in realproperty, located in the United States and heldfor the production of income. Income from realproperty includes:q Rental income from real property.q Profit from disposing of U.S. timber, coal, oriron ore while keeping a share in it.q Rents and royalties from mines, oil or gaswells, or other natural resources.

The election does not apply to dispositions

of U.S. real property interests discussed earlier.To make the election, attach a statement toyour return for the year of the election. Includein your statement:

1. That you are making the election.

2. A complete list of all your real property,or any interest in real property, located in theUnited States (including location). Give thelegal identification of U.S. timber, coal, or ironore in which you have an interest.

3. The extent of your interest in the realproperty.

4. A description of any substantialimprovements on such real property.



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5. Your income from the property.

6. The dates you owned it.

7. Whether the election is under section871(d) or treaty.

8. Details of any previous elections andrevocations of the real property elections.

Foreign Income Taxed by the UnitedStates

You may be required to report some incomefrom foreign sources on your U.S. return if it iseffectively connected with a U.S. trade or

business. For this foreign income to be treatedas effectively connected with a U.S. trade orbusiness, you must have a fixed place ofbusiness in the United States. The income,gain, or loss must result directly from the usualbusiness activities of your U.S. office. Thekinds of foreign income that may be taxed atthe graduated rates are:q Interest or dividends from the U.S. business.q Income from foreign sales made by your U.S.office.q Rents or royalties you received for the useof intangible property located outside theUnited States or the privilege of using it. Suchproperty includes patents, copyrights,trademarks, and franchises.

Special Rules for Former U.S.Citizens and Former U.S.Long-Term Residents

Section 877 may affect your tax liability if youare a former citizen or former long-termresident (LTR) of the United States. You are aformer LTR if you were a lawful permanentresident of the United States (that is, you hada green card) for at least 8 of the 15consecutive tax years ending with the year yourresidency ended. In determining if you are aformer LTR, do not count any year that youwere treated as a resident of another countryunder a tax treaty and you did not waive treatybenefits.

If you were a former citizen or former LTRand you relinquished your citizenship orterminated your residency after February 5,1995, you are subject to the provisions ofsection 877 on your U.S. source income if oneof the principal purposes of your action was toavoid U.S. taxes.

You are considered to have tax avoidanceas a principal purpose if (1) your averageannual net income tax for the last 5 tax yearsending before the date of your action torelinquish your citizenship or terminate yourresidency was more than $100,000 or (2) yournet worth on the date of your action was$500,000 or more. These amounts areadjusted for inflation if your expatriation actionis after 1996 (see chart on this page).

Although there are exceptions to these rules,you will qualify for an exception only if you areeligible to submit a ruling request to the IRSthat your renunciation of U.S. citizenship ortermination of U.S. residency did not have asone of its principal purposes the avoidance ofU.S. tax and you submit such a ruling requestin a complete and good faith manner. For moredetails about these exceptions, see section877(c); Notice 97-19, 1997-1 C.B. 394; andNotice 98-34, 1998-2 C.B. 29.

If the rules of section 877 apply to you,check the Yes box in item P on page 5 ofthe form. You are subject to tax on U.S.

Inflation-Adjusted Amounts for Expatriation Actions After 1996

IF you expatriatedduring ... Your 5-year average annual

net income tax was morethan ...

THEN, the rules outlined on this page apply if ...

Your net worthequaled orexceeded ...

OR

1997199819992000

$106,000109,000110,000112,000

$528,000543,000552,000562,000

source income and gains on either (1) a netbasis at the graduated rates applicable toindividuals with allowable deductions or (2) agross basis at a rate of 30% under the rulesof section 871(a). See Chapter 4 of Pub. 519for more details on the tax imposed undersection 871(a).

If you have items of U.S. source income thatare subject to tax under section 871(a), youwill be taxed at a rate of 30% on your grossincome only if this tax exceeds the tax at theregular graduated rates on your net income. Ifthe 30% tax on your gross income exceeds thegraduated tax on your net income, report thoseitems on the appropriate lines on page 4 ofForm 1040NR. If the graduated tax on your netincome exceeds the 30% tax on your gross

income, report your income on the appropriatelines on page 1 of Form 1040NR and attach astatement describing the items and amountsof income that are subject to tax by reason ofsection 877.

If you have other items of U.S. sourceincome that are not subject to tax under section871(a), you will be taxed on a net basis at theregular graduated rates applicable toindividuals. Report this income on theappropriate lines on page 1 of Form 1040NR.

For purposes of computing the tax dueunder section 877, the following items ofincome are treated as U.S. source.

1. Gains on the sale or exchange ofpersonal property located in the United States.

2. Gains on the sale or exchange of stockissued by a domestic corporation or debtobligations of the United States, U.S. persons,a state or political subdivision thereof, and theDistrict of Columbia.

3. Income or gain derived from stock in aforeign corporation if you owned, either directlyor indirectly (through the rules of sections958(a) and 958(b)) more than 50% of the voteor value of the stock of the corporation on thedate of your renunciation of citizenship ortermination of residency or at any time duringthe 2 years preceding such date. Such incomeor gain is considered U.S. source only to theextent of your share of the earnings and profitsearned or accumulated prior to the date ofrenunciation of U.S. citizenship or terminationof residency.

You may not claim that a tax treaty in effecton August 21, 1996, prevents the impositionof tax by reason of section 877.

Annual Information Statement

If the expatriation rules apply to you and youare liable for U.S. taxes, you must attach astatement to Form 1040NR that sets forth bycategory (for example, dividends, interest, etc.)all items of U.S. and foreign source grossincome (whether or not taxable in the UnitedStates). The statement must identify the sourceof such income (determined under section 877

as modified by Section V of Notice 97-19,1997-1 C.B. 394) and those items of incomesubject to tax under section 877. If theexpatriation rules apply to you, you must attachthis statement to Form 1040NR, even if youhave fully satisfied your U.S. tax liabilitythrough withholding of tax at source.

If you fail to furnish a complete statement,as described above, you will not be consideredto have filed a true and accurate return.Therefore, you will not be entitled to anydeductions or credits if your tax liability for your2000 taxable year is later adjusted. See section874(a).

Line Instructions for Form1040NR

Name, Address, and IdentifyingNumberName. If you are filing Form 1040NR for anestate or trust, enter the name of the estate ortrust, and your name, title, and address. Also,give the name and address of any U.S.grantors and beneficiaries.

P.O. Box. Enter your box number instead ofyour street address only if your post officedoes not deliver mail to your home.

Foreign Address. Enter the information in the

following order: city, province or state, andcountry. Follow the country's practice forentering the postal code. Do not abbreviate thecountry name.

Identifying Number. If you are an individual,you are generally required to enter your socialsecurity number (SSN). To apply for an SSN,get Form SS-5 from a Social SecurityAdministration (SSA) office. Fill in Form SS-5and return it to the SSA.

If you do not have an SSN and are noteligible to get one, you must get an individualtaxpayer identification number (ITIN). To applyfor an ITIN, file Form W-7 with the IRS. Itusually takes about 30 days to get an ITIN.Enter your ITIN wherever your SSN isrequested on your tax return. If you are

required to include another person's SSN onyour return and that person does not have andcannot get a SSN, enter that person's ITIN.

Note: An ITIN is for tax use only. It does notentitle you to social security benefits or changeyour employment or immigration status underU.S. law.

If you are filing Form 1040NR for an estateor trust, enter the employer identificationnumber of the estate or trust.

An incorrect or missing identifying numbermay increase your tax or reduce your refund.



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Filing Status

The amount of your tax depends on your filingstatus. Before you decide which box to check,read the following explanations.

Were You Single or Married? If you weremarried on December 31, consider yourselfmarried for the whole year. If you were single,divorced, or legally separated under a decreeof divorce or separate maintenance onDecember 31, consider yourself single for thewhole year. If you meet the tests describedunder Married Persons Who Live Apartbelow, you may consider yourself single for thewhole year.

If your spouse died in 2000, consideryourself married to that spouse for the wholeyear, unless you remarried before the end of2000.

Married Persons Who Live Apart. Somemarried persons who have a child and who donot live with their spouse may file as single. Ifyou meet all five of the following tests and youare a married resident of Canada or Mexico,or a U.S. national, check the box on line 1. Ifyou meet the tests and you are a marriedresident of Japan or the Republic of Korea(South Korea), check the box on line 2.

1. You file a return separate from yourspouse.

2. You paid more than half the cost to keepup your home in 2000.

3. You lived apart from your spouse duringthe last 6 months of 2000.

4. Your home was the principal home ofyour child, stepchild, adopted child, or fosterchild for more than half of 2000.

5. You claim this child as your dependentor the child's other parent claims him or her asa dependent under the rules in Pub. 501 forchildren of divorced or separated parents.

Line 6Qualifying Widow(er) WithDependent Child. You may check the box online 6 and use joint return tax rates for 2000 ifall seven of the following apply.

1. You were a resident of Canada, Mexico,Japan, or the Republic of Korea (South Korea),or were a U.S. national.

2. Your spouse died in 1998 or 1999 andyou did not remarry in 2000.

3. You have a child, stepchild, adoptedchild, or foster child whom you can claim as adependent.

4. This child lived in your home for all of2000. Temporary absences, such as for school,vacation, or medical care, count as time livedin the home.

5. You paid over half the cost of keepingup your home.

6. You were a resident alien or U.S. citizenthe year your spouse died. This refers to your

actual status, not the election that somenonresident aliens can make to be taxed asU.S. residents.

7. You could have filed a joint return withyour spouse the year he or she died, even ifyou did not actually do so.

Exemptions

Exemptions for estates and trusts aredescribed in the instructions for line 37 onpage 11.

Note: Residents of India who were studentsor business apprentices may be able to claim

exemptions for their spouse and dependents.See Pub. 519 for details.

Line 7bSpouse. If you checked filing statusbox 3 or 4, you can take an exemption for yourspouse only if your spouse had no grossincome for U.S. tax purposes and cannot beclaimed as a dependent on another U.S.taxpayer's return. (You can do this even if yourspouse died in 2000.) In addition, if youchecked filing status box 4, your spouse musthave lived with you in the United States atsome time during 2000. Finally, your spousemust have an SSN or an ITIN. If your spouse

is not eligible to obtain an SSN, he or she canfile Form W-7 with the IRS to apply for an ITIN.See Identifying Number on page 5 foradditional information.

Line 7cDependents. Only U.S. nationalsand residents of Canada, Mexico, Japan, andthe Republic of Korea (South Korea), mayclaim exemptions for their dependents. If youwere a U.S. national (American Samoan) or aresident of Canada or Mexico, you can claimexemptions for your children and otherdependents on the same terms as U.S.citizens. See Pub. 501 for more details. If youwere a resident of Japan or the Republic ofKorea (South Korea), you may claim anexemption for any of your children who livedwith you in the United States at some time

during 2000.You can take an exemption for each of your

dependents. If you have more than fivedependents, attach a statement to your returnwith the required information.

Line 7c, Column (2). You must enter eachdependent's identifying number (SSN, ITIN, oradoption taxpayer identification number(ATIN)). If you do not enter the correctidentifying number, at the time we process yourreturn we may disallow the exemption claimedfor the dependent and reduce or disallow anyother tax benefits (such as the child tax credit)based on the dependent. If your dependentchild was born and died in 2000 and you donot have an identifying number for the child,attach a copy of the child's birth certificate

instead and enter DIED in column (2).Adoption Taxpayer Identification

Numbers (ATINs). If you have a dependentwho was placed with you by an authorizedplacement agency and you do not know his orher SSN, you must get an ATIN for thedependent from the IRS. An authorizedplacement agency includes any personauthorized by state law to place children forlegal adoption. See Form W-7A for details.

Line 7c, Column (4). Check the box in thiscolumn if your dependent is a qualifying childfor the child tax credit (defined below). If youhave at least one qualifying child, you may beable to take the child tax credit on line 44.

Qualifying Child for Child Tax Credit. Aqualifying child for purposes of the child tax

credit is a child who:q Is claimed as your dependent on line 7c, andq Was under age 17 at the end of 2000, andq Is your son, daughter, adopted child,grandchild, stepchild, or foster child, andq Is a U.S. citizen or resident alien.

A child placed with you by an authorizedplacement agency for legal adoption is anadopted child even if the adoption is not final.An authorized placement agency includes anyperson authorized by state law to placechildren for legal adoption.

A grandchild is any decendent of your son,daughter, or adopted child and includes yourgreat-grandchild, great-great-grandchild, etc.

Beginning in 2000, a foster child is anychild you cared for as your own child and who:q Is (1) your brother, sister, stepbrother, orstepsister; (2) a descendant (such as a child,including an adopted child) of your brother,sister, stepbrother, or stepsister; or (3) a childplaced with you by an authorized placementagency andq Lived with you for all of 2000. A child whowas born or died in 2000 is considered to havelived with you for all of 2000 if your home wasthe child's home for the entire time he or shewas alive during 2000.

To find out who is a resident alien, seeResident Alien or Nonresident Alien onpage 1.

Children Who Did Not Live With You Dueto Divorce or Separation. If you checked filingstatus box 1 or 3 and are claiming a child whodid not live with you under the rules in Pub.501 for children of divorced or separatedparents, attach Form 8332 or similar statementto your return. But see Exception below. Ifyour divorce decree or separation agreementwent into effect after 1984 and it states you canclaim the child as your dependent withoutregard to any condition, such as payment ofsupport, you may attach a copy of certainpages from the decree or agreement instead.See Pub. 504 for details.

Note: You must attach the requiredinformation even if you filed it in an earlier year.

Exception. You do not have to attach Form8332 or similar statement if your divorce decreeor written separation agreement went intoeffect before 1985 and it states that you canclaim this child as your dependent.

Other Dependent Children. Include thetotal number of children who did not live withyou for reasons other than divorce orseparation on the line labeled Dependents on7c not entered above.

Rounding Off to Whole Dollars

To round off cents to the nearest whole dollaron your forms and schedules, drop amountsunder 50 cents and increase amounts from 50to 99 cents to the next dollar. If you do roundoff, do so for all amounts. But if you have toadd two or more amounts to figure the amountto enter on a line, include cents when addingand only round off the total.

Income Effectively ConnectedWith U.S. Trade or Business

Pub. 519 explains how income is classified andwhat income you should report here. Theinstructions for this section assume you havedecided that the income involved is effectivelyconnected with a U.S. trade or business inwhich you were engaged. But your decisionmay not be easy. Interest, for example, maybe effectively connected with a U.S. trade orbusiness, it may not be, or it may be taxexempt. The tax status of income also dependson its source. Under some circumstances,items of income from foreign sources aretreated as effectively connected with a U.S.trade or business. Other items are reportableas effectively connected or not effectivelyconnected with a U.S. trade or business,depending on how you elect to treat them.



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Line 8Wages, Salaries, Tips, etc. Enter thetotal of your effectively connected wages,salaries, tips, etc. For most people, the amountto enter on this line should be shown in box 1of their Form(s) W-2. However, do not includeamounts exempted under a tax treaty andreported in Item M on page 5 of Form 1040NR.Also include in this total:q Tip income you did not report to youremployer. Also include allocated tips shownon your W-2 form(s) unless you can prove thatyou received less. Allocated tips should beshown in box 8 of your W-2 form(s). They are

not included as income in box 1. See Pub. 531for more details.

CAUTION

!You may owe social security and

Medicare tax on unreported or allocatedtips. See the instructions for line 50 on

page 12.q Dependent care benefits, which should beshown in box 10 of your W-2 form(s). But firstcomplete Form 2441 to see if you may excludepart or all of the benefits.q Employer-provided adoption benefits,which should be shown in box 13 of your W-2form(s) with code T. But first complete Form8839 to see if you can exclude part or all of thebenefits.q Excess salary deferrals. The amount

deferred should be shown in box 13 of yourW-2 form and the Deferred compensation boxin box 15 should be checked. If the totalamount you deferred for 2000 under all planswas more than $10,500, include the excess online 8. But a different limit may apply if amountswere deferred under a tax-sheltered annuityplan or an eligible plan of a state or localgovernment or tax-exempt organization. SeePub. 525 for details.

CAUTION

!You maynotdeduct the amountdeferred. It is not included as income inbox 1 of your W-2 form.

q Disability pensions shown on Form 1099-Rif you have not reached the minimumretirement age set by your employer. Disabilitypensions received after you reach that age andother pensions shown on Form 1099-R (otherthan payments from an IRA*) are reported onlines 17a and 17b. Payments from an IRA arereported on lines 16a and 16b.q Corrective distributions shown on Form1099-R of (1) excess salary deferrals plusearnings and (2) excess contributions plusearnings to a retirement plan. But do notinclude distributions from an IRA* on line 8.Instead, report them on lines 16a and 16b.

*This includes a Roth, SEP, SIMPLE, oreducation IRA.

Missing or Incorrect Form W-2. If you donot get W-2 form by January 31, 2001, askyour employer for it. Even if you do not get aForm W-2, you must still report your earnings

on line 8. If you lose your Form W-2 or it isincorrect, ask your employer for a new one.

Line 9aTaxable Interest. Report on line 9aall of your taxable interest income from assetseffectively connected with a U.S. trade orbusiness.

If you received interest not effectivelyconnected with a U.S. trade or business, reportit on page 4 of Form 1040NR, unless it is taxexempt under a treaty. See Pub. 901. Inaddition, interest from a U.S. bank, savings andloan association, credit union, or similarinstitution, and from certain deposits with U.S.insurance companies, is tax exempt to a

nonresident alien if it is not effectivelyconnected with a U.S. trade or business.

Interest credited in 2000 on deposits thatyou could not withdraw because of thebankruptcy or insolvency of the financialinstitution may not have to be included in your2000 income. For details, see Pub. 550.

Line 9bTax-Exempt Interest. Certain typesof interest income from investments in stateand municipal bonds and similar instrumentsare not taxed by the United States. If youreceived such tax-exempt interest income,report the amount on line 9b. Include any

exempt-interest dividends from a mutual fundor other regulated investment company. But donot include interest earned on your IRA, orinterest from a U.S. bank, savings and loanassociation, credit union, or similar institution(or from certain deposits with U.S. insurancecompanies) that are exempt from tax under atax treaty or under section 871(i) because theinterest is not effectively connected with a U.S.trade or business.

Line 10Ordinary Dividends. Enter yourtotal ordinary dividends from assets effectivelyconnected with a U.S. trade or business. Eachpayer should send you a Form 1099-DIV.

Capital Gain Distributions. If you receivedany capital gain distributions, see theinstructions for line 14 on this page.

Nontaxable Distributions. Somedistributions are nontaxable because they area return of your cost. They will not be taxeduntil you recover your cost. You must reduceyour cost (or other basis) by these distributions.After you get back all of your cost (or otherbasis), you must report these distributions ascapital gains on Schedule D (Form 1040). Fordetails, see Pub. 550.

TIP

Dividends on insurance policies are apartial return of the premiums you paid.Do notreport them as dividends.

Include them in income only if they exceed thetotal of all net premiums you paid for thecontract.

Line 11Taxable Refunds, Credits, or

Offsets of State and Local Income Taxes.

TIP

None of your refund is taxable if, in theyear you paid the tax, youdid notitemize deductions.

If you received a refund, credit, or offset ofstate or local income taxes in 2000, you mayreceive a Form 1099-G. If you chose to applypart or all of the refund to your 2000 estimatedstate or local income tax, the amount appliedis treated as received in 2000.

For details on how to figure the amount youmust report as income, see Recoveries inPub. 525.

Line 12Scholarship and FellowshipGrants. If you received a scholarship orfellowship, part or all of it may be taxable.

If you were a degree candidate, the amountsyou used for expenses other than tuition andcourse-related expenses are generally taxable.For example, amounts used for room, board,and travel are generally taxable.

If you were not a degree candidate, the fullamount of the scholarship or fellowship isgenerally taxable. Also, amounts received asa scholarship or fellowship that are payment forteaching, research, or other services aretaxable even if the services were required toget the grant.

Report the total amount of the grant on line12 and show any nontaxable part on line 31. If

the grant was reported on Form 1042-S, enterthe gross amount from column (b) on line 12.However, do not include amounts exemptedunder a tax treaty and reported in item M onpage 5 of Form 1040NR. If you are excludingitems allowed by section 117 (that is, amountsused for tuition and course-related expensessuch as fees, books, supplies, and equipment)that exceed amounts shown on Form 1042-S,attach a statement describing these amounts.See Pub. 520 for more information.

Attach any Form 1042-S or Form W-2 youreceived from the college or institution. If you

did not receive a 1042-S or W-2 form, attacha statement from the college or institution (ontheir letterhead) showing the details of thegrant.

Line 13Business Income or (Loss). If youoperated a business or practiced yourprofession as a sole proprietor, report youreffectively conncected income and expenseson Schedule C or Schedule C-EZ (Form1040).

Include any income you received as a dealerin stocks, securities, and commodities throughyour U.S. office. If you dealt in these itemsthrough an independent agent, such as a U.S.broker, custodian, or commissioned agent,your income may not be considered effectivelyconnected with a U.S. business.

Line 14Capital Gain or (Loss). If you hadeffectively connected capital gains or losses,including any effectively connected capitalgain distributions from a mutual fund, youmust complete and attach Schedule D (Form1040). But see the Exceptionbelow. Enter theeffectively connected gain or (loss) fromSchedule D (Form 1040) on line 14.

Gains and losses from disposing of U.S. realproperty interests are taxed as if you wereengaged in a U.S. trade or business and aretreated as effectively connected with that tradeor business. See Dispositions of U.S. RealProperty Interests on page 4.

Exception. You do not have to fileSchedule D (Form 1040) if both of thefollowing apply.

1. The only amounts you have to report onSchedule D (Form 1040) are effectivelyconnected capital gain distributions.

2. Those distributions do not include 28%rate gains, unrecaptured section 1250 gains,or section 1202 gains.

If both of the above apply, enter youreffectively connected capital gain distributionson line 14 and check the box on that line. Also,be sure you use the Capital Gain TaxWorksheet on page 12 to figure your tax.

Line 15Other Gains or (Losses). If yousold or exchanged assets used in a U.S. tradeor business, see the instructions for Form4797.

Lines 16a and 16bIRA Distributions.

Note: If you converted part or all of an IRA toa Roth IRA in 1998 and you chose to report thetaxable amount over 4 years, see1998 RothIRA Conversionson page 8.

You should receive a Form 1099-R showingthe amount of the distribution from yourindividual retirement arrangement (IRA).Unless otherwise noted in the line 16a and 16binstructions, an IRA includes a traditional IRA,Roth IRA, education (Ed) IRA, simplifiedemployee pension (SEP) IRA, and a savingsincentive match plan for employees (SIMPLE)IRA. Leave line 16a blank and enter the totaldistribution on line 16b.



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Exception. Do not enter your total IRAdistribution on line 16b if any of the followingapply.

1. You made nondeductible contributions toany of your traditional or SEP IRAs for 2000or an earlier year. Instead, use Form 8606 tofigure the amount to enter on line 16b; enterthe total distribution on line 16a. If you madenondeductible contributions to these IRAs for2000, also see Pub. 590.

2. You converted part or all of a traditional,SEP, or SIMPLE IRA to a Roth IRA in 2000.Instead, use Form 8606 to figure the amountto enter on line 16b; enter the total distributionon line 16a.

3. You made an excess contribution in2000 to your IRA and withdrew it during theperiod of January 1, 2001, through April 16,2001. Enter the total distribution on line 16aand the taxable part (the earnings) on line 16b.

4. You received a distribution from an Edor Roth IRA and the total distribution was notrolled over into another IRA of the same type.Instead, use Form 8606 to figure the amountto enter on line 16b; enter the total distributionon line 16a.

5. You rolled your IRA distribution over intoanother IRA of the same type (for example,from one traditional IRA to another traditional

IRA). Enter the total distribution on line 16a andwrite Rollover next to line 16b. If the total online 16a was rolled over, enter zero on line 16b.If the total was not rolled over, enter the partnot rolled over on line 16b. But if 1 above alsoapplies, use Form 8606 to figure the taxablepart.

If you rolled over the distribution (a) in 2001or (b) from a conduit IRA into a qualified plan,attach a statement explaining what you did.

CAUTION

!You may have to pay an additional taxif(1)you received an early distributionfrom your IRA and the total distribution

was not rolled over or(2)you were born beforeJuly 1, 1929, and received less than theminimum required distribution. See theinstructions for line 51 on page 12 for details.

1998 Roth IRA Conversions. If youconverted an IRA to a Roth IRA in 1998 andyou chose to report the taxable amount over 4years, leave line 16a blank and enter on line16b the amount from your 1998 Form 8606,line 17. But you may have to enter a differentamount on line 16b if any of the followingapply.q You received a distribution from a Roth IRAin 2000. Use Form 8606 to figure the amountto enter on line 16b.q You received a distribution from a Roth IRAin 1998 or 1999. See Pub. 590 to figure theamount to enter on line 16b.q The owner of the Roth IRA died in 2000. SeePub. 590 to figure the amount to enter on line

16b.Note: If you received a distribution fromanother type of IRA, figure the taxable amountof the distribution and enter the total of thetaxable amounts on line 16b.

Lines 17a and 17bPensions andAnnuities. Use lines 17a and 17b to reporteffectively connected pension and annuitypayments you received. You should receive aForm 1099-R showing the amount youreceived. See below for details on rollovers andlump-sum distributions. But if this income is noteffectively connected with your U.S. trade orbusiness, report it on line 76.

Do not include the following payments onlines 17a and 17b. Instead, report them on line8.

q Disability pensions received before you reachthe minimum retirement age set by youremployer.q Corrective distributions of excess salarydeferrals or excess contributions to retirementplans.

TIP

If you received a Form 1099-R thatshows Federal income tax withheld,attach it to Form 1040NR.

Some annuities are tax-exempt. See section871(f).

Note: If you perform services in the UnitedStates, your income is effectively connectedwith the conduct of a U.S. trade or business.When you receive a pension in a later year asa result of these services, the pension is alsoconsidered effectively connected with theconduct of a U.S. trade or business.

Fully Taxable Pensions and Annuities. Ifyour pension or annuity is fully taxable, enterit on line 17b; do not make an entry on line17a. Your payments are fully taxable if eitherof the following applies.q You did not contribute to the cost (see below)of your pension or annuity orq

You got your entire cost back tax free before2000.

Fully taxable pensions and annuities alsoinclude military retirement pay shown on Form1099-R. For details on military disabilitypensions, see Pub. 525. If you received aForm RRB-1099-R, see Pub. 575 forinformation on how to report your benefits.

Partially Taxable Pensions and Annuities.If your pension or annuity is partially taxableand your Form 1099-R does not show thetaxable part, you must use the General Rule tofigure the taxable part. The General Rule isexplained in Pub. 939. However, if your annuitystarting date (defined below) was after July 1,1986, you may be able to use the SimplifiedMethod explained below. But if your annuity

starting date was after November 18, 1996,and items 1, 2, and 3 below under SimplifiedMethod apply, you must use the SimplifiedMethod to figure the taxable part.

You can ask the IRS to figure the taxablepart for you for an $85 fee. For details, seePub. 939.

If your Form 1099-R shows a taxableamount, you may report that amount on line17b. But you may be able to report a lowertaxable amount by using the General Rule orthe Simplified Method.

Once you have figured the taxable part ofyour pension or annuity, enter that amount online 17b and the total on line 17a.

Annuity Starting Date. Your annuitystarting date is the later of the first day of the

first period for which you received a payment,or the date the plan's obligations became fixed.

Simplified Method. If your annuity startingdate (defined above) was after July 1, 1986,and all three of the following apply, you canuse this simpler method. But if your annuitystarting date was after November 18, 1996,and all three of the following apply, you mustuse the Simplified Method.

1. The payments are for (a) your life or (b)your life and that of your beneficiary.

2. The payments are from a qualifiedemployee plan, a qualified employee annuity,or a tax-sheltered annuity.

3. At the time the pension or annuitypayments began, either you were under age75 or the number of years of guaranteedpayments was fewer than 5. See Pub. 575 forthe definition of guaranteed payments.

If all three apply, use the worksheet on page9 to figure the taxable part of your pension orannuity. For more details on the SimplifiedMethod, see Pub. 575.

Age (or Combined Ages) at AnnuityStarting Date. If you are the retiree, use yourage on the annuity starting date. If you are thesurvivor of a retiree, use the retiree's age on

his or her annuity starting date. But if yourannuity starting date was after 1997 and thepayments are for your life and that of yourbeneficiary, use your combined ages on theannuity starting date.

If you are the beneficiary of an employeewho died, see Pub. 575. If there is more thanone beneficiary, see Pub. 575 to figure eachbeneficiary's taxable amount.

Changing Methods. If your annuity startingdate was after July 1, 1986, and beforeNovember 19, 1996, you may be able tochange from the General Rule to the SimplifiedMethod (or the other way around). For details,see Pub. 575.

Cost. Your cost is generally your netinvestment in the plan as of the annuity startingdate. It should be shown in box 9b of Form1099-R for the first year you received paymentsfrom the plan.

Death Benefit Exclusion. If you are thebeneficiary of a deceased employee or formeremployee who died before August 21, 1996,amounts paid to you by, or on behalf of, anemployer because of the death of theemployee may qualify for a death benefitexclusion of up to $5,000. If you are entitled tothis exclusion, add it to the amount you enteron line 2 of the worksheet on page 9. Do thiseven if the Form 1099-R shows a taxableamount. The payer of the annuity cannot addthe death benefit exclusion to your cost whenfiguring the taxable amount. Special rulesapply if you are the survivor under a joint andsurvivor's annuity. For details, see Pub. 939.

Rollovers. A rollover is a tax-freedistribution of cash or other assets from oneretirement plan that is contributed to anotherplan. Use lines 17a and 17b to report a rollover,including a direct rollover, from one qualifiedemployer's plan to another or to an IRA or SEP.

Enter on line 17a the total distribution beforeincome tax or other deductions were withheld.This amount should be shown in box 1 of Form1099-R. From the total on line 17a, subtractany contributions (usually shown in box 5) thatwere taxable to you when made. From thatresult, subtract the amount that was rolled overeither directly or within 60 days of receiving thedistribution. Enter the remaining amount, evenif zero, on line 17b. Write Rollover next to line17b.

Special rules apply to partial rollovers ofproperty. For more details on rollovers,including distributions under qualified domesticrelations orders, see Pub. 575.

Lump-Sum Distributions. If you receiveda lump-sum distribution from a profit-sharingor retirement plan, your Form 1099-R shouldhave the Total distribution box in box 2bchecked. You may owe an additional tax if youreceived an early distribution from a qualifiedretirement plan and the total amount was notrolled over. For details, see the instructions forline 51 on page 12.



9/32

Simplified Method WorksheetLines 17a and 17b (keep for your records)

Enter the total pension or annuity payments received this year. Also, enterthis amount on Form 1040NR, line 17a

1.1.

Enter your cost in the plan at the annuity starting dateplus any death benefit exclusion (see page 8)

2.2.

3.

3.

Divide line 2 by line 3 4.4.

Multiply line 4 by the number of months for which thisyears payments were made. If your annuity startingdate was before 1987, skip lines 6 and 7 and enterthis amount on line 8. Otherwise, go to line 6

5.

5.

Enter the amount, if any, recovered tax free in yearsafter 1986 6.

6.

Subtract line 6 from line 2 7.7.

Enter the smaller of line 5 or line 78. 8.

Taxable amount. Subtract line 8 from line 1. Enter the result, but not less

than zero. Also, enter this amount on Form 1040NR, line 17b. If your Form1099-R shows a larger amount, use the amount on this line instead ofthe amount from Form 1099-R

9.

9.

Note: If you had more than one partially taxable pension or annuity, figure the taxable part ofeach separately. Enter the total of the taxable parts on Form 1040NR, line 17b. Enter the totalpension or annuity payments received in 2000 on Form 1040NR, line 17a.

Enter the appropriate number from Table 1 below.But if your annuity starting date was after 1997 andthe payments are for your life and that of your ben-eficiary, enter the appropriate number from Table 2below

Table 1 for Line 3 Above

IF the age at annuitystarting date (seepage 8) was . . .

55 or under

5660

6165

6670

71 or older

300

260

240

170

120

360

310

260

210

160

AND your annuity starting date was

before November 19,1996, enter on line 3 . . .

after November 18, 1996,enter on line 3 . . .

Table 2 for Line 3 Above

IF the combined ages atannuity starting date(see page 8) were . . .

110 or under

111120

121130

131140

141 or older

410

360

310

260

210

THEN enter online 3 . . .

elsewhere on your return or other schedules.List the type and amount of income. Ifnecessary, show the required information onan attached statement. For more details, seeMiscellaneous Taxable Income in Pub. 525.

Report other income on page 4 of Form1040NR if not effectively connected with a U.S.trade or business.

Line 22. Use line 22 to report your totaleffectively connected income that is exemptfrom tax by a tax treaty. Do not include thisexempt income on line 23 or line 31. Also, youmust complete item M on page 5 of Form

1040NR.

Adjusted Gross IncomeLine 24IRA Deduction.

TIP

If you make any nondeductiblecontributions to a traditional IRA for2000, you must report them onForm

8606.

If you made contributions to a traditional IRAfor 2000, you may be able to take an IRAdeduction. But you must have had earnedincome to do so. You should receive astatement by May 31, 2001, that shows allcontributions to your traditional IRA for 2000.

Were You Covered by a Retirement Plan?If you were covered by a retirement plan(qualified pension, profit-sharing (including401(k)), annuity, SEP, SIMPLE, etc.) at workor through self-employment, your IRAdeduction may be reduced or eliminated. Butyou can still make contributions to an IRA evenif you cannot deduct them. In any case, theincome earned on your IRA contributions is nottaxed until it is paid to you.

The Pension plan box in box 15 of yourW-2 form should be checked if you werecovered by a plan at work even if you were notvested in the plan. You are also covered by aplan if you were self-employed and had a SEP,SIMPLE, or qualified retirement plan.

Special Rule for Married Individuals. If

you checked filing status box 3, 4, or 5 and youwere not covered by a retirement plan but yourspouse was, you are considered covered by aplan unless you lived apart from your spousefor all of 2000.

See Pub. 590 for more details.

Line 25Student Loan Interest Deduction.

Use the worksheet on page 10 to figure thisdeduction if all five of the following apply.

1. You paid interest in 2000 on a qualifiedstudent loan (see page 10).

2. At least part of the interest paid in 2000was paid during the first 60 months that interestpayments were required to be made. SeeExamplebelow.

3. You checked filing status box 1, 2, or 6.

4. Your modified adjusted gross income(AGI) is less than $55,000. Use lines 3 through5 of the worksheet on page 10 to figure yourmodified AGI.

5. You are not claimed as a dependent onsomeone's (such as your parent's) 2000 taxreturn.

Example. You took out a qualified studentloan in 1993 while in college. You had 6 yearsto repay the loan and your first monthlypayment was due July 1995, after yougraduated. You made a payment every monthas required. If you meet items 3 through 5above, you may use only the interest you paidfor January through June 2000 to figure your

Enter the total distribution on line 17a and

the taxable part on line 17b.

TIP

You may be able to pay less tax on thedistribution if you were born before1936, you meet certain other conditions,

and you choose to useForm 4972to figure thetax on any part of the distribution. You mayalso be able to use Form 4972 if you are thebeneficiary of a deceased employee who wasborn before 1936. For details, see Form 4972.

Line 20Unemployment Compensation.You should receive a Form 1099-G showingthe total unemployment compensation paid toyou in 2000.

If you received an overpayment of

unemployment compensation in 2000 and yourepaid any of it in 2000, subtract the amountyou repaid from the total amount you received.Enter the result on line 20. Also, enterRepaid and the amount you repaid on thedotted line next to line 20. If, in 2000, yourepaid unemployment compensation that youincluded in gross income in an earlier year, youmay deduct the amount repaid on Schedule A(Form 1040NR), line 11. But if you repaid morethan $3,000, see Repayments in Pub. 525 fordetails on how to report the repayment.

Line 21Other Income. Use this line toreport any other income effectively connectedwith your U.S. business that is not reported



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Student Loan Interest Deduction WorksheetLine 25 (keep for your records)

2.

Enter the total interest you paid in 2000 on qualified student loans (definedbelow). Do not include interest that was required to be paid after the first60 months

3.

Enter the smaller of line 1 or $2,000

4. Enter the total of the amounts from Form 1040NR,line 24, lines 26 through 31, plus any amount youentered on the dotted line next to line 32

5. Modified AGI. Subtract line 4 from line 3

6. Is line 5 more than $40,000?

7. Divide line 6 by $15,000. Enter the result as a decimal (rounded to at leastthree places). Do not enter more than 1.000

8. Multiply line 2 by line 7

9. Student loan interest deduction. Subtract line 8 from line 2. Enter theresult here and on Form 1040NR, line 25. Do not include this amount infiguring any other deduction on your return (such as on Schedule A (Form1040NR), Schedule C (Form 1040), Schedule E (Form 1040), etc.)

2.

8.

9.

3.

4.

5.

6.

7. .

1.

Before you begin:

1.

Enter the amount from Form 1040NR, line 23

Complete Form 1040NR, lines 26 through 31, if they apply to you.

Figure any amount to be entered on the dotted line next to line 32(see the instructions for line 32 that begin on this page).

See the instructions for line 25 that begin on page 9.

No. Skip lines 6 and 7, enter -0- on line 8, andgo to line 9.

Yes. Subtract $40,000 from line 5

insurance for yourself, your spouse, anddependents. The insurance plan must beestablished under your business. But if youwere also eligible to participate in anysubsidized health plan maintained by your oryour spouse's employer for any month or partof a month in 2000, amounts paid for healthinsurance coverage for that month cannot beused to figure the deduction. For example, ifyou were eligible to participate in a subsidizedhealth plan maintained by your spouse'semployer from September 30 throughDecember 31, you cannot use amounts paid for

health insurance coverage for Septemberthrough December to figure your deduction.For more details, see Pub. 535.

If you qualify to take the deduction, use theworksheet below to figure the amount you candeduct.

Exception. Use Pub. 535 instead of theworksheet below to find out how to figure yourdeduction if either of the following applies.

q You had more than one source of incomesubject to self-employment tax.q You are using amounts paid for qualifiedlong-term care insurance to figure thededuction.

Line 29Self-Employed SEP, SIMPLE, andQualified Plans. If you were self-employed

or a partner, you may be able to take thisdeduction. See Pub. 560 or, if you were aminister, Pub. 517.

Line 30Penalty on Early Withdrawal ofSavings. The Form 1099-INT or Form1099-OID you received will show the amountof any penalty you were charged.

Line 31Scholarship and FellowshipGrants Excluded. If you received ascholarship or fellowship grant and were adegree candidate, enter amounts used fortuition and course-related expenses (such asfees, books, supplies, and equipment). Do notinclude any amount shown on line 22. SeePub. 520 for more information.

Line 32. Include in the total on line 32 any ofthe following adjustments that are related to

your effectively connected income. To findout if you can take the deduction, see the formor publication indicated. On the dotted line nextto line 32, enter the amount of your deductionand identify it as indicated.

q Performing-arts-related expenses (see Form2106 or Form 2106-EZ). Identify as QPA.q Reforestation amortization (see Pub. 535).Identify as RFST.

deduction. June is the end of the 60-monthperiod (July 1995June 2000).

Qualified student loan. This is any loanyou took out to pay the qualified highereducation expenses for yourself, your spouse,or anyone who was your dependent when theloan was taken out. The person for whom theexpenses were paid must have been an eligiblestudent (see below). However, a loan is not aqualified student loan if (1) any of the proceedswere used for other purposes or (2) the loanwas from either a related person or a personwho borrowed the proceeds under a qualifiedemployer plan or a contract purchased undersuch a plan. To find out who is a relatedperson, see Pub. 970.

Qualified higher education expensesgenerally include tuition, fees, room and board,and related expenses such as books andsupplies. The expenses must be for educationin a degree, certificate, or similar program atan eligible educational institution. An eligibleeducational institution includes most colleges,universities, and certain vocational schools.You must reduce the expenses by the followingnontaxable benefits.q Employer-provided educational assistancebenefits that are not included in box 1 of yourW-2 form(s).q Qualified distributions from an education IRA.q Any scholarship, educational assistanceallowance, or other payment (but not gifts,

inheritances, etc.) excluded from income.For more details on these expenses, seePub. 970.

An eligible student is a person who:q Was enrolled in a degree, certificate, or otherprogram (including a program of study abroadthat was approved for credit by the institutionat which the student was enrolled) leading toa recognized educational credential at aneligible educational institution andq Carried at least half the normal full-time workload for the course of study he or she waspursuing.

Line 26Medical Savings Account (MSA)Deduction. If you made contributions to anMSA for 2000, you may be able to take thisdeduction. See Form 8853 for details.

Line 27Moving Expenses. Employees andself-employed persons (including partners) candeduct certain moving expenses. The movemust be in connection with employment thatgenerates effectively connected income.

If you moved in connection with your job orbusiness or started a new job, you may be ableto take this deduction. But your new workplacemust be at least 50 miles farther from your oldhome than your old home was from your oldworkplace. If you had no former workplace,your new workplace must be at least 50 milesfrom your old home. The deduction is generallylimited to moves to or within the United Statesor its possessions. If you meet theserequirements, see Pub. 521. Use Form 3903to figure the amount to enter on this line.

Line 28Self-Employed Health InsuranceDeduction. If you were self-employed and hada net profit for the year, you may be able todeduct part of the amount paid for health

1. Enter the total amount paid in 2000 for health insurance coverageestablished under your business for 2000 for you, your spouse, anddependents. But do not include amounts for any month you wereeligible to participate in an employer-sponsored health plan 1.

2. Multiply line 1 by 60% (.60) 2.

3. Enter your net profit and any other earned income* from the businessunder which the insurance plan is established, minus any deductionyou claim on Form 1040NR, line 29 3.

4. Self-employed health insurance deduction. Enter the smaller ofline 2 or line 3 here and on Form 1040NR, line 28 4.

*Earned income includes net earnings and gains from the sale, transfer, or licensing ofproperty you created. It does not include capital gain income.

Before you begin:

Self-Employed Health Insurance Deduction WorksheetLine 28 (keep for your records)

Be sure you have read the Exception above to see if you can use thisworksheet instead of Pub. 535 to figure your deduction.

Complete Form 1040NR, line 29, if it applies to you.



11/32

Deduction for Exemptions WorksheetLine 37 (keep for your records)See the instructions for line 37 below.

2. Multiply $2,800 by the total number of exemptions claimed onForm 1040NR, line 7d

3. Enter the amount from Form 1040NR, line 34

4. Enter the amount shown below for the filing statusbox you checked on page 1 of Form 1040NR: Box 1 or 2, enter $128,950 Box 3, 4, or 5, enter $96,700 Box 6, enter $193,400

5.

Note: If line 5 is more than: $122,500 if you checkedfiling status box 1, 2, or 6; $61,250 if you checkedfiling status box 3, 4, or 5, stop here. Youcannottake a deduction for exemptions. Enter -0- on Form1040NR, line 37.

6. Divide line 5 by: $2,500 if you checked filing statusbox 1, 2, or 6; $1,250 if you checked filing status box3, 4, or 5. If the result is not a whole number, increaseit to the next higher whole number (for example,increase 0.0004 to 1)

7. Multiply line 6 by 2% (.02) and enter the result as a decimal amount

8. Multiply line 2 by line 7

9. Deduction for exemptions. Subtract line 8 from line 2. Enter the resulthere and on Form 1040NR, line 37

2.

8.

9.

3.

4.

5.

6.

7.

Is the amount on Form 1040NR, line 34, more than the amount shown on line 4 below foryour filing status?

.

No. Stop. Multiply $2,800 by the total number of exemptions claimed on Form 1040NR,line 7d, and enter the result on line 37.

Yes. Continue.

1.

Subtract line 4 from line 3

capital gains (including capital gaindistributions), that is effectively connected witha U.S. trade or business. But if neither of thechild's parents was alive on December 31,2000, do not use Form 8615 to figure thechild's tax.

Schedule D (Form 1040). If you had a netcapital gain on Schedule D (both lines 16 and17 of that schedule are gains) and the amounton Form 1040NR, line 38, is more than zero,use Part IV of Schedule D to figure your tax.

Capital Gain Tax Worksheet. If youreceived capital gain distributions but you are

not required to file Schedule D (Form 1040),use the worksheet on page 12 to figure yourtax.

Schedule J (Form 1040). If you had incomefrom farming, your tax may be less if youchoose to figure it using income averaging onSchedule J.

Line 40Alternative Minimum Tax. The taxlaw gives special treatment to some kinds ofincome and allows special deductions andcredits for some kinds of expenses. If youbenefit from these provisions, you may have topay a minimum amount of tax through thealternative minimum tax. This tax is figured onForm 6251 for individuals. If you are filing foran estate or trust, get Schedule I (Form 1041)and its instructions to see if you owe this tax.

If you have any of the adjustments orpreferences from the list below or you areclaiming a net operating loss deduction or theforeign tax credit, you must complete Form6251. Otherwise, to see if you should completeForm 6251, add the amount on line 36 of Form1040NR to the amounts on lines 3 and 15 ofSchedule A (Form 1040NR). If the total is morethan the dollar amount shown below thatapplies to you, fill in Form 6251.q $33,750 if you checked filing status box 1or 2.q $22,500 if you checked filing status box 3,4, or 5.q $45,000 if you checked filing status box 6.

Disposition of U.S. Real Property

Interests. If you disposed of U.S. real propertyinterests at a gain, you must make a specialcomputation to see if you owe this tax. Fordetails, see the Instructions for Form 6251.

Adjustments and Preferences:

1. Accelerated depreciation.

2. Stock by exercising an incentive stockoption and you did not dispose of the stock inthe same year.

3. Tax-exempt interest from private activitybonds.

4. Intangible drilling, circulation, research,experimental, or mining costs.

5. Amortization of pollution-control facilitiesor depletion.

6. Income or (loss) from tax-shelter farm

activities or passive activies.7. Percentage-of-completion income from

long-term contracts.

8. Alternative minimum tax adjustmentsfrom an estate, trust, electing large partnership,or a cooperative.

9. Section 1202 exclusion.

CAUTION

!Form 6251 should be filled in for a childunder age 14 if the child's adjustedgross income from Form 1040NR, line

34, exceeds the child's earned income by morethan $5,200.

q Repayment of supplemental unemploymentben

Documents

US Internal Revenue Service: i1040nr--2000