Residency

Code Section 7701 (b)(2)(A)(iii)

U.S residency start date depends on two things:

ü  Residency is established under the green card test.

ü  Residency is established under substantial presence test.

If residency is established under the green card test, the residency start date is the first day an alien is physically present in the United States with a green card.

If residency is established under substantial presence test residency start date begins the first day an alien is present in the United States.

If an alien is a resident in two consecutive calendar years the residency starting date for an alien who was a U.S resident in the preceding year is January 1.

Code Section 7701 (b)(4)

Some aliens can qualify to elect first year residency. If a qualifying alien satisfies eihter the greeen card test or substntial presence test, he or she can elect to be taxed as a U.S resident for a portion of preceding year. Under this election taxpayer can itemize his / her deductions and also claim foreign tax credit, begining with the entry date into the United States.

Code Section 7701 (b)(2)(B)

Under the physical presence test an alien’s U.S residency terminaton date is the last day of the year that individual was present in the United States.

Under the green card test an alien’s U.S residency will terminate on the last day he / she had a green card.

Taxpayer must establish a close connection and a tax home in a foreign country for rest of the year.

If this exception applies, the alien is taxed as a U.S resident from Jan 01 to the residency termination date and as a non-resident for the remainder of the year. The residency termination date is later of the two residency tests, if an alien qualifies as a resident under both residency tests.

If an alien is a resident in two consecutive calendar years the normal residency termination rules do not apply if the alien is a U.S resident in succeeding year. So an alien is considered a resident through December 31.

Code Section 6013 (a)(1)

If during a tax year one or both spuses were a non-resident, a married couple cannot file a joint return.

If a non-resident alien spouse becomes a U.S resident during the year, the couple may elect to treat that spouse as a U.S resident for the entire taxable year.

Under code section 6013(g), a similar election is available when the spouse is a non-resident alien for the entire year.

Disclaimer:

This information is for educational purposes only. It does not constitute any legal advice or opinion. Please do not use any of its contents without seeking a professional advice.

References:

www.jct.gov/publications.html

http://www.law.cornell.edu

http://www.irs.gov/publications

U.S Taxation of International Transactions by Robert J. Misey, Michael S. Schadewald

Introduction to United states International Taxation by Paul R. McDaniel, Hugh j. Ault and James R. Repetti

International Taxation by Joseph Isenbergh

International Taxation in a nutshell by Richard L. Doernberg.

International Income Taxation, Code and Regulations by Robert J. Peroni – CCH

Mansoor Suhail (Mani)

Accountant

BSBA – EA – ICIA – RA

Tax for Canada and U.S.A

Web: www.theaccountingandtax.com and www.taxservicesguru.com

Blog: http://taxservicesguru.blogspot.ca

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