Source of Income From Sales of Inventory and Natural Resources Produced in One Jurisdiction and Sold in Another Jurisdiction

Section 863(a) authorizes the Secretary to promulgate regulations allocating and apportioning to U.S. or foreign sources all items of income not described in sections 861 and 862. The regulations provide rules for determining the amount of U.S. or foreign source income from cross border sales. The regulations provide amendments to the existing regulations. Section 1.863 l(b)(6) requires a statement to be attached to a return explaining the methodology used to determine fair market value and any additional production activities performed by the taxpayer, and §1.863 3(e)(2) requires a taxpayer who uses a method to determine income attributed to production activities and sales (as described in §1.863 3(b)), must fully explain in a statement attached to the return the methodology used, the circumstances justifying use of that methodology, the extent that sales are aggregated, and the amount of income allocated. This information is used to enable the IRS to determine if the taxpayer has properly determined the source of its income.

The latest form for Source of Income From Sales of Inventory and Natural Resources Produced in One Jurisdiction and Sold in Another Jurisdiction expires 2020-11-30 and can be found here.