Rev. Rul. 54-428

The purpose of this Revenue Ruling is to call attention to certain provisions of the Internal Revenue Code of 1954 which have an effect on departing aliens in connection with the termination of the taxable year under the provisions of section 6851 of such Code.

Under the provisions of section 146(a)(1) of the Internal Revenue Code of 1939, the Commissioner by reason of jeopardy was authorized to terminate the taxable year of a departing alien. Section 47(e) of the Internal Revenue Code of 1939 provided for the proration of personal exemptions in such cases. Since the Internal Revenue Code of 1954 has no provision comparable to section 47(e), there can be no proration of the personal exemption in the case of a return filed for a short period by reason of the termination of the taxable year due to jeopardy. Departing aliens are allowed the full personal exemption.

Under the provisions of section 871 of the Internal Revenue Code of 1954, the tax base of nonresident aliens not engaged in trade or business in the United States, which includes interest (except interest on deposits with persons carrying on the banking business), dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income, has been enlarged to include certain gains, profits, and income which are considered gains from the sale or exchange of capital assets. These include the following: (1) gain from lump sum distribution by a qualified pension trust (sec. 402(a)(2) of the Internal Revenue Code of 1954); (2) certain gains from timber and coal (sec. 631(b) and (c) of the Internal Revenue Code of 1954, and sec. 1231 of such Code); and (3) gains derived from transfer of an interest in a patent (sec. 1235 of the Internal Revenue Code of 1954).

Until such time as Form 1040C, U.S. Departing Alien Income Tax Return, and instructions have been revised and issued, the present Form 1040C should be used. Where necessary, supporting schedules can be attached to the return to reconcile the applicable provisions of the Internal Revenue Code of 1954 with the outdated Form 1040C.