Because X's activity in space is not simply the facilitation of its own communications, or part of a "separate service" provided by X, X's activity constitutes space activity in its entirety, and X's income from the activity is
sourced under the general SPOCI rules.
However, a consistency rule would require a loss recognized on the sale of an 80%-owned foreign affiliate to reduce foreign source passive income if, within the past five years, the seller had recognized gain on the sale of a foreign affiliate
sourced under the foreign affiliate stock rule.
No reciprocal agreement: The remedy for nonreciprocal filing states is to have the taxpayer claim a credit for taxes paid to another state, and effectively assign tax to the state in which the income is
sourced. The credit is normally limited to the resident state tax assessed on the out-of-state income.
Moreover, the consistency exception requires foreign sourcing of all losses if as little as $1 of gain has been
sourced under section 865(f) in the past five years.
1.861-7(c), inventory purchased for resale is
sourced at the place where the title and risk of loss to the goods passes from the seller to the buyer under the sales contract as free on board (FOB) place of destination or FOB place of shipment.
The example concludes that liquefaction of natural gas is not an "additional production activity" and therefore all of the taxpayer's income is
sourced to the United States.
sourced. This ruledisregards the residence-of-the-seller rules in Sec.
[sections] 1.863-3(b) permits taxpayers to apportion 50 percent of the income derived from the sale outside the United States of products manufactured within the United States on the basis of the location of the assets held to produce the income; the other 50 percent of the income is
sourced under the title-passage rule (i.e., where title to the goods shifts to the purchaser and hence where the place of sale is determined to occur).
Instead, it concluded that such fees should be
sourced as if they were interest, even though they were not actually interest.
In International Multifoods Corp., 108 TC 579 (1997), the Tax Court supported the proposed regulations that the loss on stock sales is generally
sourced to the seller's residence.
Prior to 1987, taxpayers that derived income from the sale of personal property
sourced such income under the "title passage" rule.
