26 U.S.C. § 863 — Special rules for determining source

(a) Under the Secretary's regulations, allocate or apportion items not listed in sections 861(a) and 862(a) between United States and foreign sources. For income separately assigned to United States sources, deduct directly allocated expenses, losses, and deductions and a ratable share of unassignable items; the remainder is United States-source taxable income. (b) For income from both United States and foreign sources, first subtract properly allocated expenses, losses, deductions, and ratable unassignable amounts. The United States part may then be found using the Secretary's general formulas. Income from (1) services performed partly inside and partly outside the United States, (2) inventory produced^* partly or wholly in one area and sold or exchanged in the other, or (3) inventory bought in a United States possession and sold or exchanged in the United States is treated as partly from each source. Inventory income in (2) is allocated only by production activity. (c)(1) Transportation income from transportation that begins and ends in the United States is entirely United States-source. (2)(A) Otherwise, if transportation begins or ends in the United States, 50 percent is United States-source. (B) This does not cover personal-service transportation income unless the transportation runs from the United States to a possession or from a possession to the United States; vessel-related income also requires the taxpayer^* to be a citizen or resident alien. (3) “Transportation income” means income from using, hiring, or leasing a vessel or aircraft, or directly related services, and includes containers used with them. (d)(1) Unless regulations provide otherwise, space or ocean activity income is United States-source for a United States person^* and foreign-source for anyone else. (2)(A) Space or ocean activity means activity in space or on or under water outside the jurisdiction recognized by the United States of a foreign country, United States possession, or the United States, including Antarctica. (B) It excludes transportation income, international communications income, and activity involving mines, oil or gas wells, or natural deposits to the extent within the United States, a foreign country, or a possession; for section 638, a foreign country's jurisdiction excludes jurisdiction the United States does not recognize. (e)(1)(A) A United States person sources 50 percent of international communications income inside and 50 percent outside. (B)(i) A non-United States person sources such income outside, unless regulations or clause (ii) provide otherwise. (ii) Income of such a person attributable to a United States office or fixed place of business is United States-source. (2) “International communications income” includes income from transmitting communications or data between the United States and a foreign country or United States possession.