Rev. Rul. 68-333

Section 871(a)(1)(C) of the Internal Revenue Code of 1954 deals with the taxation of income of nonresident alien individuals not connected with United States business. Section 881(a)(3) of the Code deals with the taxation of income of foreign corporations not connected with United States business. These sections impose a tax on the income received from sources within the United States by the nonresident alien individual or foreign corporation for each taxable year in the case of amounts received attributable to bonds or other evidences of indebtedness issued after September 28, 1965, that under section 1232 of the Code are considered as gains from the sale or exchange of property that is not a capital asset.

The taxes imposed by sections 871(a)(1)(C) and 881(a)(3) of the Code are subject to withholding at source under section 1441 of the Code, in the case of nonresident alien individuals and foreign partnerships, and under section 1442 of the Code, in the case of foreign corporations.

Held, pending the issuance of regulations under sections 1441 and 1442 of the Code with respect to amounts subject to tax under sections 871(a)(1)(C) and 881(a)(3) of the Code, only the original issuers of the bond or other evidence of indebtedness from which amounts are derived (that under section 1232 of the Code are considered as gains from the sale or exchange of property that is not a capital asset) will be required to withhold Federal income tax.

¹ Based on Technical Information Release 877, dated December 27, 1966.