Question

James, a U.S. nonresident, received $3,333 (effectively connected) in 2017 for work he did in 2016. Which statement best describes the situation? The payment is considered:

A) To not be effectively connected, because it was received in 2017.

B) To be effectively connected only if he is still employed in the US in 2017

C) To not be effectively connected because of his residency status.

D) To be effectively connected, because it would have been had it been received in 2016.

Answer 1

Effectively connected income : When a non resident or foreign person engages in trade or business in United States, all the income from the sources in United States connected with that trade or business is considered as Effectively connected Income

For the payment received in different tax year from the tax year in which the transaction took place, it would be treated as the effectively connected in that year in which the transaction took place or work is done.

Therefore in the given case answer is (D) i.e

The payment is considred to be effectively coonected, because it would have been had it been received in 2016