Use the following examples to help you complete the correct attachment to your Form 1040. The completed form for each example
is shown on the pages that follow.
Illustrated Example of Form 4563
John Black is a U.S. citizen, single, and under 65. He was a bona fide resident of American Samoa during all of 2016. John
received $10,800 from the rental of a condominium he owns in Florida, and $800 of dividends from U.S. corporations. John
must file Form 1040 because his gross income from U.S. sources is $11,600 ($10,800 rental income, and $800 of dividends),
which is more than his adjusted filing requirement for single filers under 65 ($10,350). (See
Filing Requirement if Possession Income Is Excluded
in chapter 4.)
Because he must file Form 1040 (not illustrated), he fills out Form 4563 to determine the amount of income from American Samoa
he can exclude. See
Bona Fide Resident of American Samoa
in chapter 3.
Completing Form 4563.
John enters his name and social security number at the top of the form.
On Form 4563 (see later), John enters the date his bona fide residence began in American Samoa, June 2, 2015. Because
he is still a bona fide resident, he enters “not ended
” in the second blank space.
He checks the box labeled “Rented house or apartment
” to describe his type of living quarters in American Samoa.
Lines 3a and 3b.
He checks “No
” on line 3a because no family members lived with him. He leaves line 3b blank.
Lines 4a and 4b.
He checks “Yes
” on line 4a because he owns a rental property outside American Samoa (Florida), which he rents to an unrelated individual.
He enters the relevant information on line 4b.
He enters the name and address of his employer, Samoa Products Co. It is a private American Samoa corporation.
He enters the dates of his 2-week vacation to New Zealand from November 11 to November 25. That was his only trip
outside American Samoa during the year.
He enters the $24,000 in wages he received from Samoa Products Co.
He received $220 in dividends from an American Samoa corporation, which he enters here. He also received $800 of dividends
from a U.S. corporation, but he will enter that amount only on his Form 1040 because the U.S. dividends do not qualify for
the possession exclusion.
John received $10,800 in rental income from his condominium in Florida, but he will enter that amount only on his
Form 1040 because the rental income does not qualify for the possession exclusion.
John totals the amounts on lines 7 and 9 to get the amount he can exclude from his gross income in 2016. He will not
enter his excluded income on Form 1040. However, he will attach his completed Form 4563 to his Form 1040.
Illustrated Example of Form 5074
Tracy Grey is a U.S. citizen who is a self-employed fisheries consultant with a tax home in New York. Her only income for
2016 was net self-employment income of $80,000. Of the $80,000, $20,000 was from consulting work in Guam and the rest was
earned in the United States. Thinking she would owe tax to Guam on the $20,000, Tracy made estimated tax payments of $1,409
to Guam. She was not a bona fide resident of Guam during 2016.
Tracy completes Form 1040 (not illustrated), reporting her worldwide income. Because the adjusted gross income on her Form
1040 was $50,000 or more and at least $5,000 of her gross income is from Guam, Tracy must file Form 5074 with her Form 1040.
All amounts reported on Form 5074 are also reported on her Form 1040. See
U.S. Citizen or Resident Alien (Other Than a Bona Fide Resident of Guam)
in chapter 3.
Completing Form 5074.
Tracy enters her name and social security number at the top of the form.
On Form 5074 (see later), Tracy enters her self-employment income from Guam ($20,000) on line 6. She has no other
income from Guam, so the total on line 16 is $20,000.
Tracy's only adjustment in Part II is the deductible part of the self-employment tax on her net income earned in Guam.
She enters $1,413 on line 21 and line 28. Her adjusted gross income on line 29 is $18,587.
Tracy made estimated tax payments of $1,409. She enters this amount on line 30, and again on line 34 as the total
Illustrated Example of Form 8689
Juan and Carla Moreno live and work in the United States. In 2016, they received $14,400 in income from the rental of a condominium
they own in the U.S. Virgin Islands (USVI). The rental income was deposited in a bank in the USVI and they received $500 of
interest on this income. They were not bona fide residents of the USVI during the entire tax year.
The Morenos complete Form 1040 (not illustrated), reporting their income from all sources, including their interest income
and the income and expenses from their USVI rental property (reported on Schedule E (Form 1040)). The Morenos take the standard
deduction for married filing jointly, both are under 65, and they have no dependents.
The Morenos also complete Form 8689 to determine how much of their U.S. tax shown on Form 1040, line 63 (with certain adjustments),
must be paid to the U.S. Virgin Islands. See
U.S. Citizen or Resident Alien (Other Than a Bona Fide Resident of the USVI)
in chapter 3.
The Morenos file their Form 1040, attaching Form 8689 and all other schedules, with the Internal Revenue Service.
At the same time, they send a copy of their Form 1040 with all attachments, including Form 8689, to the Virgin Islands Bureau
of Internal Revenue. The Virgin Islands Bureau of Internal Revenue will process this copy.
Completing Form 8689.
Juan and Carla enter their names and Juan's social security number at the top of the form.
The Morenos enter their income from the USVI in Part I (see later). The interest income is entered on line 2 and the
net rental income of $6,200 ($14,400 of rental income minus $8,200 of rental expenses) is entered on line 11. The Morenos'
total USVI income of $6,700 is entered on line 16.
The Morenos have no adjustments to their USVI income, so they enter zero (-0-) on line 28, and $6,700 on line 29.
Their USVI adjusted gross income (AGI) is $6,700.
On line 30, the Morenos enter the amount from Form 1040, line 63 ($4,539). Their Form 1040 does not show any entries
required on line 31, so they leave that line blank and enter $4,539 on line 32.
The Morenos enter their worldwide AGI, $54,901 (Form 1040, line 38), on line 33. Next, they find what percentage of
their AGI is from USVI sources ($6,700 ÷ $54,901 = 0.122) and enter that as a decimal on line 34. They then apply that percentage
to the U.S. tax entered on line 32 to find the amount of U.S. tax allocated to USVI income ($4,539 x 0.122 = $554), and enter
that amount on line 35.
Part IV is used to show payments of income tax to the USVI only. The Morenos had no tax withheld by the U.S. Virgin
Islands, but made estimated tax payments to the USVI of $400, which they entered on lines 37 and 39. They include this amount
($400) in the total payments on Form 1040, line 74. On the dotted line next to the entry space for line 74, they enter “Form 8689
” and show the amount. The Morenos do not complete Form 1116 because they receive credit on Form 1040, line 74, for the tax
paid to the USVI.
The income tax they owe to the USVI ($154) is shown on Form 8689, line 44. They enter this amount on line 45. They
also include this additional amount ($154) on the dotted line next to the entry space and in the total on Form 1040, line
74. The Morenos will pay their USVI tax at the same time they file the copy of their U.S. income tax return with the U.S.