Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-62

1955-1 C.B. 212

Sec. 61

IRS Headnote

A resident alien reporting income on the cash receipts and disbursements basis must include in his gross income the gross receipts from the sale of cattle which he raised for sale in a foreign country and which he sold there subsequent to acquiring residence in the United States.

Full Text

Rev. Rul. 55-62

Advice has been requested whether a resident alien, reporting income on the cash receipts and disbursements basis, must include in his gross income the gross receipts from the sale of cattle which he raised for sale in a foreign country and which he sold there subsequent to acquiring residence in the United States, or whether the fair market value of the cattle at the time he became a resident of the United States should be used as the basis for computing the gain on the sale.

Resident aliens of the United States are, in general, taxable the same as citizens of the United States, that is, on their entire income derived from all sources, including income from sources without the United States. See sections 39.211-1 and 39.212-1(a)(2) of Regulations 118. A taxpayer reporting his income on the cash receipts and disbursements basis who raises livestock for the purpose of sale is required to include in his gross income the gross receipts during the taxable year from the sale of livestock which was raised during the taxable year or prior years. See section 39.22(a)-7 of Regulations 118.

In the case of a taxpayer reporting income on the cash receipts and disbursements method who raises livestock for sale, an increase in the value of such property is not subject to tax until gain has been realized from the increase through some identifiable event such as a sale or exchange of the property. Where cattle were raised outside the United States and sold there subsequent to the date the owner became a resident alien of the United States, no part of the increase in the value of the cattle, which occurred while the owner was a nonresident as to the United States, was subject to Federal income tax. Therefore, in the case of a taxpayer reporting income on the cash receipts and disbursements basis, the entire amount of the gain from the sale would be taxable in the United States in the year in which the sale was consummated.

Accordingly, it is held that a resident alien, reporting income on the cash receipts and disbursements basis, shall include in his gross income the gross receipts during the year from the sale of livestock which was raised for sale in a foreign country and which he sold there subsequent to acquiring residence in the United States