Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 61-2

1961-1 C.B. 393

Sec. 876

Sec. 933

Sec. 6012

IRS Headnote

A bona fide resident of Puerto Rico employed by an agency of the Commonwealth of Puerto Rico who is temporarily studying in the United States during a taxable year in the interests of his employer retains his status, for Federal income tax purposes, as a resident of Puerto Rico. Compensation received by him from the Puerto Rican agency during the year for services performed in Puerto Rico is excludable from gross income subject to Federal income tax. However, compensation received by him from such agency which is attributable to the period of study in the United States is includible in gross income subject to Federal income tax. If such gross income amounts to $600 or more, he must file a Federal income tax return for such taxable year.

Full Text

Rev. Rul. 61-2

Advice has been requested as to the status, for Federal income tax purposes, of a bona fide resident of Puerto Rico temporarily studying in the United States and the income tax treatment of compensation received by him from sources within Puerto Rico.

In the instant case, an individual had established bona fide residence in Puerto Rico before January 1, 1958, and is a permanent employee of an agency of the Commonwealth of Puerto Rico. During the year 1958, the individual was sent to the United States through the sponsorship of the Puerto Rican Government to pursue further studies. During the period of study in the United States, the individual continued to receive compensation from his employer in Puerto Rico. His only income for 1958 was the salary received from the agency of the Commonwealth of Puerto Rico.

By the enactment of Public Law 600, 81st Cong., 2d sess., approved July 3, 1950, 64 Stat. 319, 48 U.S.C. 731(b), the Insular Government of the Commonwealth of Puerto Rico is no longer an instrumentality or agency of the United States exercising delegated power. See Mora et al v. Torres , 113 Fed.Supp. 309, affirmed 206 Fed.(2d) 377. Accordingly, an employee of the Commonwealth Government will not be considered as deriving income from United States sources on account of his salary received for services performed in Puerto Rico, as would an individual receiving salary for services performed in Puerto Rico as an employee of the United States or an instrumentality thereof.

Section 933 of the Internal Revenue Code of 1954 provides that, in the case of an individual who is a bona fide resident of Puerto Rico during the entire taxable year, income derived from sources within Puerto Rico (except amounts received for services performed as an employee of the United States or any agency thereof) is not includible in his gross income and shall be exempt from Federal income tax. However, such individual is not allowed as a deduction from his gross income any deductions (other than the deduction for personal exemptions) properly allocable to or chargeable against amounts excluded from gross income under section 933 of the Code.

Section 876 of the Code provides that an alien individual who is a bona fide resident of Puerto Rico during the entire taxable year is not subject to the provisions of the Code relating to nonresident alien individuals, but is subject to the tax imposed by section 1 of the Code.

Section 6012 of the Code provides that every individual having for the taxable year gross income of $600 or more must file a Federal income tax return.

The pursuit of studies in the United States in the interests of his Puerto Rican employer is considered as the performance of services in the United States for which compensation is received. Once bona fide residence in Puerto Rico has been established, temporary absences therefrom in the United States or elsewhere on vacation or business trips will not necessarily deprive an individual of his status as a bona fide resident of Puerto Rico.

Accordingly, it is held that a bona fide resident of Puerto Rico employed by an agency of the Commonwealth of Puerto Rico, who is temporarily studying in the United States during a taxable year for purposes of his employer, retains his status for Federal income tax purposes as a resident of Puerto Rico. Compensation received by him from the Puerto Rican agency during the year for services performed in Puerto Rico is excludable from gross income subject to Federal income tax. However, compensation received by him from such agency which is attributable to the period of study in the United States is includible in gross income subject to Federal income tax, whether or not he is a citizen of the United States. If such gross income amounts to $600 or more, he must file a Federal income tax return for such taxable year.