[Code of Federal Regulations]
[Title 26, Volume 18, Parts 500 to 599]
[Revised as of April 1, 2000]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR509.111]

[Page 44]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY 
                               (Continued)
 
PART 509--SWITZERLAND--Table of Contents
 
                       Subpart--General Income Tax
 
Sec. 509.111  Real property income and natural resource royalties.

    (a) General. Income of whatever nature derived by a nonresident 
alien who is a resident of Switzerland, or by a Swiss corporation or 
other entity, from real property situated in the United States, 
including gains derived from the sale or exchange of such property, 
rentals from such property, and royalties in respect of the operation of 
mines, quarries, or other natural resources situated in the United 
States, is not exempt from United States tax by the convention. Such 
items of income are subject to taxation under the provisions of the 
Internal Revenue Code of 1954 generally applicable to the taxation of 
nonresident alien individuals and foreign corporations. See Article IX 
of the convention. Interest derived from mortgages and bonds secured by 
real property does not constitute income from real property for purposes 
of this section but is subject to the provisions applicable to interest 
generally. See Sec. 509.109.
    (b) Net basis--(1) General. Notwithstanding the provisions of 
paragraph (a) of this section, a nonresident alien who is a resident of 
Switzerland, or a Swiss corporation or other entity, who during the 
taxable year derives from sources within the United States any income 
from real property as described in such paragraph may elect for such 
taxable year to be subject to United States tax on a net basis as though 
such alien, corporation, or other entity were engaged in trade or 
business in the United States during such year through a permanent 
establishment situated therein.
    (2) Manner of electing. Such nonresident alien (including an 
individual, fiduciary, and member of a partnership) shall signify his 
election to be subject to tax on such a basis by filing Form 104B 
clearly marked at the top of the first page thereof as follows: ``Return 
of Resident of Switzerland Electing to File on a Net Basis Pursuant to 
Article IX of Swiss Income Tax Convention''. Such corporation shall 
signify its election to be subject to tax on such a basis by filing Form 
1120 clearly marked at the top of the first page there of as follows: 
``Return of Swiss Corporation Electing to File on a Net Basis Pursuant 
to Article IX of Swiss Income Tax Convention''. The election so 
signified shall be irrevocable for the taxable year for which such 
election is made. All income from sources within the United States, 
including gains from the sale or exchange of capital assets or of other 
property, shall be disclosed on the return so filed. See sections 871 
and 882 of the Internal Revenue Code of 1954 and the regulations 
thereunder.