[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: 26CFR520.115]

[Page 132]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY 
                               (Continued)
 
PART 520--SWEDEN--Table of Contents
 
                       Subpart--General Income Tax
 
Sec. 520.115  Scope of Article XIV.

    (a) General. Article XIV (a) has an important bearing upon other 
articles of the convention. While many preceding articles provide in 
effect that items of income derived by citizens or residents of the 
United States or by domestic corporations from sources in Sweden are 
subject to tax only in Sweden, Article XIV(a) nevertheless permits the 
imposition of Federal income tax upon such income in the hands of such 
taxpayers. For example, Article V provides that income from real 
property, including gains derived from the sale or exchange of such 
property, shall be taxable only in the contracting State in which such 
property is situated. Hence, looking at such article without reference 
to Article XIV a United States citizen realizing such income from real 
property situated within Sweden would not be subject to Federal income 
tax upon such income. Article XIV(a), however, prescribes that, 
notwithstanding Article V or any other article of the convention, the 
Federal income tax may apply to all items of income without regard to 
other provisions of the convention and hence all items of income from 
sources within Sweden, regardless of their treatment in the articles 
dealing respectively with such items of income, must be included in 
gross income of United States citizens, residents and corporations for 
the purposes of the Federal income tax.
    (b) Credit for Swedish income taxes. (1) Article XIV(a), for the 
purposes of avoidance of double taxation, further provides that a 
citizen or resident of the United States or a domestic corporation 
deriving income from sources within Sweden shall be entitled to a credit 
against the Federal income tax liability for the amount of Swedish 
national income and property tax, including surtax, and for the Swedish 
communal income tax. Such credit is, however, subject to the limitations 
prescribed in section 131, Internal Revenue Code (relating to the credit 
for foreign taxes) in that it cannot exceed the same proportion of the 
tax against which the credit is taken which the taxpayer's net income 
from sources within Sweden bears to the entire net income, in the case 
of a taxpayer other than a corporation, or to the normal tax net income, 
in the case of a corporation, for the same taxable year.
    (2) In the application of Article XIV(a), the provisions of section 
131, Internal Revenue Code, are in general applicable. See paragraph 6 
of the protocol to the convention.

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