Tax Type
Individual Income Tax
Description
Foreign pension income
Topic
Taxable Income
Date Issued
05-11-1989
May 11, 1989
Re: Request for Ruling: Individual Income Tax
Dear****************
This will reply to your letter dated February 21, 1989 in which you request a ruling regarding the applicability of the Virginia subtraction for foreign source income to pension income.
FACTS
**********("The Taxpayer") received income from the United Kingdom in 1987 in the form of interest, dividend and pension income. The Taxpayer included all of his foreign income in federal adjusted gross income for tax year 1987. The Taxpayer filed a Virginia 1987 individual income tax return in which he took a subtraction for foreign source interest and dividend income. The Taxpayer requests a ruling whether a foreign pension may also be subtracted as foreign source income for Virginia purposes.
RULING
Virginia Code §58.1-322(C)(7) provides a subtraction from federal adjusted gross income for "[a]ny amount included therein which is foreign source income as defined in §58.1-302." Virginia Code §58.1-302 defines foreign source income as:
-
- 1. Interest, other than interest derived from sources within the United States;
2. Dividends, other than dividends derived from sources within the United States;
3. Rents, royalties, license, and technical fees from property located or services performed without the United States or from any interest in such property, including rents royalties, or fees for the use of or the privilege of using without the United States any patents, copyrights, secret processes and formulas, good will, trademarks, trade brands, franchises, and other like properties; and
4. Gains, profits, or other income from the sale of intangible or real personal property located without the United States.
- 1. Interest, other than interest derived from sources within the United States;
In interpreting this statute. the department adopted Virginia Individual Income Tax Regulation 630-2-302(F), a copy of which is enclosed.
The above statute does not provide a subtraction for all classes of foreign source income. While IRC §862 lists "compensation for labor or personal services performed without the United States" as foreign source income, the Virginia statute does not provide a subtraction for this type of income or for pensions resulting from services performed in a foreign country. Only the types of income specifically enumerated in the above statute may be subtracted from federal adjusted gross income.
Supportive of the department's position is IRC §911, which defines income from foreign sources for purposes of the federal foreign earned income exclusion, specifically excludes amounts received as a pension or annuity from the definition of foreign earned income.
Therefore, based on the above, I must conclude that a pension received from a foreign source is properly included in Virginia taxable income and would not qualify for the subtraction as foreign source income for Virginia purposes.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner