Hi and welcome to Just Answer!A resident alien's
income is generally subject to tax in the same manner as a U.S. citizen. If you are a resident alien, you must report all interest, dividends
, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U.S. tax return. You must report these amounts whether from sources within or outside the United States.A nonresident alien
usually is subject to U.S. income tax
only on U.S. source income.
Under the residency rules
of IRC section 7701(b) most foreign students are considered to be "exempt individuals." That is, they are exempt for extended periods of time from counting days of presence in the United States for the purposes of determining whether they are resident aliens of the United States. Thus, most foreign students remain nonresident aliens in the United States for extended periods of time.
If your only U.S. business activity is trading in stocks, securities, or commodities (including hedging transactions
) through a U.S. resident broker or other agent, you are not engaged in a trade or business in the United States. Thus - such income is NOT is treated as effectively connected income.- and is taxes at flat 30% federal income tax rate.
However if these gains will be taxable for you depends if you physically present in the United States for 183 days or more during the taxable year. This 183-day rule bears no relation to the 183-day rule under the substantial presence test of IRC section 7701(b)(3). Thus, there are situations in which the 183-day rule of IRC section 871(a)(2) may apply to individuals who have not crossed the threshold of U.S. residency under IRC section 7701(b)(3).
In most situations - you must provide Form W8-BEN to your broker and establish that you are a nonresident alien and claim that you are the beneficial owner of the income.
See for reference - http://www.irs.gov/Individuals/International-Taxpayers/The-Taxation-of-Capital-Gains-of-Nonresident-Alien-Students,-Scholars-and-Employees-of-Foreign-Governments
IRC regulations - http://www.gpo.gov/fdsys/pkg/CFR-2012-title26-vol9/pdf/CFR-2012-title26-vol9-sec1-871-7.pdfAs we see a nonresident alien who spent in the US less than 183 days DO NOT pay any taxes on capital gains realized from trading stocks
Let me know if you need any help.
Be sure to ask for clarification if needed.