Faye was a world-renowned rock star from ABC-Country. A recordcompany located in the USA, named Platinum-USA Records, contractedwith Faye to produce records. Platinum-USA Records retained allintellectual property rights in the recordings. The contractgranted Faye payments or âroyaltiesâ based upon future sales ofrecordings. Faye paid taxes on the payments in ABC-Country asroyalties. A treaty between the USA and ABC-Country exemptsroyalties from tax in the USA. However, the treaty, did not defineroyalties or compensation for personal services. The IRS has toldFaye, that her contract with Platinum-USA generates personalservice income in the United States. Prepare a tax research memoadvising Faye on the appropriate tax treatment, given hersituation, and with her type of income.
Faye was a world-renowned rock star from ABC-Country. A recordcompany located in the USA, named Platinum-USA Records, contractedwith Faye to produce records. Platinum-USA Records retained allintellectual property rights in the recordings. The contractgranted Faye payments or âroyaltiesâ based upon future sales ofrecordings. Faye paid taxes on the payments in ABC-Country asroyalties. A treaty between the USA and ABC-Country exemptsroyalties from tax in the USA. However, the treaty, did not defineroyalties or compensation for personal services. The IRS has toldFaye, that her contract with Platinum-USA generates personalservice income in the United States. Prepare a tax research memoadvising Faye on the appropriate tax treatment, given hersituation, and with her type of income.
