Tien is a citizen of Country C, which does not have an income tax treaty with the United States. During the current year (2016), she is a nonresident alien for U.S. tax purposes and earns the following amounts:
Dividend received from a U.S. corporation ..........................................................$ 2,500
Rentals from leasing a U.S. building .......................................................................13,000
Interest received from a foreign corporation ..........................................................5,000
Tien does not conduct a U.S. trade or business. Her interest and depreciation expenses from leasing the building under a net lease arrangement total $7,000.
a. Assuming the real estate income is investment related, what is Tien’s U.S. tax liability? How is the tax collected?
b. How would your answer to Part a change if Tien makes an election to treat the real estate activity as a U.S. trade or business?