SECTION 5. DRAFTING AND

CONTACT INFORMATION

The principal author of this notice is D. Peter Merkel of the Office of Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, contact D. Peter Merkel on (202) 317-6938 (not a toll-free number).

November 10, 2025 710 Bulletin No. 2025–46

Treas. Reg. § 1.861-2(a)(7), Interest: Treas. Reg. §1.861-2(a)(7) provides a rule for determining the source of substitute interest payments made pursuant to a securities lending transaction or a sale-repurchase transaction.

Treas. Reg. § 1.861-3(a)(6), Dividends and income inclusions under sections 951, 951A, and 1293 and associated sec- tion 78 dividends: Treas. Reg. §1.8613(a)(6) provides a rule for determining the source of substitute dividend payments made pursuant to a securities lending transaction or a sale-repurchase transaction.

TD 9579, 77 FR 9846 (Feb. 21, 2012), Source of Income from Qualified Fails Charges : This Treasury Decision provides a final regulation relating to the source of income from a qualified fails charge. A qualified fails charge is sourced based on the residence of a taxpayer who receives the income.

Cross-References in Notice 2025-63

Internal Revenue Code (IRC) Section 861, Income from sources within the United States: Section 861 provides rules for determining when certain items of gross income are from sources within the United States.

IRC Section 862, Income from sources without the United States: Section 862 provides rules for determining when certain items of gross income are from sources without the United States.

IRC section 863, Special Rules Deter- mining Source: Section 863(a) provides that the Secretary shall prescribe regulations related to the source of items of gross income, expenses, losses, and deduction for which sections 861(a) and 862(a) do not provide specific sourcing rules.

IRC section 864, Definitions and Special Rules. Section 864 provides

definitions for terms such as “trade or business within the United States” and “effectively connected income.” Section 864 also provides rules for the treatment of related person factoring income, allocating certain interest, and allocating certain research and experimental expenditures.

IRC section 865, Source Rules for Per- sonal Property Sales: Section 865 provides source rules relating to the sale of personal property, including inventory, intangible property, and sales through an office or fixed place of business.

IRC section 988, Treatment of Certain Foreign Currency Transactions: Section 988(a)(3)(B) provides rules for determining the residence of a taxpayer for purposes of determining the source of foreign currency gain or loss attributable to a section 988 transaction. Section 988 gain or loss is sourced based on the residence of the taxpayer.

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