Article 21 - OTHER INCOME

   This Article provides the rules for the taxation of items of
income not dealt with in the other articles of the Convention.
An item of income is "dealt with" in an article when an item in
the same category is a subject of the article, whether or not any
treaty benefit is granted to that item of income. Article 21
deals with classes of income that are not dealt with elsewhere,

such as lottery winnings, punitive (but not compensatory) damages, covenants not to compete, and income from certain

financial instruments not dealt with in other articles to the extent derived by persons that are not engaged in the trade or

business of dealing in such instruments (if the transaction
giving rise to the income is related to a trade or business, it

is dealt with under Article 7 (Business Profits)). The article
also deals with income of the same class as income dealt with in
another article of the Convention, but from sources in third
States, where the other article deals only with items of that
class of income from sources within one of the Contracting States

(eS., Article 11 (Interest) or Article 12 (Royalties)).

Paragraph I

   Paragraph 1 contains the general rule that items of income
not dealt with in the other articles of the Convention derived by
a resident of one of the States will be taxable only in the State
of residence. This exclusive right of taxation applies
irrespective of whether the residence State exercises its right
to tax the income covered by the Article. The phrase "items of

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income of a resident" should be understood to mean "items of
income beneficially owned by a resident." Thus, is an item of
income otherwise covered by this paragraph is paid to a resident
of a Contracting State as a nominee on behalf of a third-country
resident, that income would not be exempt from source basis
taxation under paragraph 1 but would fall outside the treaty
altogether.

Paragraph 2

   Paragraph 2 contains an exception to the general rule of
paragraph 1 for income, other than income from real property,
that is attributable to a permanent establishment or fixed base
maintained in a Contracting State by a resident of the other
Contracting State. The taxation of such income is governed by
the provisions of Articles 7 (Business Profits) and 14 (Indepen­
dent Personal Services). Thus, in general, third-country income
that is attributable to a permanent establishment maintained in
the United States by a Turkish enterprise would be taxable by the
United States under Article 7. There is an exception to this
rule for income from real property, as defined in paragraph 2 of
Article 6 (Income from Immovable Property (Real Property)). If,
for example, a Turkish resident derives income from real property
located outside the United States but that is attributable to the
resident's permanent establishment or fixed base in the United
States, only Turkey and not the United States may tax that
income. This special rule for foreign-situs real property is
consistent with the general rule, also reflected in Article 6,
that only the situs and residence states may tax real property
income. Even if such property is part of the property of a
permanent establishment or fixed base in a Contracting State,
that State may not impose tax if neither the situs of the proper­
ty nor the residence of the owner is in that State.

   The rule in Point V of the Protocol dealing with deferred
income of a permanent establishment or fixed base applies to this
Article. Thus, income or gain from third-country sources that is
attributable to a permanent establishment or fixed base, but that

is deferred until after the permanent establishment or fixed base

has ceased to exist, may nevertheless be taxed in the State in
which the permanent establishment or fixed base was located.

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   This Article is subject to the saving clause of paragraph 3
of Article 1 (Personal Scope). Thus, the United States may tax
the income of a Turkish resident not dealt with elsewhere in the
Convention, if that Turkish resident is a citizen of the United
States.

   As with other benefits of the Convention, a resident of one
of the States claiming the benefit of this Article must be
entitled to the benefit under the provisions of Article 22
(Limitation on Benefits).