IRC Section 897 requires foreign investors to pay U.S. tax on gains from U.S. real property interests, including dividends and capital gains derived from such assets.
Form 1099-DIV boxes 2e, Section 897 ordinary dividends and 2f, Section 897 capital gain, are completed by a RIC or REIT. They do not apply to U.S. citizens or resident aliens and can be disregarded for them.
Amounts in these two boxes pertain specifically to foreign persons (including foreign entities) where the character of the income remains unchanged when passed through or distributed to their foreign owners or beneficiaries. This income is typically treated as effectively connected income (ECI).
If the taxpayer is a foreign person, any U.S. tax withheld on this income is usually reported on Form 1042-S.
Additional Information:
IRS Instructions for Form 1099-DIV
IRS Instructions for Form 1040-NR