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o. Other Commission Income/
Other Commissions and Fees ....... 57
p. Other Income .............. 57
M. Amounts Subject to Withholding Tax ........ 59
III. OPINION ........................ 62
A. Whether LTD Was Engaged in Trade
or Business Within the United States ....... 62
1. Background .................. 64
2. Section 1.864-4(c)(5)(i), Income Tax Regs.,
Engaged in a Banking Business Test ...... 64
B. Whether Each Item of LTD's Income
Was Effectively Connected ............. 104
1. Character and Source Rules .......... 104
2. Application of the Character and Source Rules 106
a. Management Fees ............. 107
b. Service Fees .............. 107
(1) U.S. Certificates of Deposit
and Bank Deposits . . . . . .... 107
(2) Non-U.S. Certificates of Deposit
and Term Deposits ......... 113
(3) Pace Investments .......... 114
c. Interest Income ............. 116
(1) Loans ............... 116
(2) MMA II ............... 116
d. Currency Exchange Transactions
Income (Currency Swaps
and Currency Transactions) ....... 117
e. Sales Commissions and Fees ....... 118
(1) Currency Fund, FEIM Fund,
and Matric Fund .......... 118
(2) Inversat Fund ........... 121
(3) TVA ................ 122
(4) Client Incorporation and Trust
Creation, Legal Advice
Income, and Letters of Credit ... 124
(5) Foreign Exchange Investments .... 124
(6) Treasury Bills, Wires and Checks,
Gold and Silver Futures, Project
Income, Income from Investments,
Other Commission Income, Other
Commissions and Fees,
and Other Income .......... 125
3. Effectively Connected Income Rules ...... 125
a. Introduction to the Rules ........ 125
b. Section 1.864-4(c)(5), Income
Tax Regs., Banking Activity Test .... 127
c. Section 864(c)(2)(A) Asset-use Test ... 128
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Last modified: May 25, 2011