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obligor. Interest on bonds, notes, or other interest-bearing
obligations of U.S. residents, corporate or otherwise, is
generally treated as income from sources within the United
States. Sec. 861(a)(1). The term "resident of the United
States", used in section 1.861-2(a)(1), Income Tax Regs.
(promulgated pursuant to section 861(a)(1)), includes, inter
alia, "a foreign corporation or a foreign partnership, which at
any time during its taxable year is engaged in trade or business
in the United States." Sec. 1.861-2(a)(2)(iv), Income Tax Regs.
Interest that is not treated as income from sources within
the United States pursuant to section 861(a)(1) is treated as
income from sources without the United States. Sec. 862(a)(1).
Additionally, notwithstanding section 861(a)(1) and the
regulations thereunder, certain interest is treated as income
from sources without the United States. Sec. 1.861-2(b), Income
Tax Regs.
For LTD's taxable years ended June 30, 1987 through 1989,
generally, the source of interest depends on the residence of the
obligor. Absent exceptions not applicable in the instant case,
interest on bonds, notes, or other interest-bearing obligations
of noncorporate residents or domestic corporations is treated as
income from sources within the United States. Sec. 861(a)(1).
Interest that is not treated as income from sources within the
United States pursuant to section 861(a)(1) is treated as income
from sources without the United States. Sec. 862(a)(1).
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