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within the United States. Alternatively, respondent argues that
the character of the income is personal services income
attributable to management activities performed in the United
States and therefore constitutes personal services income from
sources within the United States.
In Estate of Smith v. Commissioner, 33 T.C. 465 (1959),
Longstreet-Abbott & Co. (LACO), a commodities trading advisor
that was a partnership, offered its clients two investment
opportunities. The first type of investment was an "Individual
Trading Account" for which LACO purchased and sold, with capital
furnished by the client, commodity futures and spot commodities
in the name of the client. The second type of investment was a
common "fund" out of which LACO purchased and sold, with capital
furnished by several clients and pooled by LACO, commodity
futures and spot commodities in the name of the "fund". As its
compensation, LACO received a portion of the trading profit.
LACO "actively solicited individuals to participate in the
Funds" that it managed. Id. at 485. LACO’s "only expectation of
income was from the successful management of other individuals’
moneys." Id. LACO invested "no money of its own." Id. LACO
"only had authority to manage the Funds and to withdraw a certain
share of the profits" and was not permitted to withdraw any
portion of an investor’s cash contribution. Id. Finally, LACO
"had no economic interest in the commodity futures or spot
commodities as such, but only an interest in a share of the
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