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bank deposits. LTD’s client clearing account, from which LTD
placed clients’ funds in certificates of deposit or bank
deposits, was located in Frost Bank in San Antonio. Accordingly,
we hold that the income from U.S. certificates of deposit and
bank deposits is characterized as compensation for personal
services performed in the United States and is treated as income
from sources within the United States. Sec. 861(a)(3).
(2) Non-U.S. Certificates of Deposit
and Term Deposits
As with LTD’s U.S. investment program, we must decide two
issues regarding LTD’s non-U.S. investment program: (1) The
proper amount of income in issue and (2) the proper
characterization of such income. As to the proper amount of
income in issue, based on our analysis regarding LTD’s U.S.
investment program, we similarly conclude that LTD should include
in its income only the amounts that it retained as interest
spreads from the non-U.S. certificates of deposit and term
deposits.
As to the character of the income, petitioners contend that
the character of the income earned by LTD from non-U.S.
certificates of deposit and term deposits is interest income
which should be treated as income from sources without the United
States. Respondent, however, does not specifically address
either the character or the source of the income earned from non-
U.S. certificates of deposit or term deposits. Respondent merely
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