- 117 -
borrowed such funds from LTD, which charged them interest. LTD's
MMA II income derived from the difference between the interest
that was charged and the interest that was paid out.
Accordingly, we hold that the MMA II income is characterized as
interest from non-U.S. obligors and is treated as income from
sources without the United States. Sec. 862(a)(1).
d. Currency Exchange Transactions
Income (Currency Swaps
and Currency Transactions)
Without distinguishing between the two types of currency
transactions, see supra pp. 41-43, petitioners contend that the
income earned by LTD from those transactions was compensation for
personal services rendered entirely in Mexico. Respondent
contends that the income was from personal services, or in the
alternative, was gain from the sale of personal property, and in
either event had its source solely within the United States.
We conclude that LTD's income from currency transactions was
compensation for the performance of personal services rather than
gain from the purchases and sales of personal property. LTD
functioned as an intermediary, working in San Antonio and in
Mexico to effect its clients’ currency transactions. As to the
currency swaps, LTD’s income derived from commissions from Bank
of America and United States Trust. As to the currency
transactions, LTD’s income derived from the fees it charged its
clients for effecting the transactions. Accordingly, we hold
that the currency exchange transactions income is characterized
Page: Previous 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 NextLast modified: May 25, 2011