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(3) TVA
Petitioners contend that the character of the TVA commission
is personal services income because such commission is
compensation for investment services. Petitioners contend that
the commission should be treated as income from without the
United States because the services relating to the TVA project
were provided in Mexico. Petitioners argue that the
services relating to the TVA project relevant for sourcing
purposes include only the underwriting activities. Petitioners
maintain that the TVA project's only connection to the United
States was that INC recorded money going in or out of a client
account.
Respondent contends that the commission should be treated as
income from sources within the United States because the
investment services relating to the TVA project were provided in
San Antonio.
The TVA commission includes three types of income, and we
analyze each type individually. As to the first type of income,
we conclude that LTD’s 5-percent commission on the total funds
raised was compensation for personal services. The services that
LTD rendered in relation to the 5-percent commission included
formulating the prospectus and executing the marketing program to
solicit venture capital. We conclude that such services were
performed in Mexico. In sum, LTD’s activities relating to the 5-
percent commission consisted of performing personal services in
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