Inverworld, Inc., et al. - Page 37

                                                - 124 -                                                   
            for personal services performed outside the United States and is                              
            treated as income from sources without the United States.  Sec.                               
            862(a)(3).                                                                                    
                               (4) Client Incorporation and Trust                                         
                                     Creation, Legal Advice                                               
                                     Income, and Letters of Credit                                        
                  Respondent contends that the character of the client                                    
            incorporation and trust creation fees, the legal advice income,                               
            and the letters of credit fees are personal services income.                                  
            Respondent contends that such income items should be treated as                               
            income from sources within the United States because the                                      
            investment services relating to the income were provided in San                               
            Antonio.                                                                                      
                  Petitioners do not dispute respondent’s contentions.                                    
            Consequently, we treat petitioners as having conceded that such                               
            income is characterized as compensation for personal services                                 
            income performed in the United States and is treated as income                                
            from sources within the United States.  Sec. 861(a)(3).                                       
                               (5) Foreign Exchange Investments                                           
                  We analyze LTD’s foreign exchange investments income in a                               
            manner similar to that in the currency exchange transactions                                  
            section, supra pp. 110-112.                                                                   
                  Petitioners, however, did not provide any basis for                                     
            apportionment of the foreign exchange investments income.                                     
            Accordingly, we sustain respondent's determinations that such                                 
            income is characterized as compensation for personal services                                 




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