- 131 -
placed in one of three categories, each of which provides an
effectively connected income test. In the first category of
income, any dividends or interest from stocks or securities, or
any gain or loss from the sale of exchange of stocks or
securities which are capital assets, which is from sources
without the United States and derived by a nonresident alien
individual or a foreign corporation in the active conduct during
the taxable year of a banking, financing, or similar business in
the United States, shall be treated as effectively connected
under the same principles of section 1.864-4(c)(5)(ii), Income
Tax Regs., that are applied to U.S. source dividends or interest
derived in the active conduct of a banking, financing, or similar
business in the United States. Sec. 1.864-6(b)(2)(ii)(b), Income
Tax Regs. Accordingly, such foreign source dividends, interest,
gain, or loss from stocks or securities are treated as
effectively connected income only if two conditions are met: (1)
"the stocks or securities giving rise to such income are * * *
attributable to the U.S. office through which such [banking,
financing, or similar] business is carried on", and (2) the
stocks or securities either (a) were acquired in one of three
ways, or (b) consist of one of three types of securities. Sec.
1.864-4(c)(5)(ii), Income Tax Regs.
In the second category of income, any dividends, interest,
gain, or loss from stocks or securities which does not meet the
Page: Previous 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 NextLast modified: May 25, 2011