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consider whether "the activities of such trade or business were a
material factor in the realization of the income". Sec.
864(c)(2)(B). We have held, supra p. 98, that LTD was engaged in
"trade or business within the United States" pursuant to section
864(b) during its taxable years in issue. The activities of
LTD's trade or business relating to the management fee included
instructing banks on the disposition of client assets, working
with brokers on the disposition of client assets, applying client
deposits with LTD to client investments, and paying bills for
clients. We conclude that such activities of LTD’s trade or
business were "a material factor in the realization of the
income" within the meaning of section 864(c)(2)(B). We have
given due regard to the question of whether such income was
accounted for through such trade or business, and we find LTD's
management fee to have been accounted for through LTD's trade or
business. Sec. 864(c)(2). Consequently, we hold that LTD's
management fee is effectively connected income pursuant to
section 1.864-4(c)(5)(vi)(b), Income Tax Regs., and section
864(c)(2)(B).
b. Service Fees
(1) U.S. Certificates of Deposit
and Bank Deposits
Petitioners contend that the income from U.S. certificates
of deposit and bank deposits is personal services income from
sources without the United States. Petitioners contend that such
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