- 143 -
the client clearing account, and maintaining records of LTD’s and
its clients’ positions with respect to the investments or
deposits. 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
income from U.S. certificates of deposit and bank deposits to
have been accounted for through LTD’s trade or business. Sec.
864(c)(2). Consequently, we hold that LTD’s income from U.S.
certificates of deposit and bank deposits is effectively
connected income pursuant to section 1.864-4(c)(5)(vi)(b), Income
Tax Regs., and section 864(c)(2)(B).
(2) Non-U.S. Certificates of Deposit
and Term Deposits
Petitioners contend that the income from non-U.S.
investments and term deposits is from sources without the United
States. Petitioners contend that such income is not effectively
connected income because LTD was not engaged in the active
conduct of a banking, financing, or similar business in the
United States, its principal business was not trading in stock or
securities for its own account, and it did not have an office in
the United States to which such income is attributable.
Respondent contends that the income from non-U.S.
investments and term deposits is from sources within the United
Page: Previous 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 NextLast modified: May 25, 2011