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connected income, we apply the requirements for dividends and
interest of a taxpayer not engaged in the active conduct of a
banking, financing, or similar business within the United States.
Id. Accordingly, the loan interest is treated as effectively
connected if LTD has "an office or other fixed place of business
within the United States to which such income * * * is
attributable." Sec. 864(c)(4)(B); see sec. 1.864-6(b)(2)(ii)(a),
Income Tax Regs.
The loan interest is attributable to LTD's office or fixed
place of business within the meaning of section 864(c)(4)(B)
because it satisfies the three tests articulated in section
864(c)(5) and the regulations thereunder. The first test
provides that the office of an agent shall be disregarded unless
the agent:
(i) has the authority to negotiate and conclude
contracts in the name of the nonresident alien
individual or foreign corporation and regularly
exercises that authority or has a stock of merchandise
from which he regularly fills orders on behalf of such
individual or foreign corporation, and (ii) is not a
general commission agent, broker, or other agent of
independent status acting in the ordinary course of his
business. * * * [Sec. 864(c)(5)(A)]
See also sec. 1.864-7(d)(1)(i), Income Tax Regs. As to clause
(i), during the years in issue, INC had the authority to
negotiate and to conclude contracts in LTD’s name and regularly
exercised such authority when it purchased the certificates of
deposit from banks on LTD’s behalf. As to clause (ii), we have
concluded, supra p. 67, that INC was not an "independent agent"
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