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activities test. Id.
Section 1.864-4(c)(3)(i), Income Tax Regs., provides that
the business-activities test is of primary significance under
circumstances, inter alia, where "dividends or interest are
derived by a dealer in stocks or securities" but does not define
"a dealer in stocks or securities." However, section 1.864-
2(c)(2)(iv), Income Tax Regs., provides that "a dealer in stocks
or securities" is excepted from excluding trading activity from
the calculation of whether it is engaged in "trade or business
within the United States" pursuant to section 864(b); i.e., the
dealer must include trading activity in such calculation. We
have concluded, supra p. 85, with regard to the section
864(b)(2)(A)(ii) exclusion of trading for LTD’s trading for its
own account, that LTD is "a dealer in stocks or securities"
within the meaning of section 1.864-2(c)(2)(iv), Income Tax Regs.
Because the two terms appear in the same Code section, we apply
the same definition to section 1.864-4(c)(3)(i), Income Tax Regs.
Consequently, we hold that LTD is "a dealer in stocks or
securities" within the meaning of section 1.864-4(c)(3)(i),
Income Tax Regs.
Accordingly, LTD’s interest from loans is interest derived
by a dealer of stocks or securities within the meaning of section
1.864-4(c)(3)(i), Income Tax Regs. Consequently, we apply the
business-activities test to decide whether such interest is
effectively connected income.
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