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The MMA II interest is compensation for loans to Mexican
corporations that LTD made in the active conduct of its trade or
business in the United States. Accordingly, LTD's MMA II is
"interest" because it is "compensation for the use or forbearance
of money". Deputy v. DuPont, 308 U.S. at 498. We have held
supra p. 98, that LTD is "engaged in the active conduct of a
banking, financing, or similar business within the United States"
within the meaning of section 864(c)(4)(B)(ii). Accordingly, the
MMA II interest is "derived in the active conduct of a banking,
financing, or similar business within the United States" within
the meaning of section 864(c)(4)(B)(ii).
The MMA II interest is "interest from sources without the
United States" other than interest from stocks and securities
and, therefore, falls under the third category of foreign source
income of a foreign corporation engaged in the active conduct of
a banking, financing, or similar business in the United States.
Sec. 1.864-6(b)(2)(ii)(d)(2), Income Tax Regs. Accordingly, in
deciding whether such interest is effectively 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 in the United States. Id.
Accordingly, the MMA II interest is treated as effectively
connected if LTD has "an office or other fixed place or business
within the United States to which such income * * * is
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