- 188 -
making loans and discounts, or of exercising fiduciary powers
similar to those permitted to national banks under the authority
of the Comptroller of the Currency" and (2) the person must be
"subject by law to supervision and examination by State, or
Federal authority having supervision over banking institutions."
Rev. Rul. 83-176, 1983-2 C.B. at 112. Consequently, we conclude
that the U.S. banks that paid interest on LTD’s pooled
investments are "persons carrying on the banking business" within
the meaning of section 861(c)(1). Accordingly, we hold that the
interest from the U.S. pooled investments is treated as income
from sources without the United States. Sec. 861(a)(1)(A),
(c)(1).
(2) Taxation of Interest
We have held, supra, the interest paid to LTD’s clients on
the U.S. pooled investments is treated as income from sources
without the United States. Sec. 861(a)(1)(A), (c)(1). Interest
that is treated as income from sources without the United States
is not subject to tax pursuant to either section 871(a) or
section 881(a). Additionally, interest that is treated as income
from sources without the United States is not subject to
withholding tax pursuant to either section 1.1441-1, Income Tax
Regs., or, therefore, section 1.1442-1, Income Tax Regs. Sec.
1.1441-3(a), Income Tax Regs. Consequently, we hold that neither
LTD nor INC is a withholding agent liable for withholding tax
with respect to the interest paid on pooled investments during
the pre-1986 Act years.
Page: Previous 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 NextLast modified: May 25, 2011